Category Economic Subjects

Jan 12 2022

They Know What’s Coming, White House Prepares for Terrible December Inflation Data with Prepared Script


Posted originally on the conservative tree house on January 11, 2022 | sundance | 202 Comments

The snowball effect of cumulative inflation is going to be on display tomorrow when the BLS inflation data from December is released.  We have previously discussed the unavoidable price increases as noted within the November data Here, and within the producer price data Here.

While the data being released tomorrow is backward looking, we are in the eye of the inflation storm right now.  The consumer prices at end of January and through February are all reflecting new purchase order prices and contract prices to wholesalers, buyers and retailers.   As a result, the December reports will be the precursor to what will be much more damaging data in Feb and March.

White House spokesperson Jen Psaki began trying to get ahead of the consumer price release with a short briefing to the traveling press pool earlier today.  A short audio-only soundbite reflects the political problem the White House knows they will soon be dealing with. LISTEN:

As the BLS accurately (albeit briefly) noted in their November release, the inflation data reflected the cumulative increases in costs of products and services at all stages in the supply chain.  Raw materials cost more (extraction, regulation impact), processing costs more (energy impact), transport costs more (fuel impact), final goods assembly costs more and handling costs more.  From field-to-fork or mining-to-showcase, the total cost to create stuff costs more. [AP Interactive Chart]

Yes, the inflation data is backward looking. Meaning, it is looking back toward the previous period to compare costs.  However, despite the White House protestations to the contrary, that’s not a good thing, because it is going to get worse.

The contracted price for goods delivered (depending on sector) are net terms in 30, 60 or 90 days.  Meaning, the purchase price on final goods wholesalers were receiving in November, 2021, were agreed upon months before.  Those terms for current arriving goods in Q4 are no longer valid.  The new Q1 2022 terms (purchase orders) carry higher costs, and as an outcome, higher prices to consumers are still coming.

The AP chart above shows the ascending spike in inflation overall.   Do you see that little plateau (mid spike)?  That’s June and July of 2021, when we noticed the economy overall appeared to have stalled out.  As we highlighted {Go Deep}, that brief plateau corresponded with a gear change internally in the macro economy as productivity dropped by 5% very quickly in the third quarter.

Immediately following that two-month plateau around 5%, the next few months of data showed that American consumers, writ large, were reacting to inflation by changing their spending habits.  That’s when future contracts for new housing starts stalled out.  Immediately thereafter, up to today, all the data indicated working class U.S. consumers are hunkering down with less disposable income and prioritizing spending on essentials: housing, rent, gasoline, food.  Everything else is of lesser importance.

In the service sector, specifically hospitality and venue employment, overall demand for services slowed, but the employment data (showing the contraction) remained hidden, because we were climbing out of the COVID lockdown hole.

It appeared the service sector was gaining back jobs; but the backward to last year comparison was clouding an actual slowdown in services, because the data was comparing itself to 2020 when services were shut down.  Demand for services was down, but we couldn’t really see it.

All of this inflation is being driven by policy.  •[1] Energy policy (oil, gas leases nullified & pipelines cancelled) in combination with regulations targeting environmental impacts (CA ports emissions rules) is driving up energy costs. CORE inflation results from this. •[2] Fiscal policy by White House and legislature has been spending like drunken sailors, and that adds to a storm of •[3] monetary policy, with the Fed buying back the debt created by spending, and as a consequence devaluing the dollar currency.

The cost of exporting products is less, because China and the Euro benefit from lower U.S. dollar values.  However, more export of raw materials means higher prices domestically in what little remains of the supply/demand influence.  The multinationals are making out like bandits, Wall Street is happy, and the middle class of America is once again a victim of economic policy.

First, the DC politicians delivered the “rust belt” to us as an outcome of their favoring Wall Street over Main Street, and now they are wiping out our checking accounts with massive inflation.  Remember the oft repeated -and infuriating- catch phrase, “The U.S. is a service driven economy?“, said by both wings of the UniParty?   Well, put another way… first they off-shored our jobs, now they off-shore our wealth.   This is not an accidental outcome of flawed policy, they are doing this intentionally.

We are being gutted from the inside.

You don’t accidentally stop pipelines, cancel oil leases, shut down refining capacity, change port regulations and then act surprised by saying: ‘whoopsie’ gasoline seems to be costing more?  Duh! It’s a feature not a flaw.   Many of the people behind Joe Biden are stupid, but they ain’t *THAT* stupid.  They know what they are doing, but they have to pretend not to know things in order to avoid the tar and feathers.

Table-1 gives us a good snapshot of how the sector specific prices were rising in November [data here]:

If you want to go even deeper into the categories, check out Table-2 HERE.

Again, this was backward looking data, and there’s nothing visible right now to give any optimism that prices will not continue rising yet again in the next few months.  Exactly the opposite is true.  As we noted at the time, there is clear evidence prices will go up again in December, January and February based on the current situation.  The evidence of future price increases was clear in the Producer Price Index.

The “Producer Price Index” is essentially the tracking of wholesale prices at three stages: Origination (commodity), Intermediate and Final.

