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What I don’t see discussed is how JIT has become the “securitization” of manufacturing. Everyone had an incentive to do JIT, and it improved efficiency in each
by xondono 5y ago
What I don’t see discussed is how JIT has become the “securitization” of manufacturing.
Everyone had an incentive to do JIT, and it improved efficiency in each individual company, but it did so by inflating a systemic risk that could be easily triggered by a “black swan”.
- wnissen 5y agoThe thing is that it also reduces the risk of certain systemic risks. Recessions (and even worse, deflation) happen when production is too high relative to demand, but no one has noticed. In the 80s if demand for cars dropped, everyone from the dealers to the manufacturers to the parts suppliers were left with a ton of excess production. In the best case, you merely transfer some production from the end of a boom to the beginning of the end of the bust, but in the worst case all that inventory just sits around and deflates.