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World Bank Warns Global Economy “Perilously Close To Falling Into Recession”

World Bank Warns Global Economy “Perilously Close To Falling Into Recession”

Six months ago, The World Bank slashed its global growth outlook for 2022 and 2023 to +2.9% and +3.0% respectively blaming “the war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation” for hammering growth.

Today, in its latest report on global economic prospects, The World Bank has slashed its growth forecast for 2023 by almost a half to just +1.7%, led by weaker growth in all the world’s top economies — the United States, Europe and China.

“Global growth has slowed to the extent that the global economy is perilously close to falling into recession,” the World Bank said.

That would mark the third-weakest pace of global growth in nearly three decades, overshadowed only by the 2009 and 2020 downturns.

The World Bank called on global central banks to remain alert to the risk that aggressively tightening monetary policy to fight inflation could spill across borders. The new report called for discussions between central bankers to “help mitigate risks associated with financial stability and avoid an excessive global economic slowdown in the pursuit of inflation objectives.”

“Weakness in growth and business investment will compound the already devastating reversals in education, health, poverty, and infrastructure and the increasing demands from climate change,” said David Malpass, president of the World Bank.

For now, those central bankers are facing their nemesis… Stagflation…

Though the United States might avoid a recession this year – the World Bank predicts the U.S. economy will eke out growth of 0.5% – global weakness will likely pose another headwind for America’s businesses and consumers, on top of high prices and more expensive borrowing rates.

The United States also remains vulnerable to further supply chain disruptions if COVID keeps surging or the war in Ukraine worsens.

…click on the above link to read the rest…

UK Households Struggle As Inflation Hits 30-Year High, New Taxes Kick In

UK Households Struggle As Inflation Hits 30-Year High, New Taxes Kick In

Millions of Britons who previously found themselves financially ‘comfortable’ are feeling the heat over accelerating inflation, record energy bills, and tax increases which kick in this year.

A food bank for military veterans in Newcastle-under-Lyme, England. The Food Foundation survey found that 16% of people surveyed cut back on food to afford other essentials © Nathan Stirk/Getty

According to the Bank of England, scorching inflation will result in the largest drop in disposable income in 30 years when adjusted for inflation.

In April, UK energy bills are due to jump 54% to around 2,000 pounds ($2,723) a year per household. While some of it will be offset by emergency government support – and social security will also increase, it will be against the backdrop of rising interest rates according to Reuters.

“There’s just too much going up at once,” said 38-yaer-old care worker Nicola Frape, who huddles under blankets with her 14-year-old daughter to conserve heat, and have limited roadtrips due to the price of gas. “The pressure is just going to be even worse in April,” she added.

With economies around the world rebounding from coronavirus lockdowns, prices for everything from food and clothes to haircuts and rent, as well as energy are going up, fuelled by resurgent demand and shortages due to supply chain disruptions.

Accurate national comparisons of changes in living standards are hard to make but concerns about inflation are emerging as a big factor in elections including France’s presidential race in April and U.S. midterm elections in November. -Reuters

A February survey found that the number of people experiencing food insecurity was 20% higher in January than the previous six months, according to FT.

The decline in living standards for much of the UK population prompted chancellor Rishi Sunak last week to announce a £9bn package to help struggling households.

…click on the above link to read the rest of the article…

“The System Is Broken”: Boots-on-the-Ground View by a US Manufacturer on the Supply Chain Chaos

“The System Is Broken”: Boots-on-the-Ground View by a US Manufacturer on the Supply Chain Chaos

“We are simply limited to what our suppliers tell us we can have. It really isn’t supposed to work this way!”

For what seems like a long time now, Wolf Street has been discussing the apparently never-ending shortages that US manufacturers, construction companies, retailers, and other businesses have been struggling with. So here are the boots-on-the-ground observations by an Ohio-based manufacturer, with operations in other states, about the global supply-chain chaos. Todd Miller is the president of Isaiah Industries, which manufactures metal roofing shingles for residences and commercial buildings and sells them under several brands, such as Classic Metal Roofing Systems, in North America, Japan, and the Caribbean. He shared his observations with Wolf Street:

By Todd Miller, president of Isaiah Industries:

Over the years, we have seen some situations where metal supply was tight and caused some disruption for us and our customers. However, we’ve never seen anything like we’re experiencing now as it goes beyond just metal supply to also include the specialty coatings we use.

