90 Miles From Tyranny

Sunday, March 20, 2022

Visage à trois #128

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At approximately 9am local time on February 21, 1972, a Boeing 707 airplane dubbed Spirit of ‘76 landed in Shanghai’s Hongqiao airport.

The airplane’s main door opened, and out walked US President Richard Nixon.

The trip shocked the world. There had been no formal communication or diplomatic ties between the US and China for 25 years. And Nixon’s voyage not only normalized relations between the two countries, but it kickstarted decades of worldwide economic growth.

Back then, the US was the richest and most powerful economy in the world. But as a consequence of that prosperity, the US was also a very expensive place to produce.

US companies were on the lookout for inexpensive, foreign manufacturing hubs where they could cheaply produce their products and sell them back to the US market.

China became that cheap manufacturing hub.

Eventually China was producing just about everything from T-shirts to antibiotics. And because the cost of production was so low in China, consumers around the world benefited.

Combined with cheap oil, a functioning global supply chain, and relative peace and stability, cheap Chinese production helped keep prices low and constrain inflation for decades.

But these trends are rapidly coming to an end.

For starters, China is now an economic superpower; many of its largest cities, in fact, have a per-capita GDP that exceeds the United States and Western Europe.

Wages have increased dramatically in China over the years because of this increase in prosperity, which means that it’s no longer cheap to manufacture most lower-end products there.

A lot of manufacturing has already shifted to cheaper places like Vietnam, Bangladesh, etc. But even those countries are quickly becoming more expensive places to produce. And they don’t have nearly enough capacity to keep up with global manufacturing demand.

Some large companies are starting to bring their manufacturing back home. This is becoming more popular now as global stability wanes.

Plus businesses learned during the COVID-19 lockdowns, and the resulting global supply chain dysfunction, that manufacturing at home is more reliable.

That may be true. But manufacturing in a ‘rich’ country is also a LOT more expensive.

So, regardless of whether a business chooses to manufacture at home or abroad, they’re almost guaranteed to suffer higher production costs. And that means consumers will be paying more.

This trend is a massive reversal from decades of cheap foreign production that kept prices low. But it only scratches the surface of why inflation will likely persist for years to come.

(British economist Charles Goodhart, a former central bank official, describes this phenomenon in his new book The Great Demographic Reversal. It’s definitely worth reading to understand this trend.)

Historic shifts in the labor market will also be a major contributor to inflation.

For example, there have never been more retirees in the history of the world than there are right now. And their numbers are growing.

According to Federal Reserve data, an additional 1.5 million people in the United States retired early during the first year of the pandemic. There will likely be more to come.

Plus US Labor Department statistics show that millions of other individuals, including young people, abandoned the idea of working altogether because of the pandemic.

Traditionally there’s a steady balance between the number of jobs in the economy, and the number of workers in the labor force. Sometimes there are shocks, like during the Great Recession in 2008, when millions of jobs vanished, practically overnight.

Now the converse has taken place: millions of workers have vanished, practically overnight.

The end result is that there are 11.3 million unfilled jobs in the United States– a record high– because so many people simply quit the labor force.

Of course, another key labor trend is that younger workers aren’t interested in most traditional jobs.

Countless teenagers aspire to be Instagram starlets, or to live-steam themselves playing video games for a living. They have little interest in construction, transportation, or manufacturing jobs.

So, in summary, we have former ‘low cost’ manufacturing hubs becoming a lot more expensive. Plus a constrained work force back home that limits production and pushes costs higher.

This is all highly inflationary.

And there’s absolutely nothing the government or central bank can do about it. Gen Z 20-somethings aren’t going to suddenly decide to start working traditional jobs just because the Federal Reserve raises interest rates by 0.25%.

Most likely the politicians will make it much worse– which is another key factor in future inflation.

Nancy Pelosi stated on Friday that inflation was solely Vladimir Putin’s fault and insisted that their multi-trillion dollar deficit spending is “reducing the national debt” and “not adding to inflation.”

The President, meanwhile, has blamed inflation on “greed”, while the Federal Reserve insists that higher prices are a result of supply chain dysfunction.

