Inflation, the supply chain, and monetary policy: a self-reinforcing triple whammy

 

If you've been following our discussions on inflation over recent months, you'll know that the cold, hard evidence of financial reality indicates that our inflation rate is close to out of control.  The official rate of inflation bears about as much resemblance to the actual, on-the-street reality as I do to Mata Hari.  Some months ago, I suggested:  "To know the true rate of consumer inflation in the USA, take the official rate declared by the government and multiply it by 3½.  The result will be much closer to reality."  We can argue about the multiplication factor until the cows come home, but I reckon a factor of 3 to 3½ remains a pretty accurate reflection of what's happening out there.  I see it reflected in our grocery bills every time we shop.

I'm far from the only one.  Here are a few articles that should make you worry.  First, Phil at Bustedknuckles, whose "spidey sense" is tingling as badly as mine.

The Just In Time Inventory system has finally, once and for all, been exposed as the Bean Counters Trick that it has always been.

The Trucker’s Strike down in Australia that no one heard about just proved that beyond a doubt and there is your video proof above.

The forty five container ships stacked up off the coast of California waiting to get unloaded that they don’t want you to know about is also proof. Nobody wanted to pay for building and maintaining giant warehouses to hold inventory anymore.

So right now there are 45 floating ones rocking back and forth blocking the shipping lanes instead.

For the life of me I haven’t been able to convince my wife to build up a pantry.

Ninety years ago everyone had some kind of pantry out of necessity.

I’m thinking they are going to be making a come back in a huge way here in the very near future as the signs keep popping up everywhere I go lately and they all say the same thing.

That was two days ago.

I have since seen three more with slightly different variations of the same basic message.

We can’t get what you came here to buy, so sorry.. . .

I am here to tell you that this is not going to be a temporary thing and I hate to use this phrase that got beat to death by the corporate whores a while back but it’s the one that fits the best.

We are living in a paradigm shift.

The old ways are being replaced both deliberately and by side affect necessity.

There is going to be a society wide Darwin effect start showing up here real soon.

There's more at the link.  Note, too, that the Australian truckers' strike to which Phil refers is ongoing, but news of it is being actively censored by every major Australian (and other) news outlet.  You might ask yourself why that's the case . . .

In another article, Phil notes, speaking of a Canadian prepper supplier:

Pay close attention to what this guy is telling you because he is the canary in the coal mine.

His suppliers, the ones who’s job it is to know what is going on with the supply chain, are sending him written warnings about what to expect.

Supply chain disruptions from 6 to 12 months?

I’m here to tell you that is unrealistically optimistic. We haven’t even gotten close to the neck of the funnel yet.

Price hikes of 8 to 30 percent?

Already here and going to get much, much worse.

Again, more at the link.

In case you needed confirmation of what that Canadian prepper supplier is saying, here's the Vancouver Sun, a British Columbia mainstream media outlet.

The vice-president and co-founder of Backpack Buddies, a B.C. charity that provides a backpack of food to 4,000 school kids facing food insecurity each week, has been warned by suppliers that food prices are rising ... The increases range from a five per cent jump on oatmeal, to a 38 per cent leap on cans of beans and pasta.

. . .

B.C. is accustomed to a “robust” food-supply chain, meaning that if a local crop like raspberries fails, we can expect to find berries from California or South America in store instead.

“But this year, the entire West is under siege by drought,” said Tom Baumann, an agriculture expert and professor emeritus at the University of the Fraser Valley. “On top of that, you have the pandemic, which has had a grave impact on the whole system.”

Baumann listed several other factors that contribute to rising food prices, including a shortage of farm workers, increased transportation costs and feed shortages for livestock. “None of it is good for the supply chain,” he said.

Rising food prices come as no surprise to Sylvain Charlebois, lead author of Canada’s Food Price Report, which has accurately predicted price increases the last several years.

“Food connects many elements,” said the food policy researcher at Dalhousie University in Halifax. “Unfortunately this year we have a bit of a perfect storm.”

More at the link.

"A 38% leap on cans of beans and pasta".  Thirty-eight per cent.  That's more than a one-third increase in price, in a matter of months.  If that's happening in Canada, just north of us, what makes you think it isn't happening here?  (Hint:  it is.  It's worse in some parts of the country than in others, but it's here too.  Check your grocery bills.)

