The Economy Has No Pause Button (4)

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Traffic Jam Off California Ports

Of all the lies told about the Wuhan coronavirus and our response to it, one of the most damaging has been the idea that the economy has a pause button, that we could safely halt the economy for weeks or even months, and that when we turned the key, everything would start up again without a hiccup. In the interim, all we needed to do was spread enough cash around. The consequences of that monumental miscalculation are increasingly obvious, as the US economy has a hard time getting all cylinders to fire at all, much less in synch.

The latest evidence comes from the Wall Street Journal, reporting that container traffic at the country’s ports is facing an unprecedented traffic jam. Since last October, more than 25% of incoming containers have waited at least 5 days to be handled, compared to less than 5% normally. Some of this might a result of a labor shortage at the ports, but most of it is from increased imports. Indeed, even as domestic production is in chaos, imports are at an all-time high in dollar terms.

That’s funded by those dollars the Fed is printing. That means that even as small businesses go under, all that money we’re distributing isn’t fueling domestic production, but foreign buying.

The crowded ports are playing havoc with supply chains in general, forcing US plants to shut down or defer production for lack of materials:

The disruptions underscore how several forces are coming together to squeeze the world’s supply chains, from the pandemic-driven rise in consumer demand for tech goods to a backlog of imports at clogged California ports to U.S. factory outages caused by weather woes. They are creating cost increases and delays for numerous industries, company executives and analysts say, affecting profit margins and the prices that companies and consumers ultimately pay for many goods.

“We’ve been scrambling to get enough raw material,” said Tom Nathanson, chief executive of Summit Plastics Inc., who predicted possible lasting damage to the plastics industry in the form of lost customers.

He said the Mississippi company, which makes plastic sheeting for everything from hospital gowns to packaging, was already contending with supply-demand issues before the Texas cold spell. “The costs have absolutely been passed on,” Mr. Nathanson said. “We, as consumers, are feeling that crunch.”

The disruptions, which come as the U.S. and some other economies are beginning to lurch toward normalcy, show how messy the reopening of business is proving to be a year after pandemic’s onset, and how vulnerable supply chains remain.

There’s no doubt that the Texas freeze and the resulting electricity disruption hurt, but the weather-related excuses sound a lot like what we used to hear from the Soviets about their grain harvests. The fact is, short, sharp events like a freeze don’t do lasting damage to an otherwise healthy economy or industry. The damage hasn’t been done by the weather, but by deliberate decisions to shut down production, and subsidize foreign consumer purchases. The sooner we’re done with this nightmare of interference, the better for everyone, except the politicians imposing it.

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