The Failure Of Global Supply Lines
by David Reavill
The failure of global supply lines in America is at least as old as the country. Its history goes back to the Boston Tea Party. An event where the supply of Tea and other products was unreliable, over-priced, and over-taxed.
Back then, enterprising Americans rose to overthrow this economic dictatorship and eventually declared a free and independent country.
Throughout the next century, America remained mainly true to the mantra: “buy American.” Thereby creating the most outstanding economy on earth. The American economy was noteworthy for its remarkable balance between supply and demand. American raw materials and American components supplied the mighty automakers in Detroit. Power came from the coal mines up and down the Appalachians—steel and glass from the plants in Pittsburgh.
Back then, supply and demand were kept equal by the free market operation. Decisions at the plant level meant those managers could budget, plan, and store all they needed to continue production. If the plant manager saw that coal or steel was running short, they would stockpile additional inventory to meet that future shortage.
The balance came from each actor along the supply chain, acting in their self-interest but producing a well-ordered symphony of economic harmony. It was a process that was a wonder to behold. It was what Adam Smith, nearly 200 years before, called the “Invisible Hand.”
Unfortunately, by the 20th Century, American Politicians, along with unscrupulous business interests, who thought they had a “better way.” Let’s go global. The oil industry was one of the first sectors to move in this direction. Having developed the rich Saudi fields in the 1950s, Aramco steadily increased America’s reliance on this off-shore supplier.
However, 20 years later, the Saudis turned the tables. From then on, the Saudis, not the Americans, would be in control. American oil and gas, at the margin, would be in the hands of the House of Saud.
Later, the Saudis would organize all of the mid-east oil countries. They would expand their reach to the entire globe. The Americans now found themselves out in the cold. Literally in the cold, as during the OPEC Oil Embargo, we were without energy for the first time in our history. Again, we had become reliant on others for one of our most basic economic supplies.
It was just like the Boston Tea Party all over again. Reliance on foreign supply had provided little else but a shortage. Americans had failed to learn the lessons of our history. By relying on others, we ended up with not enough.
Again in the 1990s, the most recent iteration of “under-cut America” began. It seems the entire technology sector operated under a universal business model. Market to the Americans, but build everything in China. Apple was the first to introduce this method of production. Apple would build their iPhones, iPods, Mac computers, and other products in China. At the same time, it was designing and marketing those products in the US.
I remember one particularly ludicrous moment when Tim Cooke, CEO of Apple, tried to make the case that those Chinese factories weren’t manufacturing facilities. They were just assembly plants—a distinction without a difference. However, Mr. Cooke would slice it. Those supply lines stretched across the Pacific. And Apple did not give those jobs to Americans.
Today I am hard-pressed to think of a single US Technology company that doesn’t use overseas factories to build its product. And the result is that today we have supply lines that are no longer secure. We have, once again, become reliant upon far away suppliers with different business ethics and different measures of quality. Price, reliable supply, and quality of construction are all out of the American’s hands.
The Boston Tea Party became the defining moment in this nation’s history two hundred forty-nine years ago. The moment that an unruly group called the Sons of Liberty stood up and began a series of events that would lead to American Independence. A time when Americans grew tired of working for a distant elite whose only goal seemed to be exploiting those Yankee Colonists.
I sense that we’re close to that flash point again.
Close to the time when the new group of “Sons and Daughters of Liberty” stand again and declare our Independence from today’s intertwined Global Elite.
As European oil prices continue to ease, things look slightly brighter today.
That California heat wave looks to get some relief as hurricane Kay passes Southern California this weekend, promising much need rain and hopefully some relief from the high temperatures.
Today’s big news will be the speech by Chairman of the Federal Reserve, Jerome Powell. The markets are looking for Powell to take a more moderate stance regarding tightening. But Powell doesn’t seem to be in that mood lately. Recently he has promised nothing but higher interest rates, and that’s what I expect him to say today. Look for Powell, the interest rate hawk, in today’s speech.
Here’s some welcome news in this demanding economic environment. In overnight financial information, Japan announced that their final estimate of GDP grew at 9/10th%. At the same time, the European Central Bank is expected to raise its core interest rate in just a few minutes. Analysts are looking for the new rate to come in at 1 1/4%. That would be the highest interest rate for Europe in six years.
The Labor Department will announce the latest jobless claims here in the US. It is expected to rise slightly.
A light day in earnings, with the cyber security firm, Zscaler, interactive company Docusign, and up-scale retailer RH all reporting after markets close.
Import taxes should be the inverse of what is produced in America. The tariff need to be almost exponential. If we import 1% the tariff is 1%. If we don’t produce the item in America, that tariff is 1000%. America needs to producing at least 50% of everything we use. We also need to have tariffs on strategic exports. No none citizen should be allowed to own land in America. The FED should adjust the money Supply an rate to equal 0% inflation.