Monday, January 24, 2022

"I’m Afraid Supply Chain Collapse Is Just Getting Started"

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"I’m Afraid Supply Chain Collapse Is Just Getting Started"
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by Epic Economist

"The catastrophic collapse of the global supply chain is calling a lot of attention in recent weeks. Everyone seems to be worried about the breakdown of this complex system that allows goods to move around the world. From finding groceries at your local supermarket to buying a new car or domestic appliances, every good across the chain seems to be scarce. On top of that, deliveries are facing massive delays and consumers’ options are getting increasingly limited. Many people are still wondering why is all of this still happening. After almost two years of persistent disruptions, the government has vowed to fix our current supply chain issues. But up until this point, things have only gotten more entangled and the crisis has been severely aggravated. There are many reasons behind this complex problem, and in an analysis recently published by the economist and financial expert James Rickards, we can find a more detailed answer.

First, we have to consider that the supply chain is an extensive, interconnected and dynamic system, and when any complex system collapses, looking for a specific cause won’t take us anywhere. This sort of internal chain collapse happens because these systems are essentially too large and too reliant on one another, they also require an extraordinary amount of energy inputs to keep running. So any specific cause cited by government authorities and the so-called experts is more likely to be a symptom rather than a true cause. And although that may be frustrating, it’s not possible to solve a complex problem with a simple solution. But now, it has reached everything. And it’s not just grocery stores. As Rickards explains, it’s every supermarket, convenience store and retail outlet from coast to coast. And, of course, it’s not just cleaning products and paper goods. Your local store might have empty shelves for eggs, meat, canned goods, peanut butter, milk and many other staples.

Evidently, stockouts of certain goods happen from time to time, but the shortages we’re witnessing right now are far more widespread than they’ve ever been. In every store you enter, you can be sure that something will be missing and some of the shelves will be bare. And yet, the government and the mainstream media are still trying to push the narrative that this crisis is going to end soon, and that steps are being taken to alleviate shortages and backlogs and everything will be back to normal in a short while. They have been blaming the ongoing shortages on the new surge of virus cases and the number of workers currently sick. They argue that things will be calmer once the outbreak is put under control. But that’s the narrative, not the reality. There’s growing evidence that the supply chain crisis is just beginning, and it will stay with us for years and have some major economic consequences.

Supply chains are global, and given that everything is connected, everything is collapsing all at once. On the other side of the globe, conditions are pretty chaotic, too. China, the world’s leading manufacturer, is shutting down factories at a large scale due to newly confirmed vírus cases. The country has a zero-tolerance policy, in which even a single new infection case can trigger a lockdown.

This situation is considerably aggravating, and it will worsen even further as more as we move toward the Beijing Olympics and the Lunar New Year holidays in China. That’s to say, as the world’s largest producer is shutting down production for now and for many months to come, we will continue to feel the impacts of this here in America, and it’s safe to say that most people are not prepared for what’s coming next. These disruptions are likely to persist for years, and most investors are still not pricing all the risks it poses. It won’t be simple to solve it and it’s definitely not something that can be fixed quickly. Supply chain problems will be translated into higher costs, lower earnings, and ultimately lower stock prices in the market. And with indexes nearing or at all-time highs, now more than ever it is time to move away from vulnerable assets before the supply chain reality catches up with the stock market bubble – because when it does, things will be disastrous."

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