The warning signs of worsening shortages continue. Things like Christmas trees, sneakers, chicken tenders, alcohol, Lunchables, coffee, and pet food are all reported to be in short supply.
Companies including AMC theaters, KFC, Starbucks, General Mills, Nike, FedEx, and Costco are all reporting shortages that will last at least through the end of the year and into the next. With the decrease in supply, there will be price increases, the law of supply and demand predicts it.
In fact, FedEx has already announced a 6% increase in shipping rates.
To complicate shortages, trillions in government stimulus during the pandemic has increased personal wealth, with household net worth up 4.3% in the second quarter while the debt carried by Americans rose by 7.9%. So not only decreased supply, but increased demand- more money chasing fewer products. Lovely.
The Fed will have to acknowledge all of this and make some drastic changes in monetary policy. When that eventually happens, everyone will claim that this new policy “caught them by surprise,” which will cause a decrease in stock prices.
The Fed can’t raise interest rates too much, because the US government simply doesn’t have the money to pay the extra interest on the $28.5 trillion that is already owed.
Things are going to get much, much worse.