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No Chips? No Product

The supply chain issue is bad enough, but now it is compounded by China's shutdown.  Car dealers are moaning that they can't get product, and used cars are up 45% in the last 12 months.  We have a shortage of semiconductor chips, and it's almost impossible to think of any product today that uses electricity but does not have a chip in it.  Hell, even your toaster is run by a chip.

Batten down the hatches, folks.  Shortages are going to get much worse, and inflation looks like it will go into double-digits well before the end of the year.

I have some prized Zimbabwe currency.  The denomination of the biggest bill is $100 Trillion.  That note today will not even buy a cup of coffee.  If we are not careful, the U.S. Treasury, even though it has the exorbitant privilege of holding the world's reserve currency, might have to bring back the $1,000 bill if we experience rising inflation in a short time frame.

The problem with inflation is that it tends to breed more inflation.  If you are a restaurant owner, all your food products are going up in cost.  So you have to increase your prices - but that means having to print new menus, which is an added expense.  So, to delay the next menu print, you increase your prices slightly higher than you need.  And if you are a corporation selling a consumer necessity, you increase your prices and add just a little bit more to avoid having to give your customers two price increases in succession.  And as everyone adds a little bit for protection, inflation starts to run away.

One way that corporate vendors attempt to fool consumers is by maintaining the price of a product, but reducing the contents of the package.  Remember when it used to be difficult to remove the core of an empty toilet paper roll, because you couldn't get your finger in the right position to unwind the cardboard core?  Not today.  Many toilet tissue brands are a full inch thinner in width than in years gone by.  And have you had the experience of opening a cereal package and having to use a flash light to find the cereal at the bottom?  Here the vendor is fooling you by delivering less content, but retaining the original size of the package to maintain the footprint on the grocer's shelf.  This is just one of a number of techniques used by corporations to mask the effects of inflation.

The only way to control inflation is through higher interest rates.  The Federal Reserve Banking Cartel has been keeping interest rates at zero ever since 2008.  ZIRP has allowed corporations to buy back loads of stock in order to inflate earnings, and thus inflate the price of the stock.

That's just one of the many reasons that the stock market averages have advanced so rapidly without a major correction.  But if interest rates are allowed to rise fast enough to counter inflation, stock values will likely plummet and drive the U.S. deeper into recession.  (More than one financial writer has said that we are still in the recession of 2008 - but the Federal Reserve has buttered over the inherent weaknesses in our financial system by holding interest rates at zero for well over a decade - something we have not seen in recorded history.)

Now is the time to prepare for some rough sledding ahead, because it's likely the current administration will drive us deeper into the economic abyss.  If you need auto or home repairs, now is the time to take care of them, because the prices for repair services are likely to climb as consumers try to make do with what they have.  (Hell, you can hardly find a dealer who can deliver a new vehicle to you on demand, so you might as well spend cheapening dollars to lengthen the life of the high-end products you own.)

Keep a few thousand dollars in cash on hand, even though the money will be losing value - because if we one day have a banking holiday, it's possible the banks could put a hold on all credit accounts and possibly even limit cash withdrawals.  It's always good to remember that your banker is really not your friend.  Should we have a major banking event, your bank could well deny you access to your safety deposit box.  (And how about the way the banks cooperated with tyrannical Canadian government to freeze the bank accounts of those who participated in the truck convoy protest?)  Your banker is not your friend, nor is your communications carrier.  (Remember Verizon and AT&T ratting out to the FBI, those of their customers who happened to be in Washington D.C. on January 6, 2021?)

The world is terribly unsettled at the moment, and the overwhelming majority of Americans are sure the country is on the wrong track.  Since the psychology of consumers plays a key role in the destiny of our financial system, we need to realize that the Americans are in pain, and that pain will cause them (us) to make decisions that could accelerate the rate of inflation.  My Dad used to tell me:  Always bet on the champ.  He also said, Never buck a trend.  Our current trend is inflationary, and it makes sense to extrapolate that inflationary trend well into the future.

Apple, Other Manufacturers Face Major Shipment Delays as CCP Quarantine Policies Squeeze Suppliers

Bill Fried