The supply chain is of the most crucial pieces of the economy, but even as we are experiencing a recovery after the pandemic, we are facing a new issue. Consumers are buying as much as ever before and this has pushed the supply chain to the breaking point. Mohammed El-Erian talks about a "stagflationary wind" that he says could blow the economy off course. He believes that economic growth rates are going to slow down quite a bit due to the fact that the global supply chain is struggling which will make it tough to keep up with demand.
We are seeing the issues that the UK is experiencing with the shortage of petroleum they have. They are currently struggling to find drivers to transport the oil to the stations. This comes as a result of Brexit and not allowing men and women from other countries in the European Union to work in the UK. Another country that is struggling with energy shortages is China. In the northern part of China, they are being forced to ration power and shut down manufacturing plants. As one of the busiest times of the year approaches, Christmas, China is trying to solve this issue.
In addition to the UK and China, several other countries are struggling with the supply chain. Car companies are shutting down automotive plants in Germany until 2022. Japan is struggling to get energy and materials to the island for a reasonable price. The price per shipping container has increased nearly 300% and in some extreme classes 600%.
The economy is going to have to work quickly to fix the current supply chain issues. There is a threat of another worldwide recession if we are not able to fix the expansive supply chain crisis. I personally do not know exactly how to correct some of these issues, but I am intrigued to see how and when they are fixed, and if it is in enough time.
Source: https://www.theguardian.com/business/2021/oct/02/supply-chain-world-economy-energy-labour-transport-covid
4 comments:
That is crazy that the price of shipping containers have increased up to 300-600%! The rationing of materials increase costs of shipping will probably increase prices for goods and services around the world. It will be interesting to see how exchange rates are for the currencies of countries around the world from their changing economy during this time.
It is quite troubling that the price per shipping container has increased 300-600%. Demand is very high for a variety of goods, but if the prices increase too high because of supply chain issues this will drive demand down and consumer confidence down. I am not sure if there is a simple solution to this problem as this is a global issue not just particular to one area.
Given the rapid recovery from the pandemic, now we're facing an issue on the other side of the coin. If the US government hadn't stepped in as much as it did, I think we would have already been in a recession.
But now we have to figure out how to ramp up production to an adequate level. That means fixing unemployment as not enough people are going back to work limiting the private sector's ability to accelerate production. I'm not sure if in this case, the government needs to take its foot off the gas.
I think in order to fix the problem the government is going to have to step in and try to correct these market failures by subsidizing manufactures of products with supply chain disruptions. The pandemic in my opinion has proved that some government involvement in the economy is necessary in order to protect the everyday person.
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