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Isn't it more likely to be a trigger for continued/increasing inflation? I.e., the goods still need to get where they're going, but it's going to cost more, ei

Isn't it more likely to be a trigger for continued/increasing inflation? I.e., the goods still need to get where they're going, but it's going to cost more, either through longer routes or more expensive means (rail/truck).

bombcar 3y ago
Take all the goods at Walmart. Find the cheapest largest ones - eg, the ones that fill a container with the least dollar amount. You’ll find that many of those are already made in the USA, especially if they can be made by robots. Here’s one now! https://www.walmart.com/ip/Hyper-Tough-32-Gallon-Heavy-Duty-Plastic-Garbage-Can-Included-Lid-Indoor-Outdoor-Black/17203827 https://www.walmart.com/ip/Hyper-Tough-32-Gallon-Heavy-Duty-... China will end up making high value items where shipping is a small fraction of the cost (Apple already flies most of their products via jet) whereas cheap items that are not labor intensive will move back to near their destination. Other things will move to Mexico and further south.
- alephnerd 3y ago
  > high value items Medium value parts actually (eg. OEM). And it's the same specialization that Mexico has had since the late 1990s and early 2000s when their factories left for China [0][1][2]. That's why Mexican manufacturing has started growing again - costs have equalized between CN and MX manufacturing for intermediate parts. For example, take apart a Sony PS2, Compaq workstation, or a Toshiba DVD Player from the early 2000s - all the electronics parts in it will say Made in "Mexico/Malaysia/Thailand", and the plastic molding was 50% Mexico and China. China didn't enter the fray until after 2008 when Steve Jobs tasked Tim Cook with exploring manufacturing in China, and Samsung began opening OLED factories there as well. Low cost gizmos and gadgets have been manufactured in Vietnam and India for a decade now, and within 10 years they'll both also climb up the value chain manufacturing wise. Nhat Tao in Saigon and Sector 63 in Noida have a similar feel as Huaqiangbei in Shenzhen 10-15 years ago. History doesn't repeat, but it sure as hell rhymes. Mexico also saw economic and political instability 20-30 years ago when its factories began leaving for China. Same thing happened to Thailand in the 1990s, Malaysia in the 2000s, Turkiye in the 2010s, and Phillipines in the 1990s-2000s. [0] - http://international-economy.com/TIE_Sp03_Rosen.pdf http://international-economy.com/TIE_Sp03_Rosen.pdf [1] - https://www.cnn.com/2003/BUSINESS/12/13/china.mexico.reut/ https://www.cnn.com/2003/BUSINESS/12/13/china.mexico.reut/ [2] - https://www.nytimes.com/2003/09/03/world/as-china-gallops-mexico-sees-factory-jobs-slip-away.html https://www.nytimes.com/2003/09/03/world/as-china-gallops-me...
  - bobthepanda 3y ago
    IIRC the big anxiety in China is not really that manufacturing is disappearing, but it’s not clear what comes next. China has started running into the problems that South Korea and Japan have, where they produce a large amount of university graduates not willing to do blue collar work.
    - biotopia 3y ago
      No, the big anxiety in China is that the manufacturing is disappearing, especially to developed world like Europe and US. With real estate and consumer spending - the 2 of 3 economic engines - in the dumps, China has switched focus back to manufacturing - the other engine. However... China's annual exports drop for first time in seven years. Among key trading partners, exports to the U.S. led the decline, down 13% from the previous year. Demand from the European Union and Southeast Asian countries also shrank. https://asia.nikkei.com/Economy/Trade/China-s-annual-exports-drop-for-first-time-in-seven-years https://asia.nikkei.com/Economy/Trade/China-s-annual-exports...
      - bobthepanda 3y ago
