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Weekly Updates

  • The port of Los Angeles processed record volumes of goods last year. A record number of ships passed through the Suez Canal (despite some attempting to sail sideways). The Panama Canal had record traffic. Global manufacturing output hit an all-time high. The World Trade Organization forecasts global trade volumes grew nearly 11%.
  • This is not a picture of global supply chains lying in shattered ruins. Supply increased at an extraordinary pace in 2021. However, demand surged in a way the world has not experienced in 75 years. Thus, demand overwhelmed supply.
  • Whether shortages and price increases are caused by supply problems or a demand surge matters. Supply chain problems take a long time to sort out. When President Trump imposed trade taxes, most supply chains had to stay as they were—it takes time to build new production facilities. US importers paid the price. In contrast, a demand surge can reverse quickly. One reason inflation increases are transitory is that the current demand surge can rapidly normalize.
  • If imbalances are more demand than supply, why does supply get the blame? Politicians could tell people to stop enjoying themselves and spend less money. Alternatively, they can point to foreigners, blaming price increases and shortages on events outside their country. Blaming supply is politically easier.

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