More Shortages Are Coming

The Daily Escape:

Fall, Longfalls Dam road, Carrabassett, ME – October photo by Laura Casey

The NYT reported on how the German economy is being slowed by product shortages:

“More than 40% of German companies said they had lost sales because of supply problems in an August survey….Europewide, exports would have been 7% higher in the first six months of the year if not for supply bottlenecks, according to the European Central Bank.”

And it isn’t just Germany. Since the onset of Covid, US consumers have been experiencing disruptions in the supply chain. Wrongo has once again noticed empty shelves are back in our local chain supermarkets.

The bad news is that many think it’s going to get worse.

It’s no longer a matter of fixing one problem. A cascade of sourcing failures in raw materials, production, shipping, staffing, labor, along with weather disasters, may mean these shortages are around for several years. From Shelley Fagan:

“The US has 20 container ports located along the East and West coasts as well the Gulf of Mexico. Ports are where 70% of all US-international trade enters, accounting for 26% of…GDP.”

Even if the goods get to America, we’re at the mercy of our system of rails, barges, and trucks that  transport goods to factories, distribution centers, stores, and consumers. Trucking moves 71% of all this freight in America, and there’s a shortage of drivers.

But our transportation infrastructure is also vulnerable, and our politicians have yet to lift a finger to help. Maybe next month.

Moving cargo by sea is historically cheap and efficient, so most of our imports from Asia arrive via cargo vessels. But now there’s a shortage of shipping containers. This has caused an immense spike in the cost of shipping. From Scott Galloway:

“Until 2020, the cost of shipping a 40-foot container along the world’s major trade routes never exceeded $2,000. Then Covid hit, and shipping firms reduced their fleets in expectation of low consumer demand. Instead, demand went up. This has upended the global supply chain. Shipping costs are now up 5 times to a record high: $10,000.”

The largest ships can carry more than 10,000 of these and when things run smoothly, about 25 million containers are in use on some 6,000 ships sailing around the globe.

The supply chain disruptions are causing backlogs in transporting all this cargo. About 40% of all US container traffic flows through the ports of Los Angeles and Long Beach. Currently, there are 65 ships waiting to unload thousands of containers. Again, that’s complicated by too few drivers in the trucking industry.

Flying into San Francisco last week, Wrongo saw about 30-35 ships also stacked up there. And China’s current forced reduction in energy consumption has hurt many high-tech producers. Wolfstreet reports that:

“…suspensions or reductions of industrial electricity supply that manufacturers in numerous industries are hit with, including key facilities that produce components for Apple, Tesla, Intel, NVIDIA, Qualcomm, NXP, Infineon, and ASE Tech….They’re now under orders to temporarily halt production…”

And supply chain issues go beyond tech products. Currently, 119 million Americans use prescription drugs, of which 25% are imported. These drugs start out as APIs (active pharmaceutical ingredients) — chemicals like hydrochloric acid and caustic soda. And China accounts for 80% of total raw materials for making medicine.

India is the largest producer of generic pharmaceuticals. They fulfill 40% of the demand in the US generic market. And shortages linked to this vulnerability aren’t a new problem. From Pharmaceutical Outsourcing:

“The average drug shortage in the US lasts for 14 months and some last for years when based on a high-risk supply chain. Before COVID-19, the FDA had already placed 145 pharmaceutical products on its drug shortages list.”

Since disruptions of the supply chain cause big price increases for goods that are difficult to get, it’s a threat to America’s economic health. And for medical and pharmaceuticals, it’s also a threat to public health.

Government knows about the problem but can’t fix it. After the PPE shortages at the onset of the Covid pandemic, you’d think we would develop a detailed plan to address the areas of greatest disruption. But all that happened was a 100-day review, making recommendations to shore up vulnerabilities sometime in the future. The proposals are sound, but they won’t help end our current shortages. Consumers can expect the current supply chain issues to persist well into 2022, and possibly beyond.

The geniuses in the multinational corporations who sold us globalization and just-in-time supply chains as the way to our best future are now telling us we just have to get used to shortages.

Economies can’t always just fix themselves. That’s a fantasy of capitalist utopianism.

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Saturday Soother (Not) – March 28, 2020

The Daily Escape:

Mono Lake, CA, just after sunset – 2020 photo by hodldeeznutz. Those columns are called tufa, and are made of limestone.

Trump has finally made America number 1! We’re again showing the world our exceptionalism by having more COVID-19 cases than any other country in the world.

The House has also passed the stimulus bill, and Trump has signed it, so we will also spend the greatest amount of money on the pandemic, with the smallest fraction of it going to the people who really need it.

Or on the medical equipment that we need the most.

Don’t let anyone tell you that the $2 trillion does a whole lot more than provide relief to very rich people and corporations. This from the NYT:

“Senate Republicans inserted an easy-to-overlook provision on page 203 of the 880-page bill that would permit wealthy investors to use losses generated by real estate to minimize their taxes on profits from things like investments in the stock market. The estimated cost of the change over 10 years is $170 billion.”

The NYT explains that under the existing tax code, when real estate investors generate losses from depreciation, they can use some of those losses to offset other taxes.

This is a big tax break because depreciation is a paper loss, resulting in cash flowing to the investor while tax deductions also flow to the investor.

But the use of those losses was limited by the 2017 tax cut. The paper losses could be used only to shelter the first $500,000 of a married couple’s nonbusiness income. Any leftover losses had to be carried forward and used in future years.

The new stimulus bill lifts the $500,000 restriction for three years, this year, and two retroactive years, a boon for couples with more than $500,000 in annual capital gains or income from sources other than their business.

The IRS says the group that benefits comprises the top 1% of taxpayers. Final words to the NYT:

“A draft congressional analysis this week found that the change is the second-biggest tax giveaway in the $2 trillion stimulus package.”

As we approach a new week, doesn’t it seem like fear is setting in? One thing that might have helped would be an empathetic leader in the White House, but you fight the pandemic war with the bozo you have.

In the Thursday evening Coronavirus briefing he acted like a mafia boss, saying that one governor:

“Used to be a big wise guy but not so much anymore…we saw to it he’s not so much anymore.”

He’s referring to New York’s Andrew Cuomo asking for more ventilators. This is GoodFellas meets House of Cards.

As long as Trump controls the distribution of federal resources, he will use it to bully and threaten states for his own political benefit. And think about this: Trump is willing to hand out $500 billion to corporations to save executives, but isn’t willing to spend $1 billion on more ventilators to save sick Americans?

This is what the Trump administration has become:

Trump is NEVER going to do what is necessary to bring this pandemic under control. Success will only be achieved through cooperative action by the States. And, by the rest of us.

Reality is sinking in, we’re gonna be in our houses for a long time. 2020 is becoming the people vs. Donald Trump.

But, there are uplifting moments if you look carefully. Here’s a small effort at a Saturday Soother, aided by the students of Berklee College of Music in Boston MA. After the school closed down and the kids left for home, they created a virtual performance of Bert Bacharach’s “What The World Needs Now”:

Despite Trump, the rest of us are in this together. Protect yourself and your loved ones, this will eventually end, and you want to be here.

Those who read the Wrongologist in email can view the video here.

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