No sugar tonight in my coffee

No sugar tonight in my tea

No Sugar Tonight, by The Guess Who

BALTIMORE, MARYLAND – Yes, Dear Reader, as if rising sea levels and falling vaccine protection weren’t enough, here’s something else to worry about…

Supply Chain Disruptions. SCD.

Time Magazine:

Biden Announces New Steps to Address Supply-Chain Disruptions


Don’t wait! What holiday items you should buy now because of supply chain issues


Chinese EV maker Nio sees drop in October deliveries due to manufacturing and supply chain disruptions

Is your favorite cereal missing from the shelf? SCD.

Is your dealer unable to get the model of car you want? SCD.

Is the price of a gallon of milk now at $6.99? SCD.

Until this year, we had never heard of SCD. For more than 2,000 years, SCDs were scarcely mentioned.

And now, it’s on every pair of lips. Ships are backing up at Long Beach, California… as the Chinese valiantly try to overcome SCD by stuffing the supply channel to the U.S.

And the whole nation sits on the edge of its seat, wondering if SCD will ruin Thanksgiving… Christmas… and the American Way of Life…

Why Now?

But why, after so many years with no SCD… is the world suddenly full of it? How come?

Can you guess whose fault it is?

Moral philosopher Adam Smith illustrated the complexity of the division of labor in 18th century England by describing a pin factory:

One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands.

More than 200 years later, the world economy is far more complicated.

One group mines and refines the silicon. Another group – which includes chemists, engineers, metallurgists, machinists, mathematicians, electricians, cleaners, security officers, and God-knows-who-else – transforms it into “chips.”

These are then shipped across the widest ocean in the world, to be used in thousands of different “applications”…

…where they are plugged into everything from toaster ovens to air pressure sensors…

…assembled by other teams, drawing on specialists, scientists, and assembly line workers from all over the world…

…using parts that come from Europe, Asia, North and South America…

…and made from almost all the 118 elements in the periodic table, put together into millions of different parts and pieces…

…for millions of other finished products.


Accurate Measures

As the complexity grows, so does the need for accurate, honest measures. It doesn’t really matter if they are high or low… but they must be true.

Down to microns, microradians, and Planck lengths… one group has to shape its components to the precise size that will fit in another group’s templates.

And it must know precisely how much it can afford to spend to make it… and when, precisely, and where, precisely, it is meant to be delivered.

A tiny part… off by a fraction of an inch… with the wrong specifications… delivered to the wrong town… on the wrong day… at the wrong cost – what a disaster!

Just in Time

One of the innovations that made the modern economy possible was money. You didn’t have to know the fellow you were buying from… or even speak his language. You just had to know what he delivered… and at what price.

A more recent innovation was “just in time” inventory systems. Rather than keeping things on hand, it was cheaper to have them delivered when they were needed. This made the process cheaper and more fluid… but also more fragile.

It was amazing that it worked so well. But, in general, people could trust each other to make the components to their specifications… and deliver them on time.

Fed Meddling

And then came the feds.

First, they fudged the money. It has already lost 98% of its value over the last 100 years… And inflation is picking up. As the dollar weakens, it’s harder and harder to make long-term projections.

Then, they queered the interest rate. World commerce operates on credits and debits, to be satisfied later. But you don’t know what either is worth unless you have an accurate interest rate.

At negative real rates (adjusted for inflation)… which we’ve had for almost all of the last 12 years… any calculation is just a fruit salad of guesswork.

And then there were the feds’ tariffs, trade restrictions, and sanctions… further complicating the situation.

These were followed by lockdowns, shutdowns, border closings, mask mandates, and social distancing. Factories closed. Workers stayed home.

And then…

Without the nail, the horse is lost. Without the horse, the rider is lost. Without the rider, the battle is lost. And without the battle… the whole supply chain is, well, FUBAR.

Last Straw

And then, as if that weren’t enough… the feds stimulated demand by handing out fake money.

Drawing on the feds’ stimmy checks and unemployment toppers…

…all of a sudden, in came the orders… and retail sales went up.

But existing inventories couldn’t meet them. Suppliers couldn’t fill them… And transport companies couldn’t deliver them…

The supply chain broke apart.

Thank God the feds are on the case!




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