Commentary
By now, we’ve all heard of “The Great Reset” agenda that emanates from the techno-authoritarian zealots at the World Economic Forum. But as of today, it has yet to materialize.
Tomorrow, of course, is another day.
What kind of economic impacts should we anticipate from the supply chain disruptions that we’re currently experiencing?
Should we expect a return to something that may at least look more normal as the pandemic seems to wind down?
Unfortunately, that’s not likely to happen. In fact, the ride may get much bumpier from here on out.
2022 Disruptions Will Be Even Worse
According to economic observers such as Richard Martin, managing director at IMA Asia, the supply chain disruptions we saw in 2020 and 2021 will be “dwarfed” by those coming later this year. Chinese factory production has slowed under the lockdowns, as has shipping, with cargo ships behind in their deliveries.Martin sees a pretty dim prospect for the global economy as the year unfolds. He notes that in addition to the Chinese Communist Party’s (CCP) draconian “zero-tolerance” lockdown policy concerning the CCP virus, the war in Ukraine is adding fuel to the supply chain fire. This is broadly relevant to the European Union (EU), which relies on Ukraine for about a quarter of its cereal and vegetable oil imports, including almost half of its corn.
It’s more than just the lockdowns in China and the war in Ukraine, of course, but the chain reaction and the biggest impact start there. And the coordination of China’s and Russia’s foreign policies certainly can’t be overlooked. It’s more than a coincidence when it comes to the timing of the Russian invasion of Ukraine and China’s massive lockdowns that impact major manufacturing regions.
Food Shortages and European Challenges
Nonetheless, both policies have resulted in supply chain disruptions, impacting Western economies and North African food supplies. The latter is especially important, as food shortages, if not addressed, could trigger mass immigration from the North African region into Europe.
A combine harvester loads a truck with wheat in a field near the village of Hrebeni in the Kyiv region, Ukraine, on July 17, 2020. Russia's invasion of Ukraine could mean less bread on the table for many countries where millions are already struggling to survive. Valentyn Ogirenko/Reuters
Europe is already dealing with a heavy flow of economic refugees crossing the Mediterranean. A flood of starving people would add significant burdens to European governments. Famine is a real threat, as some European governments are already stopping grain exports.
But regardless, supply chain disruptions will have a deeper impact on food and energy supplies in Germany, which relies more than other EU countries on not only Ukraine grain but also Russian natural gas.
More Pain Is Coming to the US
According to Martin, that’s just the beginning of what we’ll see as this year unfolds.He cites big interest rate hikes in the United States that will add sluggishness to a consumer-driven economy reliant upon Chinese imports and is already under duress, which will have an added effect on an already slowed global economy.
But it’s more than just rising interest rates that will stifle economic activity in the United States. The impact of inflation is already being felt in the American consumer economy. And it’s not just the lower and middle classes that are cutting back on spending. The more wealthy are also spending less.
One further factor affecting the U.S. economy is negative consumer sentiment, which is driven by domestic policies and events and international ones. Most Americans think that the country is moving in the wrong direction and that the Biden administration is making things worse, not better.
From vaccine mandates to food, housing, and fuel inflation, Americans are angry about the country’s direction. The Biden administration’s failure to deter Vladimir Putin’s invasion of Ukraine only adds salt to Americans’ no-confidence sentiment toward the administration.
A Global Impact Is Unavoidable
Not surprisingly, Martin is not the only expert observer who sees big problems for the global economy. Many others see similar negative trends on the horizon.Trade economist Vincent Stamer with Germany’s Kiel Institute for the World Economy, for example, also sees big trouble in the latter half of this year for the EU and the global economy.
Supply bottlenecks for integral car parts as simple as electric wire assemblies for German automakers or the neon gas used in semiconductor production are made exclusively in Ukraine, with that country producing 50 percent of the world’s purified neon gas.
In terms of global impact, supply disruptions in Russia’s raw material exports will impact the global economy even deeper. Over 2,100 U.S. and 1,200 European firms rely on at least one exclusive or near-exclusive Russian-based supplier. Those numbers skyrocket to 300,000 when indirect suppliers are counted.
The consequences are that the supply chain disruptions will worsen in the near future. Even massive disruptions and shortages may become the norm before the end of 2022.
Mark Manduca, the chief investment officer of GXO Logistics, concurs with this assessment. In a recent interview on Bloomberg, he noted that inflation and interest rates have definite upside risk, and the effects of both, as well as deteriorating supply chains, will worsen as we move through the second half of this year.
Is This Part of the Reset?
In other words, the economy, our lives, and the times are about to become tougher. The logic is simple but compelling. When inventories begin to run out, shortages will occur, and prices will rise—perhaps even quite dramatically.No mystery there. But how many of these effects were expected by Beijing and Moscow?
Green fences seal entrances to shops and housing units along a street in Shanghai, China, on April 24, 2022. Jacqueline Wong/Reuters
At the time of writing, China is sealing the exits to apartments in Shanghai and taking other extreme measures in major metropolitan and manufacturing areas such as Guangzhou in the south and Jilin in the north, where many automobile factories are located. Total lockdowns are ordered under the pretext of a “zero-tolerance” policy aimed at stopping the spread of the next CCP virus variant.
But is it the virus that Beijing wants to stop? Or is it the supply chains to the United States that Beijing intends to minimize?
Will Beijing add stimulus to jumpstart domestic demand for goods that would usually be exported to foreign markets?
Was Russia’s annex of Ukraine ultimately intended to disrupt supply chains across the West and beyond?
Will the CCP give Russia more financial aid to continue down its current path that may leave Western economies reeling before the end of this year?
“Yes” may well be the answer to all of the above questions.
It certainly seems likely we’re seeing the beginning of what appears to be a rapid and dreadful reset of the global economy on some very different terms.
Or could it be that one reset leads to another?
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