The final product inflation rate in July (reported in August) was alarming at 7.8%. However, we warned it would get worse. The Bureau of Labor and Statistics (BLS) then released stunning price data for October [DATA Here], showing an even more dramatic 8.6% price increase in final demand. More intense warnings shared.

By the time we got to the November BLS Result [DATA Here], released in December 2021, unfortunately the results showed what was expected.

The cumulative costs of massive increases in energy prices are building into the supply at an astonishing rate.  The November data showed a rate of wholesale final goods inflation at 9.6%, the largest single month comparative rate increase in history.

The bureau even went back and revised/increased the August price index from 7.8 to 8.4 percent, and revised/increased the October figure from 8.6 to 8.8 percent.  The average monthly price increase is almost a full percent… every month.  It looks like the BLS backward revisions were an attempt to smooth down the rate of increase.

When you see the wholesale level of prices almost double the increase in consumer level inflation rate, you can predict that consumer prices will likely go even higher.

Future finished goods, at a retail level, will carry the current wholesale price increase.

Stuff costs a lot now… and because the inbound stuff to make the finished goods is still climbing in price…. stuff is about to cost even more.

You can see from Table A (above) that finished good prices are still climbing.  That’s the higher price inflation you are feeling when you buy a product.

What will change this scenario is an actual drop on the demand side, as U.S. consumers see their income values wiped out.   Unfortunately, that appears to be part of the policy agenda for the White House.

If they can reduce demand by making things unaffordable, they can claim victory over inflation (mid/late 2022) and proclaim their economic policies a success.  The prices will never drop, but the percent of change will stall out.

The downside of the White House achieving what they call “success” is unfortunately, by the time we reach that point we will have nothing left; we’re broke.  Prices will finally level off, but the savings of Americans will have been depleted and wage growth will then take years to catch up.

FUBAR.  All by design.

Jan 10 2022

Australia Faces Food Shortages


Armstrong Economics Blog/Australia & Oceania Re-Posted Jan 10, 2022 by Martin Armstrong

The coronavirus and supply shortages have indeed shown us that truckers are essential workers. Unfortunately, around half of employed truckers in Australia have been absent from work due to COVID quarantine requirements. Some have the virus, while others are simply asked to quarantine after exposure. Regardless, anywhere from one-third to half of truckers are absent on any given day.

Worsening matters, one in five supermarket employees are absent on any given day due to Australia’s strict isolation requirements. Additionally, 10% of retail workers in Australia are also missing on any given day. In fact, some food suppliers have reported around 70% of their factory workers are temporarily out of work due to quarantine laws.

Prime Minister Scott Morrison defines “close contact” as anyone who has spent a minimum of four hours with anyone who tests positive for COVID. Anyone who comes into close contact with the diseased must isolate for a week and take a rapid antigen test (RAT) on the sixth day. Due to this rule, countless stores and warehouses have been forced to close temporarily.

Pictures of bare shelves are appearing throughout the internet. Supermarkets claim the empty shelves are exclusively due to supply chain issues rather than panic buying. Certain groceries stores, such as Coles, have introduced purchase limits (i.e., rations) since food is in such short supply. A spokesperson from Coles told ABC Australia that they anticipate that it will take “several weeks” to fully recover.

Adding another element into the disaster, rapid test kits are in short supply. “We have a completely predictable scenario where drivers are delivering rapid tests to be sold on the shelves of supermarkets and pharmacies — but they, like most Australians, can’t access them themselves,” National Secretary Michael Kaine said. PM Morrison removed regular testing requirements for truck drivers days ago, but the damage has already been done. We should expect the supply chain and food shortage to continue in Australia until these unsustainable laws are removed.

Jan 10 2022

Greenland Bans Oil and Gas Exploration


Armstrong Economics Blog/Energy Re-Posted Jan 10, 2022 by Martin Armstrong

In July 2021, Greenland ceased issuing licenses for oil and gas exploration. Now, Greenland has announced that the ban will be permanent. The government cited climate change as their main concern, and Greenpeace cheered their decision. The announcement would leave one to believe that Greenland actually had a good amount of oil reserves. Major oil companies such as ExxonMobil, Chevron, Shell, and Eni have been scouring Greenland since the 1970s for oil unsuccessfully.

Some may recall that in April 2020, former President Trump actually attempted to buy the sovereign territory, but not for natural resources. The Trump Administration wanted Greenland as a strategic military location to repel China and Russia from dominating the Arctic region. This angered Danish authorities and the US handed over $12.1 million for “sustainable economic development,” meaning they needed to secure a consulate on the world’s largest island.

Four-fifths of Greenland (836,000 square miles) is covered by the only permanent ice sheet outside of Antarctica. Sure, there are likely oil and mineral recourses beneath the ice, but after 50 years of exploration, Greenland’s announcement to ban further exploration seems lackluster.

“The future does not lie in oil. The future belongs to renewable energy, and in that respect, we have much more to gain,” a spokesman noted. Keyword: future! There is no current sustainable energy to replace fossil fuels at this point in history. That technology does not exist on a wide enough scale to power the world. So again, this announcement sounds like another nation bowing to the Build Back Better agenda to show the world that they are adhering.

