Tag: Economics

Cargo is Piling up Everywhere

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From NPR —

Soaring demand from Americans for everything from iPads to cars is leading to a surge in freight crossing the Pacific, hitting business owners such as Nephew.

When the cargo with his games finally arrived on the West Coast, the container was immediately emptied so it could be sent back to China for another load.

The games then continued on to Minnesota by truck, rather than rail, which would have been more economical. The final shipping cost was about $12,000, at least 50% more than the game maker had budgeted.

We are getting a lesson in basic economics in real time. Businesses are trying to meet increased demand but there is a constraint on the supply (the shipping companies) and so things get delayed and prices go up. When we look at something like lumber, which is mostly produced domestically, those prices are finally starting to normalize as supply starts to meet demand.

Browsing Instagram or TikTok and you will see people blame increased prices on Biden or the global cabal but in reality the prices you are seeing in stores have little to nothing to do with who is in the oval office and more to do with basic economic principles. Another example is the basic issue of getting empty containers where they need to be to carry more cargo.

From Bloomberg —

First there were the queues at the twin ports of Los Angeles and Long Beach, which left as many as 40 container vessels awaiting a berth in early February amid a flood of traffic. Combined volumes at the terminals hit a record of 1.9 million containers in May, nearly double the Covid-19 low in March 2020.

Part of the problem has been that containers aren’t in the right places. In global terms, trade enjoyed a remarkably short and sharp pandemic. By September last year, volumes were already running ahead of their seasonally adjusted levels in January and February, as demand for medical equipment and spending on durable goods picked up in rich countries.

Trying to make all those deliveries on time meant that many vessels started making their return journeys empty, saving a few precious hours that would normally be spent picking up vacant boxes to ship back to China. That’s resulted in a glut of containers in European and North American ports and a shortage in Asia, pushing freight rates to astronomical levels on export routes.

Containers are sitting empty at ports around the world and can’t be shipped back because the ships are trying their best to keep up with demand. Add to this, there is not a huge demand for U.S. goods in places like China, there is no reason to ship back empty containers on these boats and return the containers to pick up more cargo. Some of the predictions are that this could take years to correct. The empty containers need to get back into a normal rotation which relies on demand to return in certain parts of the world and ships need to reposition to carry all of that cargo.

If there is one thing that COVID-19 has taught me, it’s that supply chains are fragile. Everyone saw the ‘Great Toilet Paper Shortage’ as a problem but what’s sitting in ports right now and the rates to ship goods around the world are the real issue. And the unfortunate reality is that there is no way to speed the process of recovery up for shippers. It will happen as demand returns.

The TSA Is Terrible at Everything

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Reason.com takes a look at a bunch of TSA stats, including a heavily redacted document regarding security breaches →

The article pulls out some interesting data from a report compiled by the Republican staff of the House Committee on Oversight and Government Reform and House Committee on Transportation and Infrastructure. Here are a few highlights:

  • 85 percent of the approximately 5,700 items of major transportation security equipment currently warehoused had been stored for longer than six months; 35 percent of the equipment had been stored for more than one year. One piece of equipment had been in storage more than six years—60 percent of its useful life.
  • TSA had 472 carry-on baggage screening machines warehoused, more than 99 percent of which have remained in storage for more than nine months; 34 percent of the machines have been stored for longer than one year.
  • TSA possessed 1,462 explosive trace detectors in storage, each purchased at a cost of $30,000. Of those devices, 492 had been in storage for longer than one year.

We should be utterly dumbfounded by these numbers. Not because we want the technology implemented, but because the equipment was bought in the first place. It equates to the TSA being given a blank check to shop in the billionaire’s version of SkyMall, all while not being completely honest about security breaches.

Even more disturbing is that even though these numbers and a series of “groping” incidents have made the news, the TSA continues to expand their reach. There are reports of TSA pat downs and bag searches taking place at McCormick Station in Chicago during the NATO summit.

I am not sure any of this is going to stop until a number of people in office put their foot down. The TSA seems less concerned with traveler safety and more concerned about the newest, fanciest equipment and which order to put people through the nude-o-scope. The goal is to make travel safer. If the TSA has lost sight of that goal, then it’s time for us to move on, shutter the TSA, and figure out a better way of performing the single task at hand.

Education and the Silent Trillion

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Behind all of the healthcare debates and save-face moments lies another policy proposal that is quietly making its way through the House. The Obama administration is proposing to increase its current 20% share of the student-loan origination market to 80% by July 1, 2010 and letting the remaining public sector 20% just fade away.

