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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 171.90+1.5%11:36 AM EST

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To: TobagoJack who wrote (179634)10/22/2021 6:32:06 PM
From: sense  Read Replies (1) of 182897
 
I know some would read that and say "Meh... a few percent here or there... what's the big deal ?"

But, we're already in an economy with a very large percentage of zombie companies that are surviving now only because low interest rates allow them to kite checks... while hoping some economic miracle happens to provide them with a new future that they just don't and won't have otherwise. Adopting the Cathie Woods style of optimism is unlikely to be enough to see most of them through...

And, for many others... those percentages, even at the smaller end of the range, are already larger than their margins...

The costs, of course, whatever the source... even if only the delays in timing... impacts prices... and thus REQUIRES business have to plan to anticipate higher future costs... and counter them with planning for higher prices before the costs are incurred...

So, there is and will be inflation... its already baked into the reality... And, that impact gets bigger, too... because the small percentage reduction in efficiency imposes costs in countering it... and those costs can be far larger than the smaller couple of percent that has to be undone with a plan to "fix it"... Fixing problems in a bottleneck... likely requires buying a whole new bottle... And, as long as you need a new bottle... might as well buy a better bottle... in the right place... to avoid future risks of more of the same ? Fixing it likely to cost more and take longer... with the delays in that efforts adding into all the others...

But, I think the issue for the Fed is.... that they do want inflation... but that's not the inflation they're looking for. The inflation they want... is the one resulting from them fostering the printing of money... as that's a form of inflation that shrinks the debt usefully. But, the structural / cost push inflation we are seeing... doesn't really help the Fed very much... as it deflates the value of their dollars even before they can issue them... So, to get the impact they want... they're going to have to inflate ON TOP OF the underlying natural rate... to win the benefit of being first to touch a new dollar that's just been printed... by using it before others figure out how fast its value has been shrinking...

The structural issues driving inflation... don't obviate the OTHER impacts... like that from the mass of debt ? What the structural issues mean... is that avoiding other forms of deleveraging by inflation of the currency... isn't going to be as linear or as simple as it might have once seemed...

There are going to be feedback channels that open between different factors... and the resonances might prove to have entirely unanticipated consequences. The one that's easy to anticipate... is that there is going to be a LOT more inflation than they're saying there will be... and that's going to be true whether or not they inflate the currency as they planned...

I agree that there will be resulting opportunities for the more agile... which, in context, will mean a focus on those that are smaller, more locally focused... or able to be vertically integrated and thus own and control their supply chains internally.

But, while market access issues imposing new costs and limits will tend to impact almost everyone... as imposing a general malaise... that occurring clearly will have discontinuous impacts...

Just look at the shipping container debacle for an example... which is wonderful, I suppose, if you happen to be a manufacturer of shipping containers... assuming you can get the steel, aluminum, tools, parts and power and employees that you need to actually manufacture them. Also good for shippers with idle boats that suddenly have a use as floating storage for containers that have nowhere else anyone can put them...

But if you are a small manufacturer of some thing with customers on the other side of the world... the inflated costs of shipping containers... the time delays imposed by shipping logistics being bolluxed... the rising cost of shipping... and then... end up finding that customers on the other end are experiencing market access problems of their own... so it all combines to impose vastly larger problems in the business than "a few percent" implies ?

The uneven nature of the distribution in the impacts... probably worth some study... both to best enable avoidance of those impacts... and to focus on the innovations needed to overcome the realization of the risks now unfolding...

I posted a while back about a fast food outfit in the U.K. with smart management who'd thought it through well enough to have deliberately enabled redundancies in their supplier networks... thus avoiding the supply cutoffs that many competitors were experiencing. They were privately owned, so don't recall the name...

But, its notable mostly as its the only one I've heard of, still, that has navigated this set of obstacles properly... to gain a competitive advantage from others feeling the pain more.


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