Jan 10 2022

Easing the Semiconductor Shortage Through Domestic Manufacturing


Armstrong Economics Blog/Technology Re-Posted Jan 10, 2022 by Martin Armstrong

As Biden said, the current crisis will end at the state level. Well, luckily Governor Ron DeSantis is continuing to support his promise to improve the economy with dealings that will benefit the nation. DeSantis previously announced plans to open Florida ports around the clock and measures to attract new labor to the Sunshine State.  The governor is now investing $10 million in semiconductor production, a crucial albeit an increasingly rare part that is vital for technology.

DeSantis accused the Chinese Communist Party of stealing American technology and threatening the global semiconductor supply chain. America is overly dependent on foreign imports of semiconductors, and although Taiwan, a US ally, mass manufactures semiconductors, its reliance and political strife with China could lead to trouble.

“We cannot be captive, key sectors of our economy should not be captive to some of these foreign nations, in particular, outfits like the Communist Party of China…So the more we have this capacity within our own country but particularly within our own state here in Florida, the more opportunities there are going to be here for people and the more secure both our economic supply chains will be and our national security,” DeSantis stated.

Strong manufacturing is crucial to the American labor force. In fact, each manufacturing job supplements an additional 7.4 jobs in other industries. The Semiconductor Industry Association (SIA) stated that global sales of semiconductors totaled $48.8 billion in October 2021, marking a 24% annual increase.

The Biden Administration has been reluctant to address China’s stronghold over the semiconductor industry in fear of retaliation. Former President Trump attempted to curb China’s borderline monopoly by withholding American machinery used to make the chips. China simply found a way to create those machines on their own (it is a free market after all). Bloomberg reported that China accounts for over 50% of the chip industry’s sales, which have surpassed the $400 billion mark. If China chose to retaliate, as the US and China tend to do, then it would have an impact on the overall growth prospects for US tech.

Jan 10 2022

Temporary Empty Shelves Are Not a Supply Chain Crisis, It Is Important to Understand the Difference


Posted originally on the conservative tree house on January 9, 2022 | Sundance | 184 Comments

BUMPED by request. Unfortunately, there is a lot of wrong information being discussed and shared.  Even reputable regional media are giving inaccurate information, making wrong interpretations {LINK}, and generally getting the explanations wrong.  Additionally, there’s general misinterpretations of ordinary outages based on the day of the week (Sunday) and bad weather in the Northeast {ex Twitter Thread}.

All of these #BidensEmptyShelves assumptions, which are being heightened by increased attention and social media, are leading to confusion.

An empty retail shelf or case for a 24, 36 to 48-hour period is not, I repeat, NOT, part of a systemic supply chain disruption.  Those are mostly location and regional specific out of stock situations caused by localized events, weather and employee shortages.

What CTH has been describing for the past several months is NOT what is noted above.  What we have been describing is a long term supply chain crisis that will slowly unfold over a period of about a week or two, and then remain a problem over time, for a period of 6+ months. {GO DEEP}

The thirteen bullet points below are the issues we will first notice as the general food supply chain begins to show signs of that type of vulnerability.  This outline explains why it is happening and how long it can be expected.

In the previous October, November and December warnings, we emphasized preparation and counted down the 90-day window.  Now, as we enter the final two weeks before mid/late January, the date of our original prediction, it appears that some media are starting to catch up, and the larger public is starting to notice.

Feel free to note in the comments section what is happening in your area.  Hopefully, most of us are much better positioned than the average person who has not been following this as closely over the past several months.

Initial food instability signs in the supply chain.  Things to look for: 

(1) A shortage of processed potatoes (frozen specifically).

And/Or a shortage of the ancillary products that are derivates of, or normally include, potatoes.

(2) A larger than usual footprint of turkey in the supermarket (last line of protein).

(3) A noticeable increase in the price of citrus products.

(4) A sparse distribution of foodstuffs that rely on flavorings.

(5) The absence of non-seasonal products.

(6) Little to no price difference on the organic comparable (diff supply chain)

(7) Unusual country of origin for fresh product type.

(8) Absence of large container products

(9) Shortage of any ordinary but specific grain derivative item (ex. wheat crackers)

(10) Big brand shortage.

(11) Shortage of wet pet foods

(12) Shortage of complex blended products with multiple ingredients (soups etc)

(13) A consistent shortage of milk products and/or ancillaries.

These notes above are all precursors that show significant stress in the supply chain.  Once these issues are consistently visible, we are going to descend into food instability very quickly, sector by sector, category by category.

At first, each retail operation will show varying degrees of the supply chain stress according to their size, purchasing power, and/or private manufacturing, transportation and distribution capacity.

♦ BACKGROUND – Do you remember the dairy farmers in 2020 dumping their milk because the commercial side of milk demand (schools, restaurants, bag milk purchasers) was forcibly locked down?   Plastic jugs were in short supply, and the processing side of the equation has a limited amount of operational capacity.

To remind us of how the issues started in 2020, a dairy farmer helps to explain:

“Are we dumping milk because of greed or low demand, no. It’s the supply chain, there are only so many jug fillers, all were running 24/7 before this cluster you-know-what.

Now demand for jug milk has almost doubled.  However, restaurant demand is almost gone; NO ONE is eating out. 