Supply shortages started in 2020 with Covid-related closures at the leading metal mills where we buy steel, aluminum, and copper. Once the consumer demand for virtually everything under the sun started to accelerate wildly in the latter part of 2020, mills were caught with shortages, and significant delays and backlogs developed – a situation that has yet to be rectified.

Generally, consumers are understanding of the price increases. But now delays and shortages threaten our ability to meet consumer needs. We currently are running about a 60-day backlog on orders, the bulk of which we are waiting for raw materials to arrive. Historically, our backlog was a couple of weeks at the most.

…click on the above link to read the rest of the article…

Rickards: Bad News, I’m Afraid

Rickards: Bad News, I’m Afraid

The breakdown of global supply chains is well-known by now. Whether it’s finding groceries in your supermarket, buying a new car or buying appliances like dishwashers and refrigerators, goods are scarce. Also, deliveries take forever and choices are limited.

Many people wonder why the problem isn’t going away. Here’s the answer:

The supply chain is a complex dynamic system. When any complex system collapses, you can look for specific causes but that’s usually a waste of time. Systems collapse internally because they are too large and too interconnected and require too many energy inputs to keep going.

Any specific cause is more likely to be a symptom than a true cause. It’s frustrating, but that’s the answer.

Most Americans’ first encounter with the supply chain meltdown was in the spring of 2020 during the first wave of the coronavirus pandemic. Shoppers noticed that items like hand sanitizer and paper goods at Costco and other big-box stores were cleaned out.

It seemed that Americans who were locked down and quarantined at the time were hoarding these products because they had no idea when they would be allowed to venture out again.

The shortages were real, but were limited to specific products. The other aisles at Costco were stocked and so were all the other stores around (at least those that were allowed to remain open).

Now It’s Everything

But it’s not just Costco this time. It’s every supermarket, convenience store and other retail outlet from coast to coast. And it’s not just cleaning products and paper goods. Your local supermarket might have bare shelves for eggs, peanut butter, milk and other staples.

It’s not a case of being stocked out of all goods all the time. Your store is like a box of Cracker Jack – you never know what’s inside.

…click on the above link to read the rest of the article…

Despotism Is the New Normal: Looming Threats to Freedom in 2022

“Looking at the present, I see a more probable future: a new despotism creeping slowly across America. Faceless oligarchs sit at command posts of a corporate-government complex that has been slowly evolving over many decades. In efforts to enlarge their own powers and privileges, they are willing to have others suffer the intended or unintended consequences of their institutional or personal greed. For Americans, these consequences include chronic inflation, recurring recession, open and hidden unemployment, the poisoning of air, water, soil and bodies, and, more important, the subversion of our constitution.—Bertram Gross, Friendly Fascism: The New Face of Power in America

Despotism has become our new normal.

Digital tyranny, surveillance. Intolerance, cancel culture, censorship. Lockdowns, mandates, government overreach. Supply chain shortages, inflation. Police brutality, home invasions, martial law. The loss of bodily integrity, privacy, autonomy.

These acts of tyranny by an authoritarian government have long since ceased to alarm or unnerve us. We have become desensitized to government brutality, accustomed to government corruption, and unfazed by the government’s assaults on our freedoms.

This present trajectory is unsustainable. The center cannot hold.

The following danger points pose some of the greatest threats to our collective and individual freedoms now and in the year to come.

Censorship. The most controversial issues of our day—gay rights, abortion, race, religion, sexuality, political correctness, police brutality, et al.—have become battlegrounds for those who claim to believe in freedom of speech but only when it favors the views and positions they support. Thus, while on paper, we are technically free to speak, in reality, we are only as free to speak as the government and tech giants such as Facebook, Google or YouTube may allow. Yet it’s a slippery slope from censoring so-called illegitimate ideas to silencing truth…

…click on the above link to read the rest of the article…

Globalism’s Achilles’ Heel

Globalism’s Achilles’ Heel

Supply chain disruptions have not been resolved, and it’s not clear when they will be. You’re seeing the effects of these disruptions at the store in the forms of shortages and higher prices.

Yet the supply chain is a subject that very few are familiar with beyond a superficial acquaintance.

Most people think the supply chain is just part of the global economy. That’s not entirely true. The supply chain is the global economy.

There isn’t a single good or service of any kind that does not arrive through a supply chain. Not one.

If the global supply chain is broken, then the global economy is broken. That increasingly appears to be the case.

The supply chain difficulties will grow worse. Even more troubling is the fact that the remedies will take years and sometimes decades to implement.

