Monitoring Biden and other Contemporary Events

Whitewashing the fact they come here and take our good jobs, while the ones from the south get blamed for taking good jobs when usually they don't.

Wait, you only think immigrants should come from the North?

Since the onset of COVID, consumers have been experiencing disruptions in the supply chain. The bad news is that it’s going to get worse.

The media and government don’t want the public to panic when they encounter empty store shelves, but it’s impossible to ignore that the shortages at the grocery store are a serious problem, and becoming too big to hide.

In June, King Yuan Electronics Co, one of the world’s largest chip-testing companies, temporarily suspended operations due to COVID-19 infections at a factory in central Taiwan. The technology world was already struggling with supply chain issues at the time. This exacerbated the shortage of semiconductor chips which has been estimated to cost car manufacturers $210 billion in revenue this year alone. The White House acknowledges that this disruption could knock one full percentage point off the GDP, resulting in waves of shutdowns, and “hurt the hundreds of thousands of U.S. workers employed in manufacturing jobs across the automotive and heavy trucking sectors.”

While chips are needed for many products — including heating and cooling systems, computers, smartphones, appliances, gaming hardware, and medical equipment, it isn’t the only shortage plaguing industry.

Wood pulp has increased in price over 50% per metric ton over the last year which is driving up prices for cardboard, printing, books, and toilet paper. A coffee shortage is predicted after a record drought in Brazil, and too much rain in Colombia. And in China, power cuts have led to the production shutdowns of 160 companies in textile, dyeing and chemical fiber industries. And there are dozens of other shortages such as automotive parts, pharmaceuticals, appliances, and more.

It’s not a matter of fixing one problem. A cascade of failures in raw materials, production, shipping, staffing, labor, and weather disasters may last for years. Unless you live off-grid and grow everything you eat or use, your life depends on goods being transported around the world. We are truly a global economy. Everyone living in modern civilization can expect to experience some level of deprivation.

Most people naively believe that something like apple juice comes from a few states away. Sure, the actual juice might be derived from Washington apples, but there is a lot more than fruit that goes into the final product — ink, metal for the container, cardboard, factory machines, parts for the truck — and workers in every step in the process. Changing the method of production or retooling a factory to use alternative supplies is costly and difficult. For many goods, it is simply impossible.

The supply chain isn’t only about transporting the finished goods to the consumer, it’s about moving raw materials, too. Products may start in one country, be assembled in another, and sold in a market on the other side of the globe.

Besides a shortage of components and raw materials, there is the issue of a lack of workers. The US Labor Department reported a record 10.9 million jobs open in July. To resolve the ongoing logistics problem, you first need trained employees. And the shipping industry is hurting for help.

How stuff moves around

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 the GDP.

An intricate system of rails, barges, and trucks transport the goods to factories, distribution centers, stores, and consumers. Trucking alone moves 71% of all this freight in America, requiring a functioning system of roads, highways, and bridges — aging infrastructure vulnerable to extreme weather events from climate change.

Moving cargo by water is efficient. So clothing from Bangladesh, electronics from Taiwan, or consumer goods from China arrive at ports via cargo vessels.

This summer, typhoons off the coast of China led to record costs of moving a 40 ft container from Asia. Shipping to the US East coast skyrocketed in the last year more than 500% to a whopping $20,000. Rising costs added to the delays as companies hoped to contract for better rates or simply to find available space on a sailing. Adding to those problems is a shortage of shipping containers which is expected to last well into 2022. The largest ships can carry more than 10,000 of these and when things run smoothly, about 25 million are in use on some 6,000 ships sailing around the globe.

But 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. It’s a complicated problem due mostly to a separate host of issues in the trucking industry.

Hurricane Ida didn’t help matters, either. Barge traffic transporting goods on inland waterways has not fully recovered following the August storm. The Port of South Louisiana, the largest grain port in the US handling more than 50% of the nation’s grain exports, sought federal assistance in recovery efforts following the devastation from Ida. Other ports in the region also requested urgent funding from Congress.