        China has always talked a big game about rebalancing without actually making the changes to do so. At some point they were going to run out of export growth as they got richer. What they need to do, and probably won’t, is stop devaluing the yuan and relax capital controls so that Chinese consumers can invest and spend in something that isn’t housing, and finally fuel consumption growth. The current situation essentially results in Chinese being underpaid.
        biotopia 3y ago
        The problem with China is that they got old and demographically smaller, and decided to pick a fight alongside Russia against Europe and US, before they got rich or at least above poverty level. China Tries To Censor Data About Nearly 1 Billion People in Poverty In his article for the business outlet Yicai, Li cited data from a 2021 research paper by the China Institute of Income Distribution at Beijing Normal University, which placed the number of people living on less than 2,000 yuan ($300) a month at 964 million, or nearly 70 percent of the population. https://www.newsweek.com/china-article-censorship-1-billion-people-monthly-income-2000-yuan-poverty-1856031 https://www.newsweek.com/china-article-censorship-1-billion-... China's population drops for second year, with record low birth rate The National Bureau of Statistics said the total number of people in China dropped by 2.08 million, or 0.15%, to 1.409 billion in 2023. New births fell 5.7% to 9.02 million and the birth rate was a record low 6.39 births per 1,000 people, down from a rate of 6.77 births in 2022. https://www.reuters.com/world/china/chinas-population-drops-2nd-year-raises-long-term-growth-concerns-2024-01-17/ https://www.reuters.com/world/china/chinas-population-drops-...
deleted 3y ago
[deleted]
tastyfreeze 3y ago
Prices rising due to longer shipping routes is not inflation. Just normal market dynamics. I think it is important to disambiguate prices rising from increased money supply, inflation, from other causes. One is fixable by policy. Everything else is just the way things work.
- nostrademons 3y ago
  Inflation and money supply increases are normal market dynamics too. The connection is that aggregate supply and aggregate demand intersect at the current price and output levels of the economy. If aggregate supply contracts, this shifts the output level lower, and the price level higher to compensate. Basically, there is a shortage of basic goods & services needed for the economy to function, so the market price mechanism is trying to incentivize people to work on those sectors that are in shortage. Drilling in a level, these aggregates are divided into consumption (current needs) + investment (production in expectation of future needs). A supply shock in a basic service like transportation means resources need to be reallocated to cover the increased cost. That means decreased investment, and all of the potential investment opportunities competing for a smaller pool of savings (which is just the excess of current production over current consumption). This drives up the "natural interest rate", the cost of capital in the absence of central bank interventions. The central bank has a choice between feeling the impact as inflation (where prices rise) or recession (where output drops). If it holds policy rates below the natural interest rate, the money supply increases, and you get inflation. The economy remains out of balance; the market is trying to shift resources from investment to consumption, but if rates are artificially low, investment will be artificially cheap and too many people will be writing software we don't need while we don't have enough truck drivers. If it holds policy rates above the natural interest rate, the money supply shrinks, and you get recession. This is letting the economy come back into equilibrium, but it means that all those software engineers will be laid off and have to get jobs as truck drivers. The Fed's choice is one of these. They can influence whether we feel the supply shock as a painful recession where lots of people lose their job and have to retrain, or whether we feel it as higher prices as the market tries to correct. But because a supply shock is a real drop in output, it means worsened standards of living regardless.

