Why Shortages Are Permanent: Global Supply Shortages Make Fantastic Financial Sense

by | Oct 7, 2021 | Headline News | 8 comments

Do you LOVE America?


    This article was originally published by Charles Hugh Smith at Of Two Minds Blog.

    The era of abundance was only a short-lived artifact of the initial boost phase of globalization and financialization.

    Global corporations didn’t go to all the effort to establish quasi-monopolies and cartels for our convenience–they did it to ensure reliably large profits from control and scarcity. Not all scarcities are artificial, i.e. the result of cartels limiting supply to keep prices high; many scarcities are real, and many of these scarcities can be traced back to the stripping out of redundancy / multiple suppliers of industrial essentials to streamline efficiency and eliminate competition.

    Recall that competition and abundance are anathemas to profits. Wide-open competition and structural abundance are the least conducive setting for generating reliably ample profits, while quasi-monopolies and cartels that control scarce supplies are the ideal profit-generating machines.

    The incentives to expand the number of suppliers, i.e. increase competition, are effectively zero. America’s corporations spent $11 trillion buying back their own stocks over the past decade; that’s equal to the combined GDP of Japan, Germany, and Italy. If adding new suppliers to the global supply chain were profitable, some of that $11 trillion would have exploited those vast profits.

    The financial reality is attempting to compete with an established cartel that has captured regulatory and political mechanisms is a foolhardy waste of capital. If firing up a new supplier of essential solvents, etc. was so captivatingly profitable, then why wouldn’t Google and Apple take a slice of their billions in cash and go make some easy money?

    The barriers to entry are high and the markets are limited. A great many specialty lubricants, solvents, alloys, wires, etc. are essential to the manufacture of all the consumer and industrial products that are sourced globally, but the markets are narrow: manufacturers need X amount of a specialty solvent, not 10X.

    Back in the good old days before globalization and financialization conquered the world, corporations lined up three reliable suppliers for every critical component, as this redundancy alleviated supply chain chokeholds. But to keep those three suppliers in the business, you need to spread the order book among all three. Nobody will keep a facility open if it’s only used occasionally when the primary supplier runs into a spot of bother.

    And so now we’re all seated at the banquet of consequences flowing from stripping out redundancy and competition and ceding control of supply chains to quasi-monopolies and cartels. Scarcities are their source of profits, and since it makes zero financial sense to spend a fortune building a plant to make solvents, lubricants, alloys, etc. in limited quantities in markets dominated by quasi-monopolies and cartels, shortages are a permanent feature of the 21st-century global economy.

    The era of abundance was only a short-lived artifact of the initial boost phase of globalization and financialization; now that the consolidation is complete, shortages make fantastic financial sense.

    By all means, thank Corporate America for squandering $11 trillion to further enrich the top 0.1% and insiders. Alas, there was no better use for all those trillions than further enriching the already-super-rich.

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      1. Beggars banquet.

      2. There’s no shortage of… morons, people that breed like roaches, refugee loving politicians, crappy weather, cheap silver, burned trees, stupid drivers, chemtrails.

        • This is being manipulated by the deep state. everything that is happening now has been planned. The planet is finding out. I hope there is plenty of rope for those involved.

        • There’s also no shortage of crap ‘made in China’ either. People are so hard up and desperate for material junk just to make themselves feel better in their miserable lives.

      3. Like any good drug dealer, financialization had to give the world’s people a taste of an aspirational middle class life. Once they got a taste then it was time to pull back supply, increase the price and ramp up profits. Remember when Obama told a room full of African students they would never get to live as well as Americans?,well he was right. But try they will one way or another, literally getting rich or die trying (most will die).

      4. In our rush to a non-functional, kleptocracy those-that-govern and those-that-run-industries have failed to factor in the severity of pushback from an informed society. People that have tasted a functional society with predictable availability of products that are now seen as necessities, will not readily return to serfdom. Maybe that is why we so frequently see the boot of tyranny.

      5. This is what Orwell wrote about the economy in the world.of 1984: “War is a way of shattering to pieces, or pouring into the stratosphere, or sinking in the depths of the sea, materials which might otherwise be used to make the masses too comfortable, and hence, in the long run, too intelligent.”

        I copied the quote from here http://george-orwell.org/1984/16.html but of course you can read it from your own copy of the book. It’s from when Winston finally has time to read Goldstein’s book.

      6. Bill Gates, Fauci, and Globalists have been putting Spike Protein and DNA damaging ingredient fused in the salads this year and soon will be putting it in all the factory processed or big industrial farm raised food. Big Pharma is leading this, so think ahead about the food you eat. Stock up now for safe food this year, for next year I believe the food grown then will be contaminated to further the death rate.

        Only food grown from heirloom seeds will be safe or local small farms who have their own orchards, crops, and raise their own livestock and produce.

        These big grain farms and mills will be bought out by Big Pharma and government like the hospitals are. They already were bought out to plow their crops under and not plant this past summer, so what is to stop them?

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