Tag: economy

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 Truth About United’s Basic Economy

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Everyone knew the day when United would announce their plans for a no-frills economy class fare was coming. The big carriers are looking for ways to grab a little bit of revenue away from the ultra low-cost carriers like Spirit, Frontier, and Allegiant. To do that, the airlines are removing benefits from certain fare classes. Delta has their version, with the same name even. American has discussed the same thing, and their fares are slated to roll out sometime in 2017. Scott Kirby, who used to work for American, now works for United and now, probably by coincidence, the day we knew was coming has arrived. United’s Basic Economy has been formally announced.

United Basic Economy

At first, I wasn’t sure I wanted to write about these new fares. There were quite a number of articles that had been written and a lot of anger and gnashing of teeth was taking place. But then I started seeing a lot of conjecture that these new fares would mean higher fares for those who don’t buy Basic Economy. That these new fares would be all that’s available and now you’ll have to pay to bring a carry-on on the plane.

The Facts

You can read the full details of United’s Basic Economy on their site, but here are the important facts:

  • No Pre-reserved seats – Seats on these fares will be assigned at check-in
  • Group 5 Boarding – These fares will be assigned Group 5 for boarding, the last group in the boarding process. United Premiers, Star Golds, and MileagePlus cardholders are excluded from this policy.
  • No voluntary ticket changes – 24 hour/Same Day Change policy excluded
  • No Premier Qualifying Miles, Segments or Dollars earned, lifetime miles or contribution to the four-segment minimum – Redeemable miles will still be earned
  • No EconomyPlus or Premium Cabin upgrades
  • No combinability with regular economy fares or partner carriers (includes interline travel)
  • Carry-on bags are limited to a single personal item (purse, backpack, etc.) – United Premiers, Star Golds, and MileagePlus cardholders are excluded from this policy and can bring two carry-on bags.

Thoughts

Besides the one bag policy on these fares, which distinguishes United’s Basic Economy from Delta’s implementation, the one thing that really sticks out to me on the list above is the lack of combinability with partner carriers and lack of interlining. This means if you are searching for a fare that requires a partner connection, say San Francisco-Bangkok, which would require a connection on someone like ANA in Tokyo, you would never see these Basic Economy fares in your results.

The “personal item only” piece seems to be the most inflammatory part of these fares, second only to the screams that families wouldn’t be able to be seated next to each other (more on that later). The truth is, customers in Group 5 usually do not have anywhere for their carry-on suitcase anyway and have to end up checking them, possibly holding up boarding.

As far as the families getting seats together, Delta even spells this out in their Basic Economy details:

With Basic Economy, you will not receive a seat assignment until after check-in or at the gate. Passengers traveling together, including families, may not be seated together.

If you want your family to be seated together, you simply buy the more expensive fare to ensure that you can preselect seats. So, I do think this point is being blown out of proportion. Which brings us to the conjecture/prediction piece of this.

Delta and United at PDX
The reality of Delta’s basic economy fares is that they are not as prolific as people think. I have only come across them twice in my searches and their savings was rather small when compared to the regular fares, something like $75 on each search. The other piece of this is the assumption that United will raise the regular fares and make money on those from people who do not want to part with their luggage or seat assignments. Based on Delta’s fares, I don’t think that will happen at all. Regular fares will stay where they are and these discount fares will be used to pull a little revenue away from the low cost carriers. United already has these basic fares in their systems and they show up about as regularly as Delta’s, the difference now is that United won’t be offering benefits with these fares. Seems like a “fare” compromise.

I think a lot of the fear around these fares is the belief that all of the economy seats will be sold as these new Basic Economy fares. That is simply untrue. United cannot sell a full 737 of these fares and survive, even if every passenger wasn’t an elite member and had to pay to check a bag. What they will do is offer a few seats on specific routes where they want to grab some business away from the competition at these Basic Economy levels.

Summary

We will not know exactly how this implementation of no-frills economy will go until 2017 when United rolls them out. But the odds of this being the doomsday that some people are predicting does not line up with the reality we have been seeing with Delta’s implementation of the exact same thing. Sure, Delta’s basic economy allows carry-on bags, but they still do not offer these fares on every flight or even that many seats on the flights where they do sell it. There is also the likelihood that these fares will be excluded from corporate booking engines, just like Delta’s no-frills fares.