The reasons for this have to do with long lead times in implementing onshoring. For example, the U.S. can cut its dependence on Asian semiconductor imports by building its own semiconductor fabrication plans (fabs).

The problem is that these plants take from three–five years to build, and the scale needed is enormous.

There are impediments to supply chain recovery that are not directly related to particular supply chains that nonetheless hurt the process of adaptation and substitution.

For example, there’s already a labor shortage in America. The causes are complicated.

There’s no literal shortage of potential workers, but many workers prefer to stay home because of some combination of government benefits, child-care responsibilities or inadequate pay offered by employers (who can’t afford to pay more themselves because they’ll go out of business).

A lot of this labor shortage centers on lower-wage jobs such as waiters, store clerks, fast-food staff and office assistants. But there will be a labor shortage coming soon in more high-skilled areas such as engineers, pilots, machinists and medical personnel.

…click on the above link to read the rest of the article…

#219. The unravelling begins

#219. The unravelling begins

THE REALITY OF SCARCITY, THE SCARCITY OF REALITY

In nineteenth-century England, pictures of great events and famous personages could be purchased “penny-plain or tuppence-coloured”.

Where the world economy is concerned, the price of flattering colouration has soared into the trillions, but the value of a “penny-plain” view has never been higher.

The penny-plain picture now, of course, is that a vast gap has opened up between the consensus expectation of continuity and the hard reality of a post-growth economy. This gap is the counterpart of the chasm that exists between the ‘real’ economy of goods and services and the ‘financial’ economy of money and credit.

Our understanding of these dissonances sets an outline programme for ongoing analysis. The best routes to effective interpretation are those which (a) compare reality with perception, and (b) calibrate the relationships between the ‘two economies’ of money and energy. In the coming months, the aim here will be to add interpretive and statistical detail to the picture that is emerging as the aquatint wash of delusion fades away.

The divergence between expectation and reality isn’t – in itself – a new development. Many of us have long known that, over a very extended period, most economic “growth” has been a cosmetic product of breakneck and hazardous monetary expansion, that the underlying economy has been faltering, and that the confidence placed in ‘continuity’ lacks a basis in fact.

We can go further, recognizing that even the simulacrum of “growth” can’t last much longer, that the real prices of assets are destined to fall sharply in a context of broader financial distress, and that the balance of political power might be poised to shift, perhaps in a direction that, once upon a time, used to be called “left”.

…click on the above link to read the rest of the article…

The Great Supply Chain Collapse

The Great Supply Chain Collapse

What’s at the root of the supply chain breakdown? That’s a critical question but the answer is almost irrelevant. The supply chain is a complex dynamic system of immense scale. It is of a complexity comparable to the climate as a system.

This means that exact cause and effect cannot be computed because the processing power needed exceeds the combined processing power of every computer in the world.

Most people have some notion of how supply chains work, but few understand how extensive, complex and vulnerable they are. If you go to the store to buy a loaf of bread, you know that the bread did not mystically appear on the shelf.

It was delivered by a local bakery, put on the shelf by a clerk, you carried it home and served it with dinner. That’s a succinct description of a supply chain – from baker to store to home.

Yet that description barely scratches the surface. What about the truck driver who delivered the bread from the bakery to the store? Where did the bakery get the flour, yeast and water needed to make the bread? What about the ovens used to bake the bread? When the bread was baked, it was put in clear or paper wrappers of some sort. Where did those come from?

Even that expanded description of a supply chain is just getting started in terms of a complete chain. The flour used for baking came from wheat. That wheat was grown on a farm and harvested with heavy equipment. The farmer hires labor, uses water and fertilizer and sends his wheat out for processing and packaging before it gets to the bakery.

The manufacturer who built the oven has his own supply chain of steel, tempered glass, semiconductors, electrical circuits and other inputs needed to build the ovens…

…click on the above link to read the rest of the article…

Global supply chain crisis could last another two years, warn experts

As some bottlenecks ease others are just starting, meaning the post-pandemic economy ‘won’t return to normal any time soon’

China’s Ningbo Zhoushan port in Zhejiang province
China’s Ningbo Zhoushan port in Zhejiang province, a key shipping hub. A new Covid outbreak in the region has raised fears of further delays in the global shipping system. Photograph: China Stringer Network/Reuters

In Britain it’s alcohol, in Canada it’s maple syrup, while in Australia it’s a crucial additive for diesel trucks, and in New Zealand it’s brown sugar. These are just some of the many shortages affecting consumers and businesses around the world as industry experts warn that the supply chain crisis prompted by the coronavirus pandemic could last for many more months and even up to two years.