Restaurant milk is distributed in 2.5 gal bags or pint chugs; further, almost 75 percent of milk is processed into hard products in this country, cheese and butter. Mozzarella is almost a third of total cheese production; how’s pizza sales going right now??

A bit of history – Years ago (40+) every town had a bottler, they ran one shift a day, could ramp up production easily.  Now with all the corporate takeovers (wall street over main street) we are left with regional “high efficiency” milk plants that ran jug lines 24/7 before this mess, no excess capacity.

Jug machines cost millions and are MADE IN CHINA. Only so many jugs can be blown at a jug plant.  We farmers don’t make the jugs, damn hard to ramp up production.

I’m a dairy farmer, believe me NO dairyman likes dumping milk; and so far there is NO guarantee they will get paid. Milk must be processed within 48 hours of production and 24 hours of receipt in the plant or it goes bad. Same with making it into cheese and butter, and neither stores well for long.

The same supply line problems exists where restaurants are supplied with bulk 1 pound blocks of butter or single serv packs or pats; and cheese is sold in 10 to 20 pound bags (think shredded Mozzarella for pizza).  Furthermore, it is not legal for this end of the supply chain to sell direct to consumers in most states.

Take cheddar cheese for instance; it goes from mild to sharp to crap in storage. Butter, frozen, only stores for so long and then must be slowly thawed and processed into other uses as it gets “strong”.  At Organic Valley we cook it down into butter oil or ghee for cooking.

We are headed for the same problem with canned veggies.  The vast majority of produce comes off and is processed in season; canned or frozen.  The supply is already in cans for the season; restaurants use gallon cans or bulk bags of frozen produce.

At some point we will run out of consumer sized cans in stock because home size sales are up (40%+) and restaurant sales are almost nonexistent.  Fresh produce out of U.S. season comes from Mexico (different climate).  I’m talking sweet corn, green beans, peas, tomatoes, all veggies are seasonal in the USA.  Fresh, out-of-season, row crops are  imported.  (There are exceptions, like hydroponic grown, but small amount of total).

Someone mentioned “time to raid all those bins of corn”.  Those bins on the farm contain yellow corn, cattle feed and totally unfit for human consumption, now or at harvest.

Eggs? Same problem.  Bakeries and restaurants of any size use Pullman egg cases, 30 dozen at a pop, 30 eggs to a flat, 12 flats to a case.  There are only so many 1 dozen egg cartons available and only so many packing machines.

Industrial bakeries and processors of packaged food buy bulk liquid eggs, no carton at all.  Also in many states it is illegal to sell this supply-chain directly to consumers. 

On your standard buffet of any size, do you really think they boil eggs and peel them? They come in a bag, boiled and diced; those nice uniform slices of boiled egg you see on your salad, a lot of them come in tubes boiled and extruded at the same time, just unwrap and slice. Your scrambled eggs come in a homogenized bag on most buffets.

Another example of Main Street being gutted and “improved by wall street” NO local egg processors available or many small egg producers either, all corporate and huge, contracted to sell to the corporate masters.

This is a warning the same problems exist in all supply chains.

The supply chain is farked.”

~ David Osterloh, Dairy Farmer 

Potato farmers and fresh food suppliers were also told to dump, blade or plough over their crops due to lack of commercial side demand.  These issues have longer term consequences than many would understand.  These are fresh crops, replenishment crops, which require time before harvest and production.

The retail consumer supply chain for manufactured and processed food products includes bulk storage to compensate for seasonality. As Agriculture Secretary Sonny Perdue noted in 2020, “There are over 800 commercial and public warehouses in the continental 48 states that store frozen products.”

Here is a snapshot of the food we had in storage at the end of February 2020: over 302 million pounds of frozen butter; 1.36 billion pounds of frozen cheese; 925 million pounds of frozen chicken; over 1 billion pounds of frozen fruit; nearly 2.04 billion pounds of frozen vegetables; 491 million pounds of frozen beef; and nearly 662 million pounds of frozen pork.

This bulk food storage is how the total U.S. consumer food supply ensures consistent availability even with weather impacts.  As a nation, we essentially stay one harvest ahead of demand by storing it and smoothing out any peak/valley shortfalls. There are a total of 175,642 commercial facilities involved in this supply chain across the country

The stored food supply is the originating resource for food manufacturers who process the ingredients into a variety of branded food products and distribute to your local supermarket. That bulk stored food, and the subsequent supply chain, is entirely separate from the fresh food supply chain used by restaurants, hotels, cafeterias etc.

Look carefully at the graphic.  See the fork in the supply chain that separates “food at home (40%)” from “food away from home (60%)”?

Food ‘outside the home’ includes restaurants, fast food locales, schools, corporate cafeterias, university lunchrooms, manufacturing cafeterias, hotels, food trucks, park and amusement food sellers and many more. Many of those venues are not thought about when people evaluate the overall U.S. food delivery system; however, this network was approximately 60 percent of all food consumption on a daily basis.

The ‘food away from home‘ sector has its own supply chain. Very few restaurants and venues (cited above) purchase food products from retail grocery outlets. As a result of the coronavirus mitigation effort, the ‘food away from home’ sector was reduced by 75% of daily food delivery operations. However, people still needed to eat. That meant retail food outlets, grocers, saw sales increases of 25 to 50 percent, depending on the area.

