You’re reading the right blog, Presidents‘ Day edition
You’re reading the right blog, Presidents‘ Day edition
No economic data today due to the Presidents’ Day holiday, so here is something else I ran across over the weekend.
Former Federal Reserve Economist Joseph Gagnon critiqued a Paul Krugman column about the cause of inflation. He notes that the causes of this inflation are both supply and demand sided:
To which Paul Krugman replied:
Yours truly bought into supply chain problems as creating some inflation almost immediately. By last summer I was also citing personal income and spending, and retail sales as adding a demand pull element to the inflation. I officially left “team transitory” last August. Two months ago I noted the reverse-“musical chairs” element of wage inflation that was likely to continue.
It’s nice to see two such prominent economists figure it out only a few months later.
How could one not see the supply shock coming as demand returned under lingering pandemic conditions? Reminds me of those that could not see the Great Recession coming. The blind leading the maligned is nothing new of course.
Ron
Supply Chain is not just flipping a switch on and off and back on again. It is not just from mfgr to the warehouse, to the truck, to the store, hospital, pharmacy, car dealer, etc. There is a whole other supply chain which supports the manufacture of those products.
Production planning and orders should have never been turned off. You can reduce it; but, you should not turn it off. Second time for semi- conductors.
There is also another and realistic chance the demand is artificial. Just like in a large snow fall, the stock disappears off the shelf.
Intermingle this with people who no longer know how the product, part, material, etc. is made. They look at the computer rather than get off their asses and “go and see” or genchi genbutsu.
Run,
Well obviously. Also the longer the chain, then the more chances for kinks and damaged links as tension is repeatedly loosened and tightened just to further the analogy.
I saw a small supply chain disruption from a severe flu season about 3 decades ago now. It took almost 6 months to clear all the back orders/shipments from a 1 month snafu. Everyone(left) in sales and production and shipping were working like one-armed paper hangers. We didn’t lose people permanently, either.
This won’t be over quickly or smoothly. Count on it.