Although there are signs that some bottlenecks are easing, the onset of the Omicron Covid variant could lead to new shutdowns, sending another disruptive spasm through the global system.

The gravest appears to be an outbreak of Covid this week in the Chinese manufacturing hub of Zhejiang, which is home to the world’s largest cargo port, Ningbo-Zhoushan. Tens of thousands are in quarantine under China’s strict zero-Covid policy and some local authorities have urged workers not to travel home “unnecessarily” for lunar new year festival in February. “Further supply chain disruption is a significant possibility,” economic analysts at Capital Economics said in a note.

Industry experts and economists believe the problems could persist as the finely calibrated network of world trade, already weakened by months of shipping backlogs, labour shortages and geopolitical tensions, remains “discombobulated”.

Maersk, one of the big three shipping companies, said the worst delays were still on the US west coast where ships were waiting four weeks to unload due to the lack of workers on land.

…click on the above link to read the rest of the article…

Food Insecurity: The exacerbating factors

Food insecurity: The exacerbating factors

 

Supply Chain Disruptions Will Continue

Supply Chain Disruptions Will Continue

Forty percent of all the cargo into the United States comes through the ports of Los Angeles and Long Beach. Offshore, there are thousands of containers stacked up on vessels waiting to get in. How many containers can the ports unload on a normal day?

New containers are coming in. There are daily arrivals. When will that supply chain backlog clear?

The answer is never. If there are more coming in than you can unload and you have an existing backlog that’s getting worse, it will never clear.

But let’s just say that with no new shipments coming in, it would take 30 days just to unload what’s already waiting offshore. Thirty days, by the way, puts you into December and the Christmas rush.

And getting it offloaded in California is just the beginning of the supply chain. You’ve got to put it on a train or a truck and get it to a distribution center and put it on another truck and get it to a store.

But wait, there’s also a trucking shortage. That’s a big part of the supply chain problem. If you can unload the merchandise but can’t transport it due to a trucking shortage, what good is it?

So this is not getting better. That’s probably the understatement of the year.

You may have heard about a semiconductor shortage. But you don’t need a computer, so what’s the big deal? Well, no, there are semiconductors in everything. You have semiconductors in your refrigerator, dishwasher, home entertainment system, etc.

The point is we’re highly dependent on vulnerable supply chains that are currently breaking down. Something radical is going to have to happen. We’re just going to have to stop importing goods. And China may actually oblige us, though not for these reasons…

…click on the above link to read the rest of the article…

Relief from High Prices Unlikely, Analysts Say Ahead of Consumer Inflation Data Release

Relief from High Prices Unlikely, Analysts Say Ahead of Consumer Inflation Data Release

With investors closely eyeing two major data releases this week on inflation—one on producer input costs and the other on consumer prices—Wells Fargo analysts say it’s unlikely sticker-shock-weary consumers will see relief as the persistent supply-side crunch will “keep fanning the flames on inflation in the near term.”

On Tuesday, the Labor Department will release data for October’s producer price index (PPI), which tends to front-run consumer inflation data as at least some production costs get passed on to consumers. Economists expect a year-over-year rise of 8.7 percent in the PPI inflation measure, which would be the highest reading in the history of the series. Last month’s PPI came in at 8.6 percent, a record high.

And on Wednesday, the Labor Department will issue figures for October’s consumer price index (CPI), a key measure of inflation from the perspective of end consumers of goods and services. Consensus forecasts predict a year-over-rise of 5.3 percent in the CPI inflation gauge for October, with the prior month’s rise amounting to 5.4 percent, near a 30-year high.

On a month-over-month basis, CPI is expected to clock in at 0.5 percent, according to consensus forecasts released by FXStreet, though Wells Fargo analysts expect inflation was running hotter.

“Consumer Price Index report for the month of October is unlikely to offer much of a reprieve on the inflation front,” Wells Fargo analysts wrote in a note, in which they predict a 0.6 percent month-over-month increase in the CPI index. “If realized, this would put headline CPI inflation at 5.9 percent year-over-year.”

…click on the above link to read the rest of the article…

The Mainstream Has the Inflation Story Backwards

The Mainstream Has the Inflation Story Backwards

The mainstream blames inflation on “supply chain bottlenecks.” But they have it completely backward. In reality, Federal Reserve-created inflation is causing the supply chain mess.