For decades, federally backed student loans were the most common way to borrow for college. Money was raised in the private sector, loans made and the private institutions paid a fee to the government for each loan. In return, the government covered most of the defaults which in turn, allowed the private lenders to make a regulated return. All of that changed in 2007 when Congress legislated a return so low that no private lender could make a profit holding the assets.

The administration is claiming that this will save $87 billion but there are discrepancies that the Congressional Budget Office says really only mean $47 billion in savings. Long story short, be prepared for the default rates to skyrocket and for more students to suffer as they come out of college and realize missing a single payment could cost them dearly.

Education for all! [that can afford it]

On the Tea Parties

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Around 750 “tea parties” are taking place around the country today in an effort to protest the taxation changes being made by the Obama administration. This is one of those issues that has turned into a boxing match between the left and right based media (I guess most issues are now). The tea parties are loosely based around the events that took place before the Revolutionary War, where “No taxation without representation” was the slogan. Today’s events differ because they focus on tax rates and government spending. This is a poor idea, or at least poor execution of an idea.

Sure, a government on its way to spending itself into a debt wholly owned by foreign nations is a bad idea, but focusing on tax increases for the wealthy is no better. The tea parties should instead be focused on bringing attention to what the government is doing with our money, maybe even making the slogan “No taxation with poor representation”. The officials are elected by us but make decisions based on their own prerogatives rather than the needs of the people.

The argument that Americans do not mind paying taxes is one that has been coming out of the media lately and it too is a poor one. Most Americans do not mind because it is simply a way of life and for the most part the actual payment takes place without them even noticing. The truth of the matter is, most Americans get a refund at the end of the year and have no idea that it is because they paid in too much to the system. Start taking more out of people’s paychecks and making the refunds smaller and the number of Americans who do not mind taxes is sure to take a dive.

Back to the tea parties, Paul Krugman, who I am constantly agreeing and disagreeing with, writes that the right-wing is a bunch of crazy people who are embarrassing themselves with their antics and maybe he is right. If the conservatives in this country want to avoid a social democracy then faux-protesting a slight tax hike is not the way to do it. This is not to say that what the government is doing is right, by all means, it isn’t. The idea is not to change tax rates, it is to reduce spending. If spending is reduced, then budgets are naturally cut and as a result, the tax rate stays steady or better yet, falls.

What this country needs is more students of history because then maybe we’d have our memories jogged on how things were done when the Constitution was drafted and what the role of the Federal government should be.

What Do the Europeans Want?

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Angela Merkel and Nicolas Sarkozy seem to be dead-set on getting their way at the G20 summit in London. Gordon Brown, the British Prime Minister, and President Obama have sort of joined forces to push their agenda for economic recovery, which includes more bailouts. Merkel, the German Chancellor, has said multiple times that she wants nothing to do with bailouts on a global scale. The French President, Nicolas Sarkozy, has also echoed those sentiments.

This is an impasse of sorts. Both Germany and France have experienced government intervention in the free market and have first hand knowledge of the effects of economic socialism, yet both Brown and Obama are not taking notice. Merkel seems to be jumping up and down and waving her arms at a person across the room while the person just stares past her. Her qualm is not with doing more socially, it is with taking money from healthy companies and markets and injecting it into dying companies. It is a form of evolutionary ethics and no one is taking notice.

Europe also has its own best interest at heart. If the Obama plans for more government healthcare and less military bases abroad actually come to fruition, the European way of life takes on a completely different form. For years Europe has been dependent on U.S. bases abroad to subsidize their domestic policies, if the money was to significantly reduce or dry up, the governments would be forced to make cuts and in some places completely remove programs that people rely on. This is not a cut and dry issue by any means, but Merkel and Sarkozy are trying to make it obvious that the path Obama is proposing is not the correct one. What Obama decides to agree on puts in motion what happens next here in the U.S.

What Happens if We Save Them and Fail

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With all of the talk about bailing out the auto-industry I started wondering what would happen if we bailed out the Big 3 automakers and still they failed. It is a very real possibility. Pushing money to a problem and committing government “oversight” to something does not ensure an entity’s ability to thrive, just look at Fannie and Freddie.

If Washington rescues Detroit and the auto companies fail anyway, then we have essentially shot ourselves in the foot. Sure, Washington can continue to print money, devalue the currency and attempt to pay off debt with more debt but in the long run it just will not work.

I understand that a lot of people would lose their jobs if we do not do something about the automakers, but I also understand that we can do something and still have a lot of people lose their jobs. This fact is little talked about and seems that it is one of those things that “we can worry about later”. Yep, let the later generations pick up the pieces…