The USSR was known for many things. Shortages were absolutely one of them. It was so bad that you could wait for up to 10 years to order and receive a car. And after that 10 year wait you got to be the proud owner of one of these.
And of course you could only order one if you were rich, and by rich of course this meant part of government. Everyone else you see was poor. And NO not, “can’t-afford-a-meal-out poor”, really poor, “eat-cabbages-three-times-a-day poor”.
This wasn’t because the Ruskies couldn’t grow oh I dunno wheat. They could. They just didn’t. The reasons are simple. Take the case of poor old entrepreneurial Ivan who needed to fill out 300 forms to get a licence to grow it, then after a year of form filling he had to promise his firstborn to the government, and finally when he did get his licence to operate 3 years later, he’d be told not only how much he could grow but where he could grow this wheat…and that would be Siberia. Ivan, being resilient and determined…not to mention on the brink of starvation, pressed on only to find that once his wheat was grown the government would tell him how much he could sell his wheat for.
This was a problem given that Ivans input costs were variable. Things such as fertilizer, (if he could find any) fuel to power his tractor, which would inevitably break down because it was made in a government controlled factory and therefore isht, and the spare parts for his tractor, cost a fortune since yet another pointy shoe in an office in Moscow would be in charge of the ministry of “manufacturing” or whatever stupid grandiose title they thought of at the time. All these costs would fluctuate, as would the weather and as any person with half a brain could tell you inflexible (fixed) pricing returns on a product that has variable input costs is as bad an idea as sticking your special bits in a toaster. This is why inevitably when Ivan realised this unfortunate truth, and that his efforts were all for nought, he did what any self respecting Russian would do. He drank more vodka. Hence all the drunken cabbage eating, and notable shortage of well…everything. Looking from the outside in you could have been forgiven for thinking that the Ruskies were a bunch of drunken layabouts which was true but only because they’d been given no alternatives.
This sheer idiocy of “managing” an economy should have been discarded to the trash heap of history when the Berlin wall finally fell. But for any students of history we know that bad ideas masked as good ones tend to keep coming back to enchant folks who fail to read history books.
Sadly in much of the western world busybodies have increasingly brought elements of this abhorrent abomination into our lives and societies. It has been like a growing cancer and one which we saw coming but hoped would be corrected. That cancer just metastasized.
Up until January of this year it was this slow but steady slide towards increasing socialist and authoritarian policies being implemented, with much of it under the ridiculous guise of “fighting climate change”.
But it took a mass hysteria over a virus with a kill rate of just 0.1% to have this trickle turn into an absolute avalanche.
How the hell did that happen?
Well this may have had a little to do with it.
Full blown marxist socialism has more recently been tried at full volume in that most unfortunate country of Venezuela (more on them in a bit), but nothing quite prepared us for the incredible global onslaught that was to come as February hit. An onslaught so outrageous that if I’d suggested it to you in December you’d have called the men in white suits to come have a look at me.
Consider that here we find ourselves today with a situation where, forgetting all about the lessons from the USSR, or even present day Venezuela, people who sit in offices for a living are determining dictating which businesses are “essential” and get to survive, and which are “not essential” and can rot and die. Even more absurd is that these pointy shoes have determined that, why yes…farmers…you know those folks that produce food – are “not essential”.
But Chris that’s surely not happening since food is clearly essential??
Aha that’s what a sensible rational person would think but you’d be as wrong as Myley Cyrus swinging naked on a wrecking ball, because that assumption is confusing logic with Government.
For the sort of people who make a living wearing a suit and sitting in an office and who’ve never spent a day risking their neck to produce anything of value to society, it is rather simple. Food obviously comes from a supermarket shelf and so clearly it’s only supermarkets that are essential. Hence if you’re a farmer that DOESN’T supply a supermarket, (which is a surprisingly large amount of farmers) you’re not essential. See this stuff is easy.
So we’re in for food shortages amongst other shortages.
The market mechanism to correct a shortage in anything at all is of course prices. But prices can just keep going higher if a man at a desk is shutting down the market’s ability to deliver more product, which would bring prices back down. And that man is doing just that.
Over in the US they just experienced the sharpest rise in food prices in 50 years! Who Woulda Thunk It?
Furthermore food shortages globally…and especially in poor developing countries are hitting.
And now you know what’ll happen now?
Think tanks who scavenge money from the public and private trough (in exchange for acting as lobby groups for those private companies) will devise “strategies” which they’ll lobby governments with in order to “solve” the problems. Basically this is like arsonists being called in to put out a fire. It’s absurd but it’ll happen.
