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Supply Chain and The Economy

Supply Chain and The Economy

October 06, 2021

Last May we purchased an outdoor patio table with a delivery date of June so we would have it just in time for summer.  A month later we were told there was a shipping delay and it was now expected to arrive in September. Last week we received a new projected date of March 2022.  At least we’ll get it for summer (next year).

By now most of us have either heard about the disruption of the product and service supply chain and the back log of cargo ships waiting outside ports or we have been directly impacted as we wait, wait and wait for the item we purchased to finally be delivered.  

Besides longer delays, how does this supply chain disruption impact our economy?  We must first realize there have been various contributing factors including the lockdowns which caused many businesses, especially smaller private businesses, to shut down temporarily or permanently.  As things reopen those smaller companies that were fortunate to survive, along with larger companies, are having difficulty rehiring employees which has decreased the labor force needed to run the business.  These factors have reduced the players involved in moving product thus forcing companies to find new channels to get product to its destination, albeit slower and less efficient.  In addition, companies are now implementing forced layoffs of unvaccinated employees which will further impact the timing of delivering services and products, increase costs and increase the potential for higher and longer inflation or stagflation implications.   At first, the Federal Reserve and some economists had suggested this was a transitory (temporary) issue which would cause slight inflation.  Now it appears likely that our economy – including businesses, individuals’ jobs and wages, and supply chain - will continue to be impacted until markets are allowed to open up and operate under more free-market conditions.

If you’d like a little more information, below are two links that provide some additional insights.  The first is an article by Brian Westbury of First Trust, an economist that we commonly refer to as a resource.  It’s a quick 3-minute read and provides a little more detail without getting technical.  The second is a 6-minute animated movie, "I, Pencil" by Leonard Read, which explains all of the many people and processes needed to create something as “simple” as a pencil and why an efficient market is beneficial.  You can also show this to your kids and grandkids for an easy to understand lesson about free-markets.

First Trust  - The Cost of Lockdowns

I, Pencil The Movie - Leonard Read

While most people don’t have control over the issues impacting our economy, you do have control over your personal situation.  This is where we can help.  First, please schedule a meeting to talk about anything on your mind.  Second, remember that regardless of what the economy looks like on any given day, month or year, one of the most important things we emphasize when it comes to your investment strategy is to avoid hasty reactions during short-term challenges but instead remain focused on the long-term.