“Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair.” – Sam Ewing Sometimes I think I’m taking crazy pills. In my real life, everywhere I look I see less choice and higher prices. Everybody I talk to has a story about something they need to buy but can’t. Many big-ticket items have unprecedented lead times, assuming you can get them at all. My friends in the corporate world are focused on raising prices ahead of their increasing input costs. They are also staying up at night worried about accessing supply altogether – be it parts, materials, or even labor. I see shrinkflation, both in the size of the consumer goods I buy and in the level of service provided, compared to the pre-Covid period.
What I'm trying to say is that the "dirty shipping cartel" 100% exists, as does pandemic profiteering. What do imagine everyone in the US started doing the moment they couldn't go out to restaurants or had to work from home? Yup, buying X-Boxes, treadmill machines, Zoom cameras blah blah blah all the crap on Amazon. And what do you imagine the shipping companies did the moment all those Chinese factories were on the phone clamoring for container space? Exactly the same things the airlines and hotels do in big holiday seasons, they hiked the prices 5X. And then 5X again.
So unless you can afford to pay those prices, you are out of luck getting your goods on that boat. Simple as that.
My wife works in logistics in Japan. The ships you mention lined up outside the ports do indeed exist, and the shipping rates have gone through the roof. They were raised by the shipping lines because they could. What you may not realise however, is that they are very often "shipping air" (as the terminology goes) on the return route back to China. Ie they are empty.
Why? Well, they can make more profit by rushing back to China for another load, than doing what they used to do, which was fill up the ship with goods for Hong Kong, Japan, Korea etc and make a few stops on the way. The shipping companies have jacked the prices up so much for the US->China route, that the best use of their ships is a mad dash loaded with Amazon tat and online shite for the US market, dump it ASAP, and charge back empty for another load. That way they can keep hold of their containers too. I don't think you have quite got the right end of the stick for some of this story.
As an example, tofu prices are rising in Japan. Why? Well, the reason they are rising is because the tofu makers can't get enough soy from US farmers, because they can't get container ships willing to stop off in Japan and miss out on that sweet online shopping cash.
From a trades perspective, things are sparse on the ground. It's not just copper going up, it's breakers and panels that aren't available. I've had parts that have gone up 50% because I've had to find the "next best thing" that would work - when you need power, you need power.
Today I had a supplier that literally had no 12-2 romex, the most basic home building wire. There are other suppliers that had it, but for how long?
It's getting crazy out there. If I had a storage container and the overhead money to spare, I'd stock up on building materials now just to make sure I could keep working, or sell if needed in a shortage.
There is a seemingly valid argument that current "hyper-inflation" is simply catching up to the average trend over time. Inflation had, after all, been remarkably low in the last 5 or 6 years before the pandemic wrench. So far, inflation has barely ebbed above that historical trend in the United States, even with this summer's huge gains at +5%.
Many of the products that were hitting +10-20% temporarily, like eggs, have indeed gone back down in price. If meat hasn't gone back down despite profits, it certainly could be indicative of price gouging and the government is right to call it out. What IS irresponsible of the government is focusing only on price gouging in a complex supply chain that clearly has other/bigger troubles; I agree that the American parties will always go after the easy political win.
@doomberg: You say at the end that you are getting out of the pot (where the water is getting warmer and the frog is unaware till it boils). The q to you sir is: how are you getting out of the pot and what would you recommend to those will less than 1m in liquid net worth?
While I agree that prices for some things are going up, and there are strange shortages (for example, no lemons? Weird!) - some things aren’t really indicative. Uber’s days are numbered, partially because of the price. This is only anecdotal, but I have seen a growing wave of people eschewing taking an Uber in favor of the older “legacy” services such as yellow cabs, because ultimately, with the price rise, especially since it has been accompanied by an actual *reduction* in the share of the charge going to the driver, is causing people to take a second look and realize that the *insane* overhead of all the “technology” that Uber touts is just not worth it. It’s less inflation on their part and more, the gravy train is ending. I personally predict they will end up going the way of MoviePass.
As far as other things, I think that some is just overblown. I think there is at least a small bit of merit when it comes to the government’s claims of ‘profiteering’ in some sectors. For example, beef - the processors’ costs have stayed largely flat, and they’re largely not being impacted by transportation woes. At the same time, the cost of their inputs is declining in real terms, as cattle ranchers are being forced by drought to sell their stock at fire sale prices — and yet, the price of beef goes up on the shelf. There’s *something* fishy going on there.