Take a deep breath. It is likely you will encounter these fares on at least a few of your searches but do not fear, it is improbable that United will jack up the regular fares. So if you want to bring a bag onboard, you will likely be able to do so with very little markup.

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.

This Week’s Links | March 13, 2009

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  • It Was 20 Years Ago Today: The Web – It has already been 20 years since Tim Berners-Lee authored his paper on Information Management for CERN and started the ball rolling developing what is now the internet.
  • Michelle Obama’s Message – Eat Fresh Food – I mentioned this idea in a post about grocery shopping and while it is not a new idea, I am glad that the First Lady is making it a publicly visible issue.
  • Skeptics Dispute Climate Worries and Each Other – Just because the climate change crowd appears to be on the same page does not make them right. It seems that dissension is only welcome when it is dissension that matches up with the beliefs of the other guy. Since the disagreements here are among the climate change skeptics, they must be wrong. Give me a break.
  • The President Lays Out His Education Ideas – He calls for merit pay, longer school years and hours, and getting kids into better schools. At the same time, his budget bill has all but completely killed the Washington Scholarship Fund. “The earmarks can stay, but what’s this scholarship thing for underprivileged kids? Get rid of that”
  • Naughty and Not So Nice: Celebrity Chefs in Firing Line (from Jessica) – Celebrity chefs are getting into hot water because their recipes contain high amounts of fat.
  • Google Voice is Launched – Google has launched Google Voice, their follow-up to GrandCentral. It allows you to use a single number for your land line, cell phone, and work and get voicemail online.
  • Geithner, With Few Aides, Is Scrambling – The Treasury Secretary and the aides as a whole are having trouble keeping up with all of the things they a promising and trying to deliver.

The Economy’s Impact on Grocery Shopping

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With the economy heading nose first for the pavement there has been an increase in stories about people feeding their families on the cheap. One story last week discussed a family of five living on $100 worth of groceries a month. The family bought a lot of canned goods, frozen vegetables, and stocked up on meats when they were cheap. On the surface there is nothing wrong with this, but when health and sustenance are taken into account, the family’s plan does not sound so great.

A Google search for multiple terms did not bring up the exact story but something that did pop up was an eHow article titled “How to Spend $100 on Groceries and Eat Well For a Month“. It is basically a shopping list for an entire month and though it contains dried fruit, a majority of the items are heavily processed and/or salt heavy. By no means am I a doctor but the list looks like a terrible diet, there is barely any fiber, there is a ton of starch, and most of the starches are bleached white flower.

The family on television had a similar list and apparently shopping for so little money is becoming a trend. This leads me to my question, is sacrificing diet for cheap food a good idea? Are there not better things to knock-off of one’s budget to allow for more spending on food, a vital piece of life? I am not suggesting that everyone should be shopping at Whole Foods or upscale stores, I just think that what we feed our bodies should be more healthy than a loaf of white bread everyday.

The way that Jessica and I budget is that we figure around $80-$100 per week for food. We usually sit down one night and go through cookbooks and make a menu for the next week, the whole process takes 30-minutes. Jess writes down all of the ingredients and then compares that to what we have in the pantry and the fridge and marks things off that we already have. We then go to the grocery store together and buy as much as we can for as little as we can. Lately we have been looking at shopping at an extra store to get things that we know will be cheaper at one place, especially with meat products.

One glaring observation I have made from shopping with Jessica is that vegetables are cheap, as long as they are in season. The amount of green leafy vegetables that can be had at a low price is amazing and it does not end with them, there are tons of options ranging from avocados to leeks. Fruit is a little trickier but grapes and apples are usually available year-round and at a decent price.

The trick with all of this is to actually eat the food that is bought. Dinner is made every night and the leftovers are taken to work the next day by both of us. Some dinners last two or more lunches (soups and sandwiches). Doing the math, I figured that our daily cost for eating a meal is around $2 each. Now I am sure the families that eat on $100/month are down in the pennies per meal, but does that really matter when the meals are not necessarily healthy?

What do you think? How much do you spend a month on groceries?