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Central banks are stealing underpants

Central banks are stealing underpants

Let’s talk about supply shocks.  Cast your mind back to the beginning of March 2020.  Remember how everyone panic bought pasta and toilet paper?  Except that it didn’t really happen – at least on a large scale.  What happened was, in their usual underhand way, the establishment media paid supermarket managers to hide the toilet rolls just out of shot while they photographed the empty shelves.  And then there was that time when the photographer got one of his mates to load a shopping trolley with multi-packs of toilet rolls to give the impression that this was commonplace.  But there were shortages.  Not from panic buying, but simply from the additional demand as we all added one or two extra items to our weekly shop.  In a just-in-time supply system, that is all it takes to create a shortage.

There was more though.  When lockdown began, there was a massive switch from what we might call the wholesale supply chain into the – usually much smaller – retail supply chain, as big consumers like schools, offices, factories, hotels and restaurants dramatically cut consumption even as a newly created army of homeworkers sought to increase theirs.  For example, most eggs would previously have been consumed in the wholesale sector, where they are packaged in cartons of thirty or more.  In the retail sector, eggs come mostly in half-dozen and dozen cartons.  So that, at the beginning of lockdown there was an egg shortage because of the shortage of egg cartons.  Toilet paper was affected in a similar way as demand for the large, wholesale rolls used in offices and factories slumped even as demand for household size rolls rocketed.

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