While severe weather impacts the Gulf states, the trucking industry grapples with a shortage of workers. It’s not just drivers, either. Recovery is expected to take much longer as the industry lost 1.52 million workers throughout the pandemic. Experts now forecast a shortage of 330,000 drivers through 2024.

Not just COVID, but you really don’t want to get sick

Does your life depend on medication or healthcare? Do you think you can easily switch to a generic version of critical pharmaceuticals? Either way, you may want to start worrying.

Currently, 119 million Americans use prescription drugs, one-quarter of these are imported.

Drugs start out as APIs (active pharmaceutical ingredients) — chemicals like hydrochloric acid and caustic soda. China accounts for 80% of total raw materials for making medicine — and for antibiotics like cephalosporins, azithromycin and penicillin, the number jumps to 90%.

India is the largest producer of generic medicines turning the raw materials from China into drugs to fulfill 40% of the demand in the US generic market. This vulnerability was highlighted at the beginning of the pandemic as supplies of medical equipment were strained and officials began to nervously eye drug imports. Pill bottles alone are projected to top $9 billion by 2024, a requirement for the distribution and sale of medicines. Even if the US transitioned to domestic production of drugs, raw materials would need to be shipped from China. Such a move would require importing machinery which is already impacted by supply chain delays.

“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.”
Pharmaceutical Outsourcing

Pharmaceuticals are only one critical product out of thousands needed to keep patients alive. COVID not only caused a shortage of masks, ventilators, and gloves, but increased demand for testing supplies and personal protective equipment. The supply chain affects suppliers of exam tables, heart defibrillators, crutches, IV poles and dozens of medical supplies.

People die without a functioning supply chain. So what is the government doing about it?

Washington’s lack of response

The disruption of the supply chain is a tremendous threat to America’s economic health. It’s also no surprise.

The White House has acknowledged that experts forecast these shocks which cost companies 42% of one year’s earnings every decade due to the recurring problem. So, it seems obvious there should be a solution already in place.

One would think with this threat to the economy — especially after the PPE shortages at the onset of the COVID pandemic— a detailed plan would be implemented to address the areas of immediate need causing the greatest disruption. Addressing the labor shortage in the trucking industry would make tremendous strides toward alleviating much of the current crisis. But this type decisive action is just as lost as a cargo container waiting on a dock somewhere on the coast of Asia.

One solution would be to raise the federal minimum wage from a laughable $7.25 to $20 an hour. This would quickly resolve many staffing shortages across a number of industries as workers would be able to afford to take positions in urban areas with a higher cost of living — such as communities where ports are located. When businesses are unwilling to offer a living wage, the positions remain unfilled creating a labor shortage which in turn threatens the economic stability of the nation. America can no longer afford to allow employers to risk the country’s economic health by refusing to retain a reliable workforce, especially in a critical industry such as shipping.

Instead, the response to the crisis from Washington has been to issue a 100-day review and make recommendations with an eye on a long-range plan to shore up vulnerabilities in the future. While the proposals are sound such as funding domestic manufacturing, and meeting the need for minerals for the burgeoning EV market, most of the attention has been focused on preventing future disruptions. This does little to stop the ongoing bottleneck at the nation’s ports.

To address the immediate supply chain problems, the White House will establish a task force led by the Secretaries of Commerce, Transportation, and Agriculture. The team will resolve problems where a “mismatch between supply and demand has been noted over the past several months: home building and construction, semiconductors, transportation, and agriculture and food.”

Such an effort will do little to solve the current crisis as the wheels of bureaucracy turn slowly. Consumers can expect the current supply chain issues to persist well into 2022 and beyond.

I'm hoping not but my confidence level is low.

It was all going so well. Successful vaccination programmes were driving the post-pandemic recovery of the global economy, stock markets were back at record highs, and prices were rising just enough to make deflation fears a thing of the past.

But a supply crunch that initially put a question mark over the availability of luxury cars or whether there would be enough PlayStations under our Christmas trees is instead morphing into a full-blown crisis featuring a shortage of energy, labour and transport from Liverpool to Los Angeles, and from Qingdao to Queensland.

All the problems are in one way or another tangled up in the surge of post-pandemic consumer demand, but taken together they threaten what one leading economist calls a “stagflationary wind” that could blow the global economy off course.

