History tells us we can spend our way out of a depression. It happened in the 20th Century as Hirohito and later Hitler forced us into war, and the nation was compelled to produce. America needed everything, Guns, Tanks, Ships, Jeeps, planes, bombs and bullets. Not to mention gasoline and diesel fuel, thousands of uniforms. America rolled up its collective sleeves, went to work or went to war and made the sacrifices to get the job done.
Now it appears we can vaccinate our way out of a pandemic, and we’re trying to spend our way back to prosperity, but it’s tricky. Right now, it seems everything is in short supply. From lumber to labor, many a commodity or product or service is in short supply and that’s driving prices higher.
Early in the pandemic, you’ll recall some of the symptoms of COVID 19 and the need to constantly sanitize led to shortages of bathroom tissue, paper towels and hand sanitizer. Enterprising brewers and distillers shifted their production line to make hand sanitizer. Eventually the paper mills caught up with demand, and we all got what we needed.
Fast forward to May of 2021. Because of vaccines the pandemic is winding down, and in some sectors the economy is revving up, but in others, the wheels continue to spin. Economists have long held when demand is greater than supply prices go up and vice versa. But they’ve never had to factor in how drought, computer hackers, and government cash payments that basically invite workers to stay home can impact that supply and demand curve.
Despite climate change and bad forestry policies and ensuing wildfires, the world still has plenty of trees. But the timber in warehouses and being cut and produced is no match for the demand for houses, cardboard and paper packaging. That send lumber prices skyrocketing. Think of just how many boxes were delivered to you via AMAZON–UPS OR FEDEX during the pandemic. Then multiply that number by a few hundred million.
Then consider how much fuel those delivery trucks need. Then add in all that diesel the over the road trucks that bring the finished goods to the warehouse consume. That alone is enough to boost prices, but look what happened when Russian based hackers tapped into a giant US Pipeline. In a matter of days gas stations along the eastern seaboard either ran out of gas all together or decided to triple the price of already high prices.
Lumber prices are adding tens of thousands of dollars to the price of a new home. Aluminum is also in short supply, and barrage companies like California based Monster reports soft drink cans are in short supply.
Drought around areas of the globe is impacting prices for coffee and other commodities. Semiconductors are in such short supply that the production of cars and trucks…which now rely heavily on board computers is slowing new vehicle production, while demand for transportation is pushing up the price of used vehicles.
And while the current and former administrations may have meant well, pandemic relief payments added to standard jobless compensation is putting hundreds of dollars more into the pockets of millions of formerly laid off workers, who would make less money on the job. Restaurants and other service sector businesses can’t get good help–or any help. Some have had to close a day here or a day there, because they don’t have even a skeleton crew to run the operation.
And even when the joints are open, you may see a number of menu items crossed off because purveyors can’t get certain products. And of course it’s sticker shock for just about everything at the grocery store.
Supply chain managers are not encouraged that this will end any time soon, but there is some hope for the service sector. Unless the democrats want to send America deeper into debt, those pandemic relief payments will wind down by December and those restaurant operators will be turning workers down, not fighting to find them.
That is if they’re still in business…
Now This
Crane’s Corner-News and Comment