Not one of these institutions– Congress, the White House, or the Fed– seems capable of looking at their own actions.

The Fed refuses to consider that inflation is due to their dizzying expansion of the US money supply– the largest since 1943.

Congress refuses to consider that inflation is due to their insane...

Quick Hits Of Wisdom, Knowledge And Snark #303

Left Wing Paradise: Gang of Dirt Bikers Pull Elderly Driver from His Car and Brutally Beat Him as Bystanders Watch

A gang of dirt bikers decided to get revenge on a motorist in Harlem in New York City on Tuesday after a traffic incident, leading to a brutal beatdown in the middle of the street.

Police said the incident started when a gang member on a dirt bike ran a red light at about 4:30 p.m. and collided with a car driven by a 64-year-old man, according to the New York Post.

The driver managed to get about two blocks from the scene when surveillance video showed what appeared to be three people on dirt bikes and one on an ATV catch up with the car.

Video showed that the driver and his son were then pulled from the car.

The driver was thrown to the street before being kicked repeatedly.

The car’s passenger, who was the driver’s son, was also assaulted, police said.

Although no bystanders went to help the victims, police said two people who were not part of the original group joined in on the attack.

A cellphone, credit and debit cards, driver’s licenses and about $150 were taken, police reported.

Police said the victims were in stable condition. The names of the victims were not released.

The Post said that when it called the home of the 64-year-old victim, a woman, who said she was the victim’s daughter, spoke with the outlet.

“He’s not OK right now,” the woman said. “Mentally, he is not OK.”

Police are hoping the public will provide a tip that could lead to an arrest.

Prior to his election, New York City Mayor Eric Adams said the explosion of dirt bikes on city streets was “a quality-of-life crisis,” according to thecity.

Last year, police had confiscated hundreds of...

So many people have been wrapped around the axle about "climate change," AKA "global warming." Our kids have been brainwashed in school about the perils of greenhouse gas (G.G.) adverse effects on the environment. The target G.G. of their ire is carbon dioxide.

As the "war in Ukraine" has evolved, there is a new clamor from the leaders in Washington, D.C. to accelerate the implementation of AOC's Green New Deal. But what happens if we cease using fossil fuels in the United States? I will focus on oil and gas production in this article.

When oil is produced from wells, the fluid that arrives to the surface is usually a mixture of petroleum, gas, water, and sediments. After initial treatment to remove water and sediments, petroleum is shipped to refineries to make various products such as gasoline, diesel, and aviation fuel. The gas, which is predominantly methane, also has gas liquids such as ethylene, propylene, and butylene. The gas is often sour and contains hydrogen sulfide and maybe some nitrogen components that have to be "sweetened" prior to shipping the methane to market.

Gas liquids mentioned above are but a tiny fraction of the hydrocarbons from oil and gas production. However, they are the building blocks for plastics, synthetic fibers for clothing, synthetic rubber, paint, resins, glues, containers, insulation, packaging, home cleaning products, and a myriad of other products.

What does it mean if we do not have these hydrocarbon building blocks? We return to natural fibers for clothing. Containers will be made from paper products or glass. As a kid, I enjoyed searching for tossed soda bottles to get the deposit money from the local supermarket. Some states who charge an exorbitant fee for plastic bottle disposal might not appreciate the lost revenue. Maybe we will increase aluminum production for containers. Aluminum requires a sizeable amount of power per pound of production. I guess we will return to waxed paper wrapping for children's sandwiches for school lunches. Forget about all those plastic containers. How about tires for cars? Someone had better get those natural rubber tree plantations going again. What about diesel engine driven trains? What about airplane travel?

One of the "bottom of the barrel" products from oil is asphalt. According to the National Asphalt Pavement Association, about 350 million metric tons of asphalt is produced annually from 3,500 plants. About 94% of all roads in the U.S. are asphalt-based. This industry will be terminated and probably replaced with concrete. Have you ever watched how long it takes to construct a concrete paved road versus asphalt? What about the cost differences, let alone plant replacements?

The cost of building products will soar, or we will revert to...