Mohamed El-Erian, and adviser to the insurance giant Allianz and president of Queens’ College, Cambridge, says this week’s surprise fall in factory output in China was a clear warning that the world economy could slump while prices were still rising quickly, a doomsday double whammy that almost sank the UK in the 1970s.

“The supply chain problems are much more persistent than most policymakers expected, although companies are less surprised,” he said. “Governments are having to rethink quickly because the three elements – supply side, transport, labour – are coming together to blow a stagflationary wind through the global economy.”

Energy shortages are providing the starkest illustration of the problem, with increasing numbers of petrol stations in the UK running out of fuel, and cities in northern China having to ration power and force factories in the world’s number one manufacturing nation to shutter just when pre-Christmas demand is reaching a peak in the west.

Both countries have been caught out by not having enough reserves amid a scramble throughout the world for natural gas and for oil, which has almost doubled in price in 12 months to nearly $80 a barrel.

Along with ongoing Covid-related restrictions in some large manufacturing countries such as Vietnam, and a well-documented shortage of components such as computer chips, factories are simply not producing enough.

British car production dropped by 27% year on year in August as a lack of semiconductors and led to a big drop in the number of vehicles exported to Australia, the US and China. On Thursday, Volkswagen, Ford and Opel maker Stellantis announced fresh temporary closures in Germany because of the chip problem. Opel is closing a plant until 2022 – the longest such stoppage so far.

In Japan, an index of stocks of finished goods has dropped to levels not even seen in the wake of 2011 earthquake and tsunami disaster.

But even if they could get their hands on more sources of energy and materials, and factories could make more goods, it would still cost more to ship things. Drewry’s shipping index, which measures the cost of containers, is up 291% compared with a year ago. On some busy routes, such as from China to Europe’s biggest port Rotterdam, the cost of shipping a container has risen sixfold in the past year.

The problems don’t end when the goods arrive at a port, with labour shortages presenting a final problem in the increasingly tortuous journey of products to their final destination. A lack of truck drivers in many parts of Europe, partly because of disputes over conditions and partly because of ongoing Covid restrictions, is causing delays.

Flavio Romero Macau, a supply chain expert at Edith Cowan University in Western Australia, says that massive pent-up consumer demand in the wake of the pandemic has strained the world’s delicately balanced economic ecosystem.

“Consumers are crazy to buy things because the world is awash with dollars from government stimulus, higher savings and pent-up demand. PlayStations, laptops, phones, gym equipment – you name it people are trying to buy it,” he says.

“Higher demand and restricted supply equals inflation: there’s no way out of it. You put all these things together and its a perfect storm.”

While warnings increase about the threat of stagflation, more economists believe central banks might have to move more quickly to raise interest rates if inflation takes hold across the developed world.

The Bank of England has flagged that rates could go up next year, and the US Federal Reserve has at last signalled the end of its massive pandemic stimulus plan that could push up the cost of borrowing in 2022.

Neil Shearing, the chief economist at Capital Economics, said the UK and the US were most at risk from overheating into inflation, leading to central bank action.

“Risks are generally skewed to the upside and there is a real possibility that inflation increases to a much higher rate that would, in time, necessitate a more substantial tightening of policy,” he said.

A paradigm shift in monetary policy after years of cheap credit could be accompanied by a rebalancing of the global economy as countries seek to shorten supply chains and become more self-sufficient through more autarkist policies, which promote non-reliance on imports. Romero Macau believes many companies could take the chance to move manufacturing away from China, where the supply of cheap labour that launched its economic miracle is drying up, to countries such as Vietnam and Mexico. The latter, he said, has cheaper labour costs than China, making it attractive especially for American companies.

Richard Flax, the chief investment officer at digital wealth manager Moneyfarm, said the crisis was already prompting a rethink by policymakers and business leaders.

“Large corporates and governments are reviewing their supply chains for crucial goods, with a mind towards security of supply as well as cost. We would expect to see supply chains in some sectors shorten as a response to Covid, either via reshoring, or as companies try to diversify their sources of supply.”

I must have missed all that "action", Walter.