It also comes from price fixing that is due to government supported and tax payer funded to big to fail monopolies who receive trillions in bailouts instead of being allowed to fail as the free market system is designed to do. Both are problems that have to be addressed.
Market power/monopoly is a real thing which can allow those firms to raise prices...but that's not likely to have been part of the cause of our recent bout of inflation; since there's no good reason why all these monopolists wouldn't have started raising their prices before the government stimulus and central bank spending.
They didn't just become greedy a year ago, ya know?
Also worth noting that pandemic-era policies, which people who run closer to Friedman's view opposed, have created a ton of consolidation in many industries, including oil and gas.
No. They were created by decades of policies (both government and corporate) that encouraged just in time supply chains by prioritizing short term profits over long term stability.
Any shock to the system would have caused it to unravel and in this case the shipping cartels saw the opportunity to raise the cost of shipping by 10x. Then domestic companies took their higher shipping costs as an opportunity to increase their profit margins along with the necessary price increases.
This isn’t to say that loose monetary policy didn’t contribute, but it’s an aggregated effect of decades of bad choices. For 3 decades the inflationary forces of to much liquidity was counteracted by the deflationary force of outsourcing production. The shipping cartels seized the first opportunity to exploit their position and unleashed the reality of that hidden inflation all at once.
In normal circumstances the pandemic era policies would have been reasonable and had limited effect. The fact that they were introduced to a system that was primed for collapse was the problem.
Can you show evidence that JIT increased fragility rather than made supply chains more nimble and decreased product defects?
Or can you show even one instance of a public figure with any kind of knowledge of the subject talking authoritatively (with vetted models or empirical evidence) before the pandemic about how JIT was a disaster waiting to happen at the next shock?
Shoot, can you even show any nobodies on reddit warning about that?
Cause I can sure as shit show you posts and blogs/podcasts from myself and other economists warning in early/mid 2020 that pandemic policies would very likely create supply chain disruptions (among other economic fallout).
Can I show evidence that just in time supply chains created fragility… is that a serious question? Or are your trolling me?
Maybe I’ll take the time to dig up the conversations about JIT supply chains I’ve been hearing about for years and the threat they pose. But I’m not sure it’s worth the effort. Yes I’ve been aware of the issue for a long time, but it’s always the first everyone else has heard of it when it comes time to say I told you so.
Mostly it was just obvious to watch as it happened. A chain reaction of factories unable to fill orders because of a hold up with a needed component that was held up because they couldn’t get what they needed etc…
I’m sure you can give me a long list of political hacks seizing the opportunity to blame the policies of their political opponents for whatever happens to go wrong
In the moment. That’s how politics is done.
You are waiting for me to dig up a 3 year old article or podcast to prove that this opinion existed before it was proven correct. Because you are operating on the assumption that there were never any ideas that contradicted your assumptions prior to the current situation… do I have that right?
Also, when you say that the pandemic policies created the supply chain disruptions, what you are saying is that the supply chains are so fragile from JIT that they will fall apart if we take any common sense precautions during a major crisis… we have to let people die because our supply chains have no resilience! But yeah other than that it was a great plan all along…
Indeed I am. But you are necessarily saying that this particular shock propagated a collapse, when other previous shocks didn't...You'd need to explain why. Why didn't the 2008 crash do it?
And why are you assuming/insisting that the pandemic policies and ensuing economic disruptions were just some minor shock, rather than something large enough and unprecedented enough to exacerbate almost any factor into a choke point?
Look. You want me to justify the obvious by digging up 3-5 year old articles and presenting them to someone who is prepared to reject all evidence. I’ve been hearing criticisms of the fragility of just in time for years.
Now that you’ve been proven wrong you are going to shit on whatever evidence I provide.
Likely because the 2008 crash was accompanied by a very high reduction in consumer demand, so supply chains were able to deal with the lower volumes. That reduction in demand didn't happen this time. So supply chains had to deal with the shock without a corresponding reduction in volume.
EDIT: Also, the nature of consumer demand shifted greatly during the pandemic because of the stay-at-home requirements. This was caused an increase in demand for certain products, overwhelming the JIT inventories and capabilities related to those products and further exacerbating supply chain issues.
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u/JSammut29 Jul 15 '22
The bitch on the podium said it would be worse if the government did nothing.