We've already noted that the inflation we're seeing all around us is more of a monetary phenomenon than anything else.  I said some months ago:

The reason house prices, share prices, etc. are all continually rising is that the "funny money" created by the Federal Reserve (the red in the graph above) is funding the increase.  More and more empty, valueless dollars, created out of thin air without any underlying economic value, are chasing whatever they can buy that does have economic value.  That's the very definition of inflation:  more money chasing the same amount of goods.  What happens when all those "funny money" dollars are exposed as having no underlying economic value, and therefore become monetarily valueless?  Just look at how much the dollar has declined in value over the past century or so.  Expect an even greater collapse in the not too distant future, as the Fed's economic chickens come home to roost.

The real problem is, nobody in our government is paying attention to the economic facts and figures that should be at their fingertips.  They're utterly ignoring the economic elephant in the living-room.  They're too busy scoring political points off each other, pointing fingers, decrying this, proclaiming that, accusing, denouncing and posturing.  They're caricatures of leaders, intent only on feathering their own nests by fooling their constituents into carrying on voting for them - while their failed policies are destroying our economy around us.

Charles Hugh Smith, whom we've met many times in these pages, comments:

Just as in the final throes of Imperial collapse in the Soviet Union, nobody seems to be in charge in the U.S. It's difficult to tell if incompetence is now the default setting everywhere in the American State or if there are a couple of competing chess games being played behind the curtain. When failure is so absolute, incompetence alone doesn't seem quite up to the task. Perhaps failure received a nudge. After all, the cliff edge is already crumbling and it doesn't take much to help a rival lose their footing.

As I have argued recently, inflation is not transitory; the trends have reversed and inflation is now embedded via two fundamental dynamics: the endless trillions being created out of thin air by the Fed and Treasury are not increasing the productivity or resilience of the U.S. economy; rather they are fatally weakening the economy and society by institutionalizing soaring wealth-income-power inequality, and 2) globalization's increase of global supplies and optimization of global supply chains has reversed; scarcities can no longer be filled by exploiting another developing-economy via neocolonial-neoliberal pillage. That oh-so-profitable game is over, but few believe it's possible: isn't there always another place and people to pillage?

The warring elites will have to choose an economic side soon: either go with the Fed's plan for an ever-more unequal future America in which inflation stripmines the bottom 90% while the technocrat class and its billionaire owners become ever-wealthier and the world loses confidence in the predictability of the U.S. dollar's value, or the debt and phantom capital of the Fed's sand castles are wiped away and the dollar is re-anchored to the nation's economic foundations of improving productivity via newly enforced competition, transparency and accountability and the resilience of a reshored industrial base.

Hopefully America's equivalents of the KGB have an equivalently sound grasp of just how prone to failure America's financial fantasy has become. No empire can survive the debauchery of its currency, for the empire's power flows not from hard power (military) or soft power (cultural influence) but from the currency that funds both hard and soft power.

There is no win-win at this late date: one elite will lose, and America will itself be lost if those debauching the dollar are allowed to win. The rationalizations are as absurd and extreme as the policies: as long as the trillions flow into the assets owned by billionaires, there can't be any inflation, and so on, an endless spew of excuses by those profiting from the debauchery of the dollar.

No nation can produce less of lesser quality, and squander more on infinitely greedy and corrupt elites, all funded by issuing trillions of new units of currency, and imagine that this asymmetry will never have consequences.

It's not yet clear that there is any leadership left in America. What's playing on stage are warring camps of self-interested elites fighting to secure their power even as the foundations crumble beneath their feet.

More at the link.

I'm going to give the last word to Peter Schiff.  He's a "gold bug", and has his own perspective on our economy, which you should take into account:  but I can't disagree with what he says in the video clip below.  It's really important.  I highly recommend that you take a few minutes out of your day to watch it, and think about what he says.  It's the reality we're facing right now.

Money quote from the video clip:

"So, you can’t solve this problem with inflation because inflation is the problem ... The limiting factor on consumption is the number of goods that you produce. If you simply produce more money and let people use it to buy stuff, well, prices just have to go up. That’s what these guys don’t seem to understand yet – that you can print money, but you can’t print stuff."

True dat.  We're seeing the consequences of that all around us.  We're awash in stimulus dollars, but we can't buy enough goods with it because of supply chain problems, inflation, and economic mismanagement.  It's a gigantic circular cluster- copulation, and I see no way out of it unless and until our politicians wake up to the catastrophe they're inflicting on us, and do something to change our trajectory.  They won't, of course, because they're terrified that doing so would mean they'd have to cut entitlement programs that they rely on to attract votes.  (Yes, it would.)  They're not going to do anything that might jeopardize their hold on power . . . so the rest of us are well and truly up the creek without a paddle.

This is not, repeat, NOT going to get better.  It's going to get worse.  Plan and prepare accordingly, or be steamrollered by reality when it arrives.

Peter