Covid regulations destroyed this complex supply chain in 2020.  It takes time to recover, because the replenishment is based on harvest cycles.  This stuff must be grown.

When the food at home sector was forced to take on the majority of food delivery, they immediately hit processing constraints.  The processing side of the supply chain to funnel food into suppliers for the grocery store has “x” amount of capacity.  That system cannot (not feasible) and did not expand to meet the 20 to 50% increase in demand.

Think about potatoes.  A potato farmer sells into one of the two paths “food at home” (retail stores, or a processing supplier) or “food away from home” (commercial food or commercial food processors).   Other than bulk raw potatoes, the harvest goes into: (1) processing or (2) storage.

(1a) processing for retail sales (40%), ex. Ore Ida frozen potatoes, canning, or any of the other thousand retail products that use potatoes, whole or mashed.

(1b) processing for commercial sales (60%), ex. McDonalds french fries, or any of the thousand restaurant, lunchroom and cafeteria needs that use potatoes, whole or mashed.

♦ Processing – When 1b was shut down in 2020, 1a quickly reached maximum retail processing capacity.  Massive multi-million machines and food processing systems have a capacity. The supplies they use also have a capacity: plastic bags, cardboard, trays, bowls, etc.  The 1a processing system can only generate “X” amount of retail product at maximum capacity.

The remaining 1b commercial product was shut down.  A massive percentage of 1b (commercial) potatoes have nowhere to go, except waste.

♦ Storage – Each processor in 1a stores product (deep cold or frozen storage) for 365-day processing and distribution.   Those storage facilities have a limited amount of capacity.   The 1b customers need fresh product for the majority of their outlets. Ergo, storing for 1b customers who might eventually be allowed to open later only works for a short period of time.  The fresh potato sales missed by 1b outlets = the 1b discard by potato farmers.

When you restart 1b suddenly the 1b short term (fresh) storage product is quickly depleted.  Refilling that 2020 storage is dependent on a new 2021 harvest, which simultaneously has a greater immediate demand because the supply chain on the processing side was boxcar’d (over capacity) and then reset to a higher capacity playing catchup.

The amount missing from 2021 storage, because it was used instead of saved, is essentially equal to the amount that was wasted in 2020.

Now you end 2021 will less reserves because storage is depleted, because a greater percentage of the current harvest was immediately used.  You enter into the beginning of 2022 (winter) in a race to try and spread out the stored potatoes as you cross your fingers and race against the clock for the next harvest before running out.

You probably noticed – but attached to this issue is yet another motive to keep people (employees) away from large industrial cafeterias and even students from school lunchrooms.   The total food supply chain needs time, and harvests, to catch up.

In the example above you can replace *potato* with just about any row crop or retail/commercial food commodity like milk.

The reason I list the shortage of potatoes as the #1 precursor is because every food outlet sells a potato in some form.  Every supermarket and every single restaurant (fancy, sit down or fast food) sells some form of potato.   Potatoes are demanded by every single food outlet; therefore, a shortage of potatoes is the first noticeable issue.

The 2020 demand disruption problem now becomes a 2021/2022 supply chain problem on both the fresh and processing side (depleted inventories), with each vector now competing for the same raw material: wheat, soybeans, grains, beans and stored row crops.

Making matters worse, the protein suppliers also need grain as feed for cattle, pigs, cows, chickens, etc.

[Note: who gets the short straw? The pet food manufacturers]

That’s the nub of the background supply chain issue in the food sector.   Additionally, recovery is not a single-issue problem.

The recovery price and shortages relate to everything from current oil and gas prices to diesel engine oil prices, to fertilizer and weed killer costs, to plastic costs and petroleum packing shortages (Styrofoam especially), to cardboard and sustainable packaging costs, to energy costs and transportation/delivery costs.   All along this complex supply chain there’s also workers and higher payroll costs.

Thus, we get the double-edged sword of higher prices (inflation) and simultaneous shortages.

Here’s what you can do to offset grocery store shortages (while possible):

(1) Buy the generic or store brand equivalent (sub-set inside retail supply chain)

(2) Purchase the organic version (another sub-set inside retail supply chain)

(3) Purchase the powered/dehydrated version (potatoes, milk, etc) and experiment (jazz it up).

Each retail operation, or chain of stores, will show varying degrees of the supply chain stress according to their size, purchasing power, and/or private manufacturing, transportation and distribution capacity.

This is where field to fork supplier relationships can make a big difference.  However, every outlet regardless of their operational excellence, is going to have significant shortages in their inventory.   It’s an unavoidable outcome of the previous chaos.

On average, the retail shortages will last for about as long as one full harvest schedule (4 to 6 months) depending on the commodity.  By September of 2022, the various sector should be relatively recovered.

However, government intervention could make the issues worse, or the recovery time take longer, depending on how they respond when people get seriously stressed in a few weeks.  The densely populated urban areas are going to be making a lot of noise and demanding the government fix the crisis.

Final note on INFLATION – The short term prices will go up again.  Another 10, 20 up to 50% should be expected depending on the item.  Those prices will eventually level off, but it’s doubtful they will be able to come back down until supply and demand find some equilibrium again, if ever.  Right now, predicting future retail prices is too far off to even fathom.

