Shortages and Inflation Are Ripping the World’s Face Off
It surprises me that, after months of inflation that haven’t abated, I still have to argue with some people that inflation is hot and is not transitory. (Sometimes I even have to argue that it is actually happening, if you can imagine that.) Let me present some of the most glaring examples of inflation that is screaming like a banshee and clearly has been and will continue to be persistent by nature.
September showed us that inflation is already biting into the belly of industrial sentiment and market sentiment. In terms of industry sentiment, a virtual conference earlier this month by Morgan Stanley with industrial CEOs, revealed a broad spectrum of Fortune 500 companies who say they are facing considerable strain in getting enough supply of materials and enough supply of labor and that the rise in costs that come with trying to overcome those shortages has become a serious detriment to business. Then you add to all of that their shipping troubles and rapidly rising shipping/freight costs.
Prices for many basic materials, such as copper and aluminum, are now at or near all-time highs. And industry leaders say they are passing these soaring costs along to consumers.
Grab a coffee.
Yup and it’s going to get worse. I have taken a bunch of money out of the bank and invested in food and other necessities. The interest from the bank is like squat. With food inflation running 35% this year anything I buy now is going to give me returns of about 35% a year from now. That’s a great investment return.
Example: The wife and I typically go through three turkeys a year. We roast them for a holiday, cut the leftovers into smaller meals and freeze the smaller meal packets. One turkey gives us many meals. We have not been able to find a turkey in the store since May. With Canadian Thanksgiving just around the corner we can finally get turkeys “on special” at twice what we paid last year. We bought three of them and they are in our freezer now. The freezer chest in the store was already near empty a week out from the holiday. In previous years, we waited until after Thanksgiving to buy the leftover turkeys on sale. I don’t think there are going to be any leftovers this year. I have also located a turkey farmer in our area. He was already completely booked for this year but we now have three turkeys reserved on his list for next year.
My wife and I are stocking up too, first with non-food necessities
Kate, thanks for posting this very informative article.
I’m Doing the same David….things we go through regularly.
Stocking up…. and when I run outa room, I’ll store it in my 5th Wheel & come winter, if I need to freeze things, its a perfect holding environment. 2 Blocks away.!!
Inflation itself is dangerous enough in our overleveraged society, burdened with consumer debt, private and public.
The expectation of inflation, rightly or wrongly, is what counts for the future as those assumptions are built into finance decisions.
That sentiment, plus cratering confidence in our leadership’s profligate negligence, is what will start the interest rate train avalanche.
Coming soon to a market near you. The only thing transitory, which is upwards, is how much inflation so real interest rates will rise.
I wouldn’t be surprised if much of the labour shortage is due to the ridiculous face-diapering and “passport” laws.
When sawing off a tree branch, one should make sure to be sitting on the side closest to the trunk.
Yes indeed. That article Kate kindly linked us to points out that a whole lot of people who would have kept working took retirement and are out of the workforce. If I had a choice between working with passports and face diapers and retiring I personally would take retirement in a flash.
I am temporarily out of the workforce for this very reason. My boss had been harping about the vaccines for months, but there was no way I was taking any drug that hadn’t been tested properly. Masks are useless and I only participate in that charade so I can function in society.
I cannot believe that people are being forced to take these experimental drugs in order to keep their jobs. It is utter madness, yet there are so few people that seem to care. So many people are just sheep and have zero ability to think critically or logically.
I am going to enjoy my unplanned vacation, grab some popcorn and watch the wheels fall off this horrible experiment.
Yup me too. I was working in the US throughout the COVID and got fed up with the Quarantine hotels every time I returned to Canada (Even though I should have been lawfully exempted, Canadian Border Agents wouldn’t allow).
So it’s early retirement at least for the interim and my High Income Tax dollars will all be paid by an American to America for now on. Oh well, Trudeau doesn’t need tax dollars, he has a printing press and a large Chinese Credit Card.
Cascading money supply combined with reduced production. Isn’t that the definition of inflation? Any idiot can see it’s likely over 20% while they tell us it’s 3%. Step 2 will be labour strife. People simply can’t put up with giving up 20% of their purchasing power every year. There are going to be some big strikes.
The biggest factor contributing to supply chain disruptions is the ongoing decay in the economy’s capital structure thanks to the trend towards zero percent interest rates.
Along the way there can be significant jumps in commodity prices, but the 40 year trend of falling interest rates that we are currently in is generally deflationary. These price jumps will be temporary. Not to say, however, that these erratic price swings are harmless. They make long term economic calculation exceedingly difficult.
As an aside, a friend ordered a wooden equipment shed in spring. Construction was supposed to start September 1. Nothing so far due to the original rafter manufacturer being unable to supply. They have found an alternate supplier, but nothing will be available until November 1. As it stands, it will be next spring before the shed will be built.
Originally, he wanted a steel quonset but the dealer would not even give him a quote as prices are too erratic to do so reliably.
Define “temporary”. What an idiotic comment.,
I built a set of logging bunks three months ago. The steel cost me $780 plus tax. Two years ago it would have been 30 to 40% less. If I bought it today I’d be tacking on another 15% to the $780.