Way back when the government kicked off the Covid panic, smart people pointing out that shutting down the world to bend the curve was not a cost free way of addressing the problem. In fact, it was a very expensive and risky solution to a problem that was best addressed through traditional means. The world has a pandemic every 15 years and a severe one at least once a generation. Humans have figured out to tough out these naturally occurring events.

Shutting down the world and making people stay home from work is a novel invention, so there was no way to know what would happen. Human societies are tough, so it took a while for the problems to manifest. Initially, those who could work from home worked from home and those unemployed were supported with subsidies. This could never be a permanent condition, so we have been trying to transition back to normalcy for the last six months, but things are nowhere near normal.

The Brits have gasoline shortages, and they are facing a winter with spiraling natural gas prices, because the energy supply chain is a mess. Keeping people at home meant keeping people out of their cars, which collapsed fuel consumption. The trucks and truck drivers were put to other uses and now that demand is returning, they suddenly have a shortage of trucks and truck drivers. This will soon hit other parts of the supply chain as demand suddenly increases for goods and services.

In the US, ports are a mess as they face similar supply chain problems. The ports in America are weird systems. The labor is unionized, but the unions are pretty much run by the government under an array of consent decrees. Demand for labor is driven by the ships in port needing to be loaded and unloaded. The stevedoring firms hire when they need to unload a ship, but they keep few fulltime people. They simply draw from the pool of longshoremen that operate at the port.

During the shutdowns, fewer ships came into port, so fewer people were needed to unload ships and fewer trucks were needed to cart the goods out of the port. That is why ships are stacked up at the ports now. The system for unloading those ships had atrophied during the pandemic, so it is now over-capacity. This leads to shortages and price disruptions throughout the economy. For example, America has been suffering an aluminum shortage for close to a year.

A good example of how throwing wrenches into the system has unpredictable long term effects is the automobile industry. When the government shut down the country, the travel industry was flattened. The car rental firms did the prudent thing. They liquidated their car fleets. After all, if you make your money renting cars and no one is renting cars, those cars are direct hits to the bottom line. In order to weather the storm, they sold off their fleets and furloughed their staff.

The trouble is a big source of used cars is the car rental industry. They get cars on programs from the manufacturers. They can be three, six or nine month programs where the company takes the new cars for a monthly fee and then returns them to the manufacturers after the term of the program. Those cars end up in the new car dealer lots as discounted used cars. Look around the car lots in America and what you see is lots of empty spaces where cars used to sit.

Once things opened up, the car rental companies went looking for cars, so they went to the used car auctions. Other shortages have made it impossible for the manufacturers to get cars to their own dealers, much less supply program cars to the rental fleets, so that left the used car market. Used car prices are now spiking to record levels because the supply chain is a mess. It will take years for this to normalize, and the cost will be in the tens of billions.

Of course, everyone who buys food has noticed that food is suddenly much more expensive and there are weird shortages. Like everything else, the broken supply chain is the main culprit. Those trucking companies suddenly put out of business by government fiat did not sit around waiting to open up again. They fired their staff, sold off their trucks and found other ways to survive. Rebuilding the many small links of the supply chain will take years and show up in higher food prices.

In a modern liberal democracy, every event requires a response, and every response requires a response and so on. The smallest pebble tossed into the water can potentially result in a flood. In this context it means government jumping in to mitigate the consequences of their fix for something else they broke. Inflation will get calls for more spending, which will get more inflation. The central banks will then try to redirect that inflation from goods to assets.

In other words, the shutdowns have created a dynamic of chaos that will take years to settle out, assuming no further shocks. The Biden administration is promising another meteor strike with their Build Back Better nonsense. You see, they broke everything and now see it as a chance to remake the world in their image. When crazy stupid people want to try to make the world, the only thing that can follow is chaos. We may be at the cusp of an age of unimaginable economic madness.

This is a good example of something said by Will Durant. “Out of every hundred new ideas ninety-nine or more will probably be inferior to the traditional responses which they propose to replace. No one man, however brilliant or well-informed, can come in one lifetime to such fullness of understanding as to safely judge and dismiss the customs or institutions of his society, for those are the wisdom of generations after centuries of experiment in the laboratory of history.”

In the fullness of time, after the West is a ruin of its own making, this age will be remembered as a gross and sustained violation of that sentiment. If over the last thirty years the people in charge had done nothing but entertain themselves with their toys, none of this would be happening. Instead, they kept trying to prove nature wrong and overturn the wisdom of ages. Reality does not take kindly to this amount of abuse, so there will be consequences.

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