"The economy is a deflationary machine." Yes, the economy is the climate. Inflation is the weather. The trend though is for climate change, warmer temperatures, and ... higher prices.
What I'm trying to say is that the "dirty shipping cartel" 100% exists, as does pandemic profiteering. What do imagine everyone in the US started doing the moment they couldn't go out to restaurants or had to work from home? Yup, buying X-Boxes, treadmill machines, Zoom cameras blah blah blah all the crap on Amazon. And what do you imagine the shipping companies did the moment all those Chinese factories were on the phone clamoring for container space? Exactly the same things the airlines and hotels do in big holiday seasons, they hiked the prices 5X. And then 5X again.
So unless you can afford to pay those prices, you are out of luck getting your goods on that boat. Simple as that.
My wife works in logistics in Japan. The ships you mention lined up outside the ports do indeed exist, and the shipping rates have gone through the roof. They were raised by the shipping lines because they could. What you may not realise however, is that they are very often "shipping air" (as the terminology goes) on the return route back to China. Ie they are empty.
Why? Well, they can make more profit by rushing back to China for another load, than doing what they used to do, which was fill up the ship with goods for Hong Kong, Japan, Korea etc and make a few stops on the way. The shipping companies have jacked the prices up so much for the US->China route, that the best use of their ships is a mad dash loaded with Amazon tat and online shite for the US market, dump it ASAP, and charge back empty for another load. That way they can keep hold of their containers too. I don't think you have quite got the right end of the stick for some of this story.
As an example, tofu prices are rising in Japan. Why? Well, the reason they are rising is because the tofu makers can't get enough soy from US farmers, because they can't get container ships willing to stop off in Japan and miss out on that sweet online shopping cash.
From a trades perspective, things are sparse on the ground. It's not just copper going up, it's breakers and panels that aren't available. I've had parts that have gone up 50% because I've had to find the "next best thing" that would work - when you need power, you need power.
Today I had a supplier that literally had no 12-2 romex, the most basic home building wire. There are other suppliers that had it, but for how long?
It's getting crazy out there. If I had a storage container and the overhead money to spare, I'd stock up on building materials now just to make sure I could keep working, or sell if needed in a shortage.
There is a seemingly valid argument that current "hyper-inflation" is simply catching up to the average trend over time. Inflation had, after all, been remarkably low in the last 5 or 6 years before the pandemic wrench. So far, inflation has barely ebbed above that historical trend in the United States, even with this summer's huge gains at +5%.
Many of the products that were hitting +10-20% temporarily, like eggs, have indeed gone back down in price. If meat hasn't gone back down despite profits, it certainly could be indicative of price gouging and the government is right to call it out. What IS irresponsible of the government is focusing only on price gouging in a complex supply chain that clearly has other/bigger troubles; I agree that the American parties will always go after the easy political win.
@doomberg: You say at the end that you are getting out of the pot (where the water is getting warmer and the frog is unaware till it boils). The q to you sir is: how are you getting out of the pot and what would you recommend to those will less than 1m in liquid net worth?
Components of inflation are rolling in a trend which in aggregate, as measured by the CRB index, is going way up! Even chickens know it’s pervasive.
While I agree that prices for some things are going up, and there are strange shortages (for example, no lemons? Weird!) - some things aren’t really indicative. Uber’s days are numbered, partially because of the price. This is only anecdotal, but I have seen a growing wave of people eschewing taking an Uber in favor of the older “legacy” services such as yellow cabs, because ultimately, with the price rise, especially since it has been accompanied by an actual *reduction* in the share of the charge going to the driver, is causing people to take a second look and realize that the *insane* overhead of all the “technology” that Uber touts is just not worth it. It’s less inflation on their part and more, the gravy train is ending. I personally predict they will end up going the way of MoviePass.
As far as other things, I think that some is just overblown. I think there is at least a small bit of merit when it comes to the government’s claims of ‘profiteering’ in some sectors. For example, beef - the processors’ costs have stayed largely flat, and they’re largely not being impacted by transportation woes. At the same time, the cost of their inputs is declining in real terms, as cattle ranchers are being forced by drought to sell their stock at fire sale prices — and yet, the price of beef goes up on the shelf. There’s *something* fishy going on there.
all those things may have something in common. Good reasoning and an excellent way to express it. Thank you
How do you define hyperinflation? Would 10% qualify, 100%, or something else? Thanks, I really enjoy the posts.
"The economy is a deflationary machine." Yes, the economy is the climate. Inflation is the weather. The trend though is for climate change, warmer temperatures, and ... higher prices.