I hope this outline provides you with information to help you make decisions for your family.

Jan 9 2022

Things to Look For…


Posted originally on the conservative tree house on January 8, 2022 | Sundance | 524 Comments

Things that seem disconnected, but ain’t.

(1) A shortage of processed potatoes (frozen specifically).

And/Or a shortage of the ancillary products that are derivates of, or normally include, potatoes.

(2) A larger than usual footprint of turkey in the supermarket (last line of protein).

(3) A noticeable increase in the price of citrus products.

(4) A sparse distribution of foodstuffs that rely on flavorings.

(5) The absence of non-seasonal products.

(6) Small to little price difference on the organic comparable (diff supply chain)

(7) Unusual country of origin for fresh product type.

(8) Absence of large container products

(9) Shortage of any ordinary but specific grain derivative item (ex. wheat crackers)

(10) Big brand shortage.

(11) Shortage of wet pet foods

(12) Shortage of complex blended products with multiple ingredients (soups etc)

(13) A consistent shortage of milk products and/or ancillaries.

These notes above are all precursors that show significant stress in the supply chain.

At first, each retail operation will show varying degrees of the supply chain stress according to their size, purchasing power, and/or private manufacturing, transportation and distribution capacity.

Remember, the dairy farmers in 2020 dumping their milk because the commercial side of milk demand (schools, restaurants, bag milk purchasers) was forcibly locked down?   Plastic jugs were in short supply, and the processing side of the equation has a limited amount of operational capacity.

Potato farmers and fresh food suppliers were also told to dump, blade or plough-over their crops due to lack of commercial side demand.  These issues have longer term consequences than many would understand.  These are fresh crops, replenishment crops, which require time before harvest and production.

The retail consumer supply chain for manufactured and processed food products includes bulk storage to compensate for seasonality. As Agriculture Secretary Sonny Perdue noted in 2020, “There are over 800 commercial and public warehouses in the continental 48 states that store frozen products.”

Here is a snapshot of the food we had in storage at the end of February 2020: over 302 million pounds of frozen butter; 1.36 billion pounds of frozen cheese; 925 million pounds of frozen chicken; over 1 billion pounds of frozen fruit; nearly 2.04 billion pounds of frozen vegetables; 491 million pounds of frozen beef; and nearly 662 million pounds of frozen pork.

This bulk food storage is how the total U.S. consumer food supply ensures consistent availability even with weather impacts.  As a nation, we essentially stay one harvest ahead of demand by storing it and smoothing out any peak/valley shortfalls. There are a total of 175,642 commercial facilities involved in this supply chain across the country

The stored food supply is the originating resource for food manufacturers who process the ingredients into a variety of branded food products and distribute to your local supermarket. That bulk stored food, and the subsequent supply chain, is entirely separate from the fresh food supply chain used by restaurants, hotels, cafeterias etc.

Look carefully at the graphic.  See the fork in the supply chain that separates “food at home (40%)” from “food away from home (60%)”?

Food ‘outside the home’ includes restaurants, fast food locales, schools, corporate cafeterias, university lunchrooms, manufacturing cafeterias, hotels, food trucks, park and amusement food sellers and many more. Many of those venues are not thought about when people evaluate the overall U.S. food delivery system; however, this network was approximately 60 percent of all food consumption on a daily basis.

The ‘food away from home‘ sector has its own supply chain. Very few restaurants and venues (cited above) purchase food products from retail grocery outlets. As a result of the coronavirus mitigation effort, the ‘food away from home’ sector was reduced by 75% of daily food delivery operations. However, people still needed to eat. That meant retail food outlets, grocers, saw sales increases of 25 to 50 percent, depending on the area.

Covid regulations destroyed this complex supply chain in 2020.  It takes time to recover because the replenishment is based on harvest cycles.  This stuff must be grown.

When the food at home sector was forced to take on the majority of food delivery, they immediately hit processing constraints.  The processing side of the supply chain to funnel food into suppliers for the grocery store has “x” amount of capacity.  That system cannot (not feasible) and did not expand to meet the 20 to 50% increase in demand.

Think about potatoes.  A potato farmer sells into one of the two paths “food at home” (retail stores, or a processing supplier) or “food away from home” (commercial food or commercial food processors).   Other than bulk raw potatoes, the harvest goes into: (1) processing or (2) storage.

(1a) processing for retail sales (40%), ex. Ore Ida frozen potatoes, canning, or any of the other thousand retail products that use potatoes, whole or mashed.

(1b) processing for commercial sales (60%), ex. McDonalds french fries, or any of the thousand restaurant, lunchroom and cafeteria needs that use potatoes, whole or mashed.

♦ Processing – When 1b was shut down in 2020, 1a quickly reached maximum retail processing capacity.  Massive multi-million machines and food processing systems have a capacity. The supplies they use also have a capacity: plastic bags, cardboard, trays, bowls, etc.  The 1a processing system can only generate “X” amount of retail product at maximum capacity.

The remaining 1b commercial product was shut down.  A massive percentage of 1b (commercial) potatoes have nowhere to go, except waste.