bombcar 3y ago

Take all the goods at Walmart. Find the cheapest largest ones - eg, the ones that fill a container with the least dollar amount. You’ll find that many of those are already made in the USA, especially if they can be made by robots. Here’s one now! https://www.walmart.com/ip/Hyper-Tough-32-Gallon-Heavy-Duty-Plastic-Garbage-Can-Included-Lid-Indoor-Outdoor-Black/17203827 https://www.walmart.com/ip/Hyper-Tough-32-Gallon-Heavy-Duty-... China will end up making high value items where shipping is a small fraction of the cost (Apple already flies most of their products via jet) whereas cheap items that are not labor intensive will move back to near their destination. Other things will move to Mexico and further south.

alephnerd 3y ago
> high value items Medium value parts actually (eg. OEM). And it's the same specialization that Mexico has had since the late 1990s and early 2000s when their factories left for China [0][1][2]. That's why Mexican manufacturing has started growing again - costs have equalized between CN and MX manufacturing for intermediate parts. For example, take apart a Sony PS2, Compaq workstation, or a Toshiba DVD Player from the early 2000s - all the electronics parts in it will say Made in "Mexico/Malaysia/Thailand", and the plastic molding was 50% Mexico and China. China didn't enter the fray until after 2008 when Steve Jobs tasked Tim Cook with exploring manufacturing in China, and Samsung began opening OLED factories there as well. Low cost gizmos and gadgets have been manufactured in Vietnam and India for a decade now, and within 10 years they'll both also climb up the value chain manufacturing wise. Nhat Tao in Saigon and Sector 63 in Noida have a similar feel as Huaqiangbei in Shenzhen 10-15 years ago. History doesn't repeat, but it sure as hell rhymes. Mexico also saw economic and political instability 20-30 years ago when its factories began leaving for China. Same thing happened to Thailand in the 1990s, Malaysia in the 2000s, Turkiye in the 2010s, and Phillipines in the 1990s-2000s. [0] - http://international-economy.com/TIE_Sp03_Rosen.pdf http://international-economy.com/TIE_Sp03_Rosen.pdf [1] - https://www.cnn.com/2003/BUSINESS/12/13/china.mexico.reut/ https://www.cnn.com/2003/BUSINESS/12/13/china.mexico.reut/ [2] - https://www.nytimes.com/2003/09/03/world/as-china-gallops-mexico-sees-factory-jobs-slip-away.html https://www.nytimes.com/2003/09/03/world/as-china-gallops-me...
- bobthepanda 3y ago
  IIRC the big anxiety in China is not really that manufacturing is disappearing, but it’s not clear what comes next. China has started running into the problems that South Korea and Japan have, where they produce a large amount of university graduates not willing to do blue collar work.
  - biotopia 3y ago
    No, the big anxiety in China is that the manufacturing is disappearing, especially to developed world like Europe and US. With real estate and consumer spending - the 2 of 3 economic engines - in the dumps, China has switched focus back to manufacturing - the other engine. However... China's annual exports drop for first time in seven years. Among key trading partners, exports to the U.S. led the decline, down 13% from the previous year. Demand from the European Union and Southeast Asian countries also shrank. https://asia.nikkei.com/Economy/Trade/China-s-annual-exports-drop-for-first-time-in-seven-years https://asia.nikkei.com/Economy/Trade/China-s-annual-exports...
    - bobthepanda 3y ago
      China has always talked a big game about rebalancing without actually making the changes to do so. At some point they were going to run out of export growth as they got richer. What they need to do, and probably won’t, is stop devaluing the yuan and relax capital controls so that Chinese consumers can invest and spend in something that isn’t housing, and finally fuel consumption growth. The current situation essentially results in Chinese being underpaid.
      - biotopia 3y ago
        The problem with China is that they got old and demographically smaller, and decided to pick a fight alongside Russia against Europe and US, before they got rich or at least above poverty level. China Tries To Censor Data About Nearly 1 Billion People in Poverty In his article for the business outlet Yicai, Li cited data from a 2021 research paper by the China Institute of Income Distribution at Beijing Normal University, which placed the number of people living on less than 2,000 yuan ($300) a month at 964 million, or nearly 70 percent of the population. https://www.newsweek.com/china-article-censorship-1-billion-people-monthly-income-2000-yuan-poverty-1856031 https://www.newsweek.com/china-article-censorship-1-billion-... China's population drops for second year, with record low birth rate The National Bureau of Statistics said the total number of people in China dropped by 2.08 million, or 0.15%, to 1.409 billion in 2023. New births fell 5.7% to 9.02 million and the birth rate was a record low 6.39 births per 1,000 people, down from a rate of 6.77 births in 2022. https://www.reuters.com/world/china/chinas-population-drops-2nd-year-raises-long-term-growth-concerns-2024-01-17/ https://www.reuters.com/world/china/chinas-population-drops-...

deleted 3y ago

[deleted]

tastyfreeze 3y ago

Prices rising due to longer shipping routes is not inflation. Just normal market dynamics. I think it is important to disambiguate prices rising from increased money supply, inflation, from other causes. One is fixable by policy. Everything else is just the way things work.

nostrademons 3y ago
Inflation and money supply increases are normal market dynamics too. The connection is that aggregate supply and aggregate demand intersect at the current price and output levels of the economy. If aggregate supply contracts, this shifts the output level lower, and the price level higher to compensate. Basically, there is a shortage of basic goods & services needed for the economy to function, so the market price mechanism is trying to incentivize people to work on those sectors that are in shortage. Drilling in a level, these aggregates are divided into consumption (current needs) + investment (production in expectation of future needs). A supply shock in a basic service like transportation means resources need to be reallocated to cover the increased cost. That means decreased investment, and all of the potential investment opportunities competing for a smaller pool of savings (which is just the excess of current production over current consumption). This drives up the "natural interest rate", the cost of capital in the absence of central bank interventions. The central bank has a choice between feeling the impact as inflation (where prices rise) or recession (where output drops). If it holds policy rates below the natural interest rate, the money supply increases, and you get inflation. The economy remains out of balance; the market is trying to shift resources from investment to consumption, but if rates are artificially low, investment will be artificially cheap and too many people will be writing software we don't need while we don't have enough truck drivers. If it holds policy rates above the natural interest rate, the money supply shrinks, and you get recession. This is letting the economy come back into equilibrium, but it means that all those software engineers will be laid off and have to get jobs as truck drivers. The Fed's choice is one of these. They can influence whether we feel the supply shock as a painful recession where lots of people lose their job and have to retrain, or whether we feel it as higher prices as the market tries to correct. But because a supply shock is a real drop in output, it means worsened standards of living regardless.