Bad News, I’m Afraid
The comments below are an edited and abridged synopsis of an article by Jim Rickards
The breakdown of global supply chains is well-known by now. Whether it’s finding groceries at the supermarket, buying a car or buying appliances, goods are scarce. Also, deliveries take forever and choices are limited.
Many people wonder why the problem isn’t going away, but the supply chain is a complex dynamic system. When any complex system collapses, you can look for specific causes but that’s usually a waste of time. Systems collapse internally because they are too large and too interconnected and require too many energy inputs to keep going.
Any specific cause is more likely to be a symptom than a true cause. It’s frustrating, but that’s the answer.
Most Americans’ first encounter with the supply chain meltdown was in the spring of 2020 during the first wave of Covid. Shoppers noticed that items at Costco and other big-box stores were cleaned out.
The shortages were real, but were limited to specific products. The other aisles at Costco were stocked and so were all the other stores around (at least those that were allowed to remain open).
Up for discussion: Now it’s everything; all connected and all collapsing at once; the ‘factory to the world’ is closing down; forced labour; and a race against time.
“The other thing we can be sure of is that these mandates will slow the economy and destroy wealth.”
“The bad news for investors, again, is that this situation will persist for years. It’s not easy to correct and definitely not something that can be corrected quickly.”
“In markets, this will play out as higher costs, lower earnings and ultimately lower stock prices.”
“With markets still close to all-time highs, this could be a good time to lighten up on stocks before the supply chain reality catches up with the stock market bubble… When it does, it won’t be pretty.”