♦ Storage – Each processor in 1a stores product (deep cold or frozen storage) for 365-day processing and distribution.   Those storage facilities have a limited amount of capacity.   The 1b customers need fresh product for the majority of their outlets. Ergo storing for 1b customers who might eventually be allowed to open later only works for a short period of time.  The fresh potato sales missed by 1b outlets = the 1b discard by potato farmers.

When you restart 1b suddenly the 1b short-term (fresh) storage product is quickly depleted.  Refilling that 2020 storage is dependent on a new 2021 harvest, which simultaneously has a greater immediate demand because the supply chain on the processing side was boxcar’d (over capacity) and then reset to a higher capacity playing catchup.

The amount missing from 2021 storage, because it was used instead of saved, is essentially equal to the amount that was wasted in 2020.

Now you end 2021 will less reserves because storage is depleted, because a greater percentage of the current harvest was immediately used.  You enter into the beginning of 2022 (winter) in a race to try and spread out the stored potatoes as you cross your fingers and race against the clock for the next harvest before running out.

You probably noticed, but there’s another motive to keep people (employees) away from large industrial cafeterias and even students from school lunchrooms.   The total food supply chain needs time, and harvests, to catch up.

In the example above you can replace *potato* with just about any row crop or retail/commercial food commodity like milk.

The reason I list potato as the #1 precursor is because every food outlet sells a potato in some form.  Every supermarket and every single restaurant (fancy or fast food) sells some form of potato.   Potatoes are demanded by every single food outlet; therefore, a shortage of potatoes is the first noticeable issue.

The 2020 demand disruption problem now becomes a 2021/2022 supply chain problem on both the fresh and processing side (depleted inventories), with each vector now competing for the same raw material: wheat, soybeans, grains, beans and stored row crops.

Making matters worse, the protein suppliers also need grain as feed for cattle, pigs, cows, chickens, etc.

[Note: who gets the short straw? The pet food manufacturers]

That’s the nub of the background supply chain issue in the food sector.   Additionally, recovery is not a single-issue problem.

The recovery price and shortages relate to everything from current oil and gas prices to diesel engine oil prices, to fertilizer and weed killer costs, to plastic costs and petroleum packing shortages (Styrofoam especially), to cardboard and sustainable packaging costs, to energy costs and transportation/delivery costs.   All along this complex supply chain there’s also workers and higher payroll costs.

Thus, we get the double-edged sword of higher prices (inflation) and simultaneous shortages.

Here’s what you can do to offset shortages (while possible):

(1) Buy the generic or store brand equivalent (sub-set inside retail supply chain)

(2) Purchase the organic version (another sub-set inside retail supply chain)

(3) Purchase the powered/dehydrated version (potatoes, milk, etc) and experiment (jazz it up).

Each retail operation, or chain of stores, will show varying degrees of the supply chain stress according to their size, purchasing power, and/or private manufacturing, transportation and distribution capacity.

This is where field to fork supplier relationships can make a big difference.  However, every outlet regardless of their operational excellence, is going to have significant shortages in their inventory.   It’s an unavoidable outcome of the previous chaos.

On average the retail shortages will last for about the same time as one full harvest schedule (4 to 6 months) depending on the commodity.   By September of 2022 the sector should be relatively recovered, depending on how government responds when people get seriously stressed in a few weeks.

The short-term prices will likely go up again, another 10, 20 up to 50% depending on item.  Those prices will eventually level off, but it’s doubtful they will be able to come back down until supply and demand find some equilibrium again, if ever.  Right now, that’s too far off to even fathom.

Jan 8 2022

1976 Vaccine Mandate Disaster


Armstrong Economics Blog/Vaccine Re-Posted Jan 8, 2022 by Martin Armstrong

This is why vaccine MANDATES are simply unconstitutional and a violation of human rights. We are not all the same.

Jan 8 2022

Minnesota Trucking Company CEO Warns About What Vaccine Mandate Will Do to Economy


Posted originally on the conservative tree house on January 7, 2022 | sundance | 110 Comments

Here’s a solid reference point for just one of the multitude of aspects related to the mandatory COVID vaccine and overall COVID mitigation rules that will come together to present an unavoidable outcome within the supply chain.

As CEO Eric Lawrence notes, even without the vaccine mandate, the testing mandate itself becomes an issue.  How and where exactly are truckers supposed to get these weekly, and depending on state, perhaps daily, Covid-19 tests.   How are they expected to modify their cross country routes, to avoid running afoul of the law, without having any idea where this testing is supposed to take place?

Follow the implementation of all these mandate tentacles across multiple industries & sectors, and what you end up with is a merging of unworkable nonsense into a logistical and supply chain mess.   For the U.S. economy, a SNAFU of that significance only ends with one result.

Jan 8 2022

The Most Dangerous Part of Biden’s Economic Plan Is that He Believes in It – Read What He Says, and You Will See What Is Coming


Posted originally on the conservative tree house on January 7, 2022 | sundance | 252 Comments

The people behind Joe Biden rushed him to the microphones today to proclaim the success of his economic policy.   Biden read from their prepared script for almost fifteen minutes [VIDEO HERE], then told the assembled press pool that “COVID was here to stay”, but not really “here to stay”, but his policies, rules and regulations that are driven by COVID are “here to stay.”

