Supply Chain Disruption? More Like Supply Chain Overload

Supply Chain Disruption? More Like Supply Chain Overload

The first step toward understanding the Great Supply Chain Disruption of 2021 is to recognize that the phrase itself is not quite accurate. Supply chains are not disrupted so much as overloaded, and the effects are more national than global.

This understanding has implications not only for US consumers but also for the Federal Reserve. It means that inflation is transitory and is unlikely to spread to the rest of the developed world. So the Fed and other banks shouldn’t raise interest rates in the near future — and consumers needn’t worry that products such as Chinese-made toys will always be so expensive.

To be sure, there have been some specific Covid-related supply-chain disruptions that have led to narrow inflation. For the most part, however, inflation is being driven by rising energy and transportation costs.

Container shipping rates, for instance, were more than five times higher in September 2021 than they were in September 2020. Making matters worse, overall congestion rates, especially at US ports, were as high as 80%, meaning there were four times as many ships waiting for a berth as were docked at any one time.

That congestion is primarily a product of dramatically higher volume. US retail sales soared in