The Inventory Glut
The biggest culprit for inflation volatility is dysfunctional supply chains.
The biggest culprit for inflation volatility is dysfunctional supply chains. Currently, It is possible to go from a spike in inflation caused by global shortages to a collapse in prices caused by excess inventories coupled with a potential collapse in demand.
The key of this is something called the bullwhip effect. In layman’s terms, when there is high demand, retailers will over-order products to ensure that they have a reliable supply. That moves up the chain, to the wholesalers and the manufacturers. Once those orders come back through (like a bullwhip cracking back), demand may not be so high anymore, and retailers are stuck holding onto too many goods. They no longer need freight services to deliver, so there’s a crash in that market.
It’s important to understand how the particular post-pandemic challenges exacerbated this dynamic. Not only did you have high demand for goods, but you had uncertainty around shipments because of the supply dysfunction. In this environment, retailers were massively over-ordering to try to get any supplies through the system.
Containers price is correcting
More about the Bullwhip effect
Iron ore is correcting
Saudi Aramco signaling potential destruction on demand
If this is the 70s why is the USD so strong? The US your currency , the EM problem .
Korean Won
USDNOK
Argentina Potential Default
Colombia moving towards the Radical Left
Would the Gustavo Petro government be like the one of Lopez Obrador in Mexico or Lula da Silva Brasil? Or on the other hand would it follow the nefarious path of the Kirchner in Argentina or Chavez in Venezuela?
Guillermo Valencia A
Co-founder Macrowise & Scale
Jun 22th , 2022
I think you put the wrong graph in the colombia part.
Thanks!