Did anyone else catch that?

Whiskey – Tango – Foxtrot… he said the quiet part out loud.

In essence, what Biden was saying was that even when the virus is no longer being a daily driver of government policy, the policies themselves will never go away.  Just like the Patriot Act, under the guise of anti-terrorism created the permanent security state, so too is COVID-19 creating the permanent government control state under the guise of public health.

As if that isn’t alarming enough, what the White House occupant outlined regarding the economy just has to be watched or read [Transcript Here] to be believed.  The most eye-opening part of his comments is that he really believes this stuff they tell him to say. So, obviously the people typing the words into the teleprompter either: (a) believe it themselves; or (b) more likely, know what they are doing is going to end up with the total collapse of the U.S. economic system, and that’s okay because the guy reading it is disposable for their plan.  I believe the latter is accurate.

Take a look at one metaphor Biden read from his teleprompter to see exactly how insane these policies are when said out loud.  Keep in mind, this is a direct quote from the transcript as he read it (emphasis mine):

Joe Biden – […] “I’m not an economist, but I’ve been doing this a long time.  But here’s the way to look at it.  If car prices are too high right now, there are two solutions: You increase the supply of cars by making more of them, or you reduce demand for cars by making Americans poorer.  That’s the choice.

Believe it or not, there’s a lot of people in the second camp.  You’ll hear them complain that wages are rising too fast among the very middle-class and working-class people who have endured decades of stalled incomes.

Their view of the economy says the only solution to our current and future challenges is to make the working families that are the backbone in our country poorer or keep them in the state they’re in.” (link)

The guy, whose policies are making more people poorer faster than any prior time in U.S. history, doesn’t see the hypocrisy of his statements.  Forget cars as the example, use bread or milk or anything else.

The Biden economic policies are driving prices through the roof.  No one is contemplating buying a new car, heck we are trying to figure out if we should buy a loaf of bread or a single gallon of gasoline to get to work.

Go stand in the line of any convenience store, and watch how people are trying to cope with the price of gas.  Not the people who pull in, gas up, pay at the pumps and exit.  I’m talking about the people who walk in with ten dollars in cash, have no electronic connection to the digital economy, and who just spent half of a $20 bill on a single loaf of bread and a package of bologna.  That remaining $10 buys them two gallons which are needed to get them to the jobsite for the next few days.

This pontificating pustule of sanctimonious bulls**t has the audacity to use “making Americans poorer” in his metaphor for car prices, as if any essential worker with dirty fingernails standing in the f**king line at 7-11 is contemplating their preferred interior and exterior color selection.

My blood pressure cuff just exploded.  ‘Scuse me for departing…

Jan 8 2022

Biden Sends $8 Billion of COVID Recovery Relief as Payments to Offset Outcome of His Energy Policy for Democrat Constituents


Posted originally on the conservative tree house on January 7, 2022 | sundance | 88 Comments

Many people have wondered how the Biden administration could implement massive economic policies against the interests of their own constituents.  The answer to that question is hidden inside the COVID relief bills, which are used as a method to pay the expenses of his policies so that targeted Democrat groups in urban regions do not have to pay for the policy.

One example of this policy and urban dependency scheme is found in the Low Income Home Energy Assistance Program (LIHEAP).

The “American Rescue Plan”, the mechanism to use taxpayer monies as redistributive subsidies to special interests under the guise of COVID bailouts and relief, contained $8 billion in funding to pay for the electricity and home heating costs of low income families.

WHITE HOUSE – […] In 2021, the Biden-Harris Administration and Congressional Democrats delivered $8 billion in LIHEAP funding nationally, more than doubling typical annual appropriations, thanks to an additional $4.5 billion provided by the American Rescue Plan. These funds represent the largest appropriation in a single year since the program was established in 1981. (more)

In essence, what this scheme allows is the Biden administration to trigger ‘Green New Deal‘ energy policies that drive massive increases in the cost of electricity, home heating, and energy use for the middle class and working class families, and yet the federal government pays those costs for the constituents they need to keep voting for them.  Lower income families do not feel the energy policy burden, but middle class families are punished.

Yes, this is fundamentally class warfare, using the federal government to select the groups they do not want to feel the pain.  It’s the same principle of increasing food stamp and SNAP food subsidy assistance by 25% this year, while those who do not qualify are forced to pay for higher food costs and the subsidy -via income taxes- of those same groups.

Additionally, “The American Rescue Plan provided other critical resources that states and localities can use to address home energy costs. ERA programs, which received an additional $21.5 billion in funding from the American Rescue Plan, can provide help with past-due utility bills or ongoing assistance with energy costs to help distressed renters avoid shut-offs and keep current on expenses.” (link)

So, when people ask how Joe Biden and the Democrats are able to drive policies that massively hurt the American economy overall; remember, the pain we are feeling from the collective weight of these policies is not hitting the constituents the Democrats need in order to keep them in office.

The champagne socialists and investment class are protected.  The lower income and willingly subsidized class are protected.  It is the middle class who are being punished by the collective weight of this economic mess.

None of this is accidental.  This is a continuance of the ‘share/spread the wealth’ economic roadmap used by Obama.

Lunch-bucket Joe?…  Ya, sure.