According to Biden administration talking points, the economy is booming. Americans are flush with cash. And they are demanding lots of goods. The supply chain simply can’t keep up. That’s why we’re seeing empty shelves and rising prices. Transportation Secretary Pete Buttigieg summed up the mainstream mantra.

 Demand is up … because income is up, because the president has successfully guided this economy out of the teeth of a terrifying recession.”

White House spokeswoman Jen Psaki told a similar tale. She said we have supply chain problems because “people have more money … their wages are up … we’ve seen an economic recovery that is underway.”

This sounds like a lot of spin. But in one sense, the mainstream is right. As Mises Institute Senior Editor Ryan McMaken pointed out in a recent article on the Mises Wire, they are correct when it comes to consumer demand and spending, even if they got it right for the wrong reason.

As Mihai Macovei showed earlier this month, the global volume of trade and shipping volume in 2021 have actually exceeded prepandemic numbers. For example, in the port of Los Angeles, ‘loaded imports’ and ‘total imports’ for the 2020–21 fiscal year (ending June 30, 2021) were both up when compared to the same period of the 2018–19 fiscal year. In other words, it’s not as if little is moving through these ports. In fact, more is moving through them than ever before. That suggests demand is indeed higher.”

But why is demand so much higher? As Psaki said, Americans have more money in their pockets. Wages are up nominally. But it’s not because the economy is booming. As McMaken points out, it’s due to inflation.

…click on the above link to read the rest of the article…

Revenge of the Real World

Revenge of the Real World

The status quo response would be amusing if the consequences weren’t so dire.

Rather than stare at empty shelves, you have two options for distraction: you can don a virtual-reality headset and cavort with dolphins in the metaverse, or you can trade various forms of phantom wealth that always go up (happy happy!) because the Fed.

Neither distraction actually solves any real-world problems, a reality we can call the Revenge of the Real World We’ve entered a peculiar phase in American history in which illusions of wealth and control are the favored distractions from the unraveling of the real world economy and social order.

Printing trillions of currency units can’t restore the global supply chain or social cohesion, Rather, jacking phantom wealth to the moon is only accelerating the collapse of the social order and the economy even as it accomplishes absolutely nothing in terms of solving real-world problems.

Let’s start with the core economic realities of the 21st century:

1. The number of high-consumption (“middle class”) people doubled from 1 billion to 2 billion. The human populace has expanded to 7.9 billion individuals, but poor people who don’t have enough money to consume large quantities of energy, goods and services delivered by the global supply chain don’t have much of an impact on global consumption of energy and resources. It’s the number of people jetting around the world playing their part in the landfill economy (toss the old one, buy a new one) who drive “growth” (i.e. waste is growth).

Strangely enough, there are actual physical limits to resources being transformed into junk being dumped in the landfills. Humanity’s rapacious appetite for stuff has extracted all the cheap-to-extract resources and now all that’s left are the increasingly expensive-to-extract resources.

…click on the above link to read the rest of the article…

China Sparks “Panic Buying” After Telling Households To Stockpile Food Ahead Of Winter

China Sparks “Panic Buying” After Telling Households To Stockpile Food Ahead Of Winter

Central planners are at it again. In September, China ordered the country’s top state-owned energy companies to secure supplies for this winter at “all costs.” Now they’re telling households to stockpile food ahead of winter, sparking wild conspiracies among netizens about heightening tensions with Taiwan.

According to Bloomberg, the Ministry of Commerce told households Monday to stock up on food in case of emergencies after a resurgence of the virus pandemic, heavy rains that sparked vegetable prices to jump, and the onset of colder weather.

The commerce ministry directive is similar to the one released ahead of the holidays at the start of October, which told local governments to secure food supplies. The order comes as a coronavirus outbreak prompted fresh lockdowns.

The directive was released on the government’s Weibo account, a similar platform to Twitter, stated: “Ministry of Commerce encourages households to stockpile daily necessities as needed.” It had more than 17 million views as of Tuesday. Some netizens were concerned that an impending invasion of Taiwan was the reason for the stockpiling directive.

“As soon as this news came out, all the old people near me went crazy panic buying in the supermarket,” wrote one Weibo user.

The Economic Daily, a Communist Party-backed newspaper, told netizens not to have “too much of an overactive imagination,” adding that the directive’s purpose was to make sure citizens could feed their families in case of a lockdown.

The weather has been a significant concern in China. China Meteorological Administration (CMA) warned last month of a La Nina weather pattern which has already brought in the first round of cooler weather.

…click on the above link to read the rest of the article…

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