Speaking of which, here’s one such Washington based “think tank”. For those who are unsure of what a think tank really is let me enlighten you. This is typically a parasitic organization masquerading as a solution, while lobbying for tax payers dollars which are funneled to enrich its “donors’. It is basically the same structure as the inaccurately named “World Health Organisation” which is neither for the benefit of the world nor about health. It is an organisation but then again so is the mafia.
Nobody asks what should be an obvious question. So I will.
How is it that these folks are going to “provide food security”?
In reality the only way to provide food security is to enable farmers to farm. To allow the entire supply chain to get on with what it does best: provide goods and services for a profit. In essence it is to allow adults to transact with one another sans intervention from some do gooders with a powerpoint and a fancy title. That means NOT getting in their effing way. And that would mean the pointy shoes in offices NOT coming up with any plan. None…nada, zilch, zero. Just get out of the way. What are the chances of that? I’d say the answer rhymes with hero.
No – instead governments will appoint special “working groups” and give them millions or even hundreds of millions of taxpayers dollars to sit in their offices and come up with powerpoint presentations, which will almost certainly then land on the desk of the bean counters at government offices who will be tasked with figuring out how to pay for the implementation of said powerpoints, which is when you and I’ll be hit with a “food levy” or maybe a “virus levy” because after all when folks are hurting and can’t afford food, it only makes sense to steal more of their income in order to justify your sitting in an office far removed from reality. So we’ll get that…and yes we’ll get more not less shortages.
Personal story.
I recently bought 3 large steaks that come on 4 legs. They’ll wander about mowing the grass for a couple of years before being matched with a good Cabernet Sauvignon. The thing is just in order to actually own one of these things you have to go through a series of registrations and fact checking with some dolt sitting in an office, who’s likely never set foot in a cowpat but dictates what, how and where regarding my inbound steaks. It just adds cost, and heaven help me if I wanted to actually make a business out of it.
And this is how you get shortages. Not because there is insufficient arable land, or because of a virus but because a system reliant on centralised control and planning works as well as it’s always worked. Just ask cabbage eating Ivan.
I could go on and on…so I will
Take Venezuela, a land blessed with two remarkable things.
- The world’s largest oil reserves and
- The world’s most left leaning socialist government
Combining the two we have and you couldn’t find a more ironic headline for this:
Real wealth destroyed.
Right now a ton of real wealth is being actively destroyed, whether we’re talking about farmers slaughtering cattle, pouring milk down the drain, or ploughing their veggies back into the land it’s real tangible wealth being destroyed.
Less visible however are the rising costs that come with state intervention in people’s lives. Restaurants if they’re allowed to finally open now have a host of things to consider. A man in an office decided that in order for you and I to go and get a plate of food, we can’t be treated like an adult and instead must adhere to a plethora of stupid new regulations such as standing on some ridiculous marks on the floor like a 4 year old. Restaurants have to have a certain measurement between tables which on average is reducing customer volumes by up to half. Then come the rapidly rising insurance premiums restaurateurs are having to deal with. In a litigious society where nothing is ever your own fault the risk of being sued by some diner because they got sick is having its inevitable consequences. Much higher costs to make a plate of food and hence much higher prices for that restaurant experience.
This will bring a lack of demand both because being served by a waiter that can’t get within 2 metres of you and comes wearing a mask isn’t exactly an “experience” worth paying for, and because incomes everywhere are under pressure and dining is something you do with disposable income.
To solve this problem, instead of getting out of the way the folks at the central banks will determine this to be a “demand problem” and one that can be solved by adding “purchasing power’. Hilariously in their eyes it’s not the destruction of wealth by the hand of government that’s the issue but rather the fact folks have no money to buy stuff now. And that’s a problem easily solved. It comes in many forms; the most recent and popular acronym is UBI or universal basic income. It is dangerously and myopically the very worst thing that one can do, which is why it’s already begun and likely to be implemented in full force.
But in the immortal words of Monty Python, I’m reminded to “always look on the bright side of life”.
The bright side is that while a mollycoddled populace who sees the government as the solution will lap up and be encouraged by ever new forms of socialism, this will simply accelerate the collapse of governments who are actually already bankrupt. And so the entire charade will come to a screeching collapsing halt. How can it not? You add representative units of productivity (money) without any commensurate productivity and you simply have shortages combined with too much money relative to any productive unit.
It is shortages that will dominate the next economic and political cycle, and while the overwhelming majority of market participants believe inflation can only come from an increase in demand…it is the supply side that quite literally nobody is paying enough attention to.
I don’t think the question to ask is will there be shortages but rather is your portfolio positioned accordingly?
-Chris
