You are comparing treasury rates a bond will pay out over the next 10 years with inflation over the last year. This is apples and oranges.
I think people who expect we're going to go back to pre-pandemic supply chains are vastly underestimating the difficulty of bringing a complex system like the economy up from a cold start. In my experience with complex systems that are much less complex than the economy (merely a few hundred million lines of code), it can't be done. You have to incrementally build a new system and then cut over parts of old system as their replacements start to function better than the old degraded experience.
This'll likely take a decade or two. Expect it to be a good decade for startups as changing relative prices make new business models viable against soaring existing prices. It's going to be very bad for consumers and for incumbents, though.
It seems to me the economy is delivering all it ever did and more.
https://fred.stlouisfed.org/series/PCES
There will be no global supply chain any more. Any country with a brain now knows they have to be completely independent of the West in every aspect. Sovereign assets must be within their borders. Currency reserves? Held at domestic banks as much as possible. Even within the West there needs to be some level of distrust because history shows that there are no perpetual alliances.
We are going to have several hundred supply chains that often don't interact, even if it would make economic sense for them to do so. This is tremendously inflationary and it's only just begun.
Unfortunately this by itself isn't good for globalization, because it relies upon free trade, stable legal systems, and secure supply lines to work. So even if you get rid of the governments that seek to detach from the world economy, the goods can't get to consumers when they get intercepted by warlords.
I think that eventually the world may converge upon city-states as a cultural unit and corporate feudalism as an economic one, but it's likely to be an exceptionally bloody transition.
Emerging defense technologies like drones, lasers, robots, micro-scale manufacturing, and self-driving vehicles - along with the latest generation of existing weaponry like MANPADS and anti-tank missiles - all preference the defender. They allow a group of relatively untrained and loosely organized defenders who know the terrain well to deploy extremely effective resistance against an attacker, as long as it's at short range. A drone swarm can quite literally destroy all hostile forces within an area without risking a single person, but it can't do this beyond say 100 miles out. These technologies are all for defense, not power-projection.
This has a similar effect as the development of the musket in the 1500s. The musket allowed relatively untrained militias to enjoy superior firepower over the knights and longbowmen that had trained professionally their whole lives. As a result, smaller city-states and colonies could defend themselves against the large standing armies that kings and emperors could wield, and so the feudal system collapsed. This reversed with rifles (their greater accuracy benefitted from more professional training) and modern armor & explosives (which required an industrial base and supply chain greater than any city could muster), ushering in the era of nation-states. Military technology is changing again, and that's why I believe the nation-state system is again going to revert to smaller decentralized units.
> They allow a group of relatively untrained and loosely organized defenders who know the terrain well to deploy extremely effective resistance against an attacker, as long as it's at short range. A drone swarm can quite literally destroy all hostile forces within an area without risking a single person, but it can't do this beyond say 100 miles out.
We already have this "drone swarm", we just call it a guided missile.
The hard part in fighting a modern army isn't killing them, it's finding them. The defender is inherently at a disadvantage in this regard because they have things to defend, which necessitate that they're position in the vicinity. Russia is struggling at the moment not because defenders are inherently advantaged but because they're relying on conscripts and relatively untrained soldiers.
> The musket allowed relatively untrained militias to enjoy superior firepower over the knights and longbowmen that had trained professionally their whole lives. As a result, smaller city-states and colonies could defend themselves against the large standing armies that kings and emperors could wield, and so the feudal system collapsed.
The exact opposite of what you're describing happened with the wide utilization of gunpowder. Pre-gunpowder, city-states and small kingdoms enjoyed relative independence due to the sheer expense of penetrating walls. Post-gunpowder, artillery (not rifles) required a whole professional organization to be utilized effectively, and formed the backbone of the army, so small states could no longer field or effectively defend against larger states, leading to increased centralization of authority, well before the creation of nation-states. "Makers of Modern Strategy from Machiavelli to the Nuclear Age" covers this transition pretty extensively.
Yes; this, and all of NATO is assisting Ukraine with G-2 (intelligence) and G-4 (logistics).
In other words, Russia created a military that was bad at being a military.
The only good thing that will come of this conflict is a revitalization in the study of military arts.
Changing topic: you said upthread “[people are] vastly underestimating the difficulty of bringing a complex system like the economy up from a cold start. In my experience with complex systems that are much less complex than the economy, it can't be done.”. Your personal example is irrelevant because it is a single person trying to restart an economy. Cities recover after earthquakes (my city Christchurch 2010) and wars (I have visited ex-Yugoslavia) due to many independent actors working, perhaps not so much due to your “command economy” example. Capitalist individuals route around damage. Although I admit effective centralised government helped Christchurch recover quickly.
Bearing the cost of ones own defense and foreign policy, instead of outsourcing it to your host government, is incredibly inefficient and leaves you open to price competition from your government-sheltered peers.
That's the entire reason the global economy of politcal-economic alliances and trade policies was created: to benefit from global, lower-cost manufacturing while still retaining the benefit of government protection.
It seems more likely we'll revert to a multi-polar late-Cold War state of affairs, with global supply chains much more influenced by current military alliances.
Economic sanctions in response to invading another country is a very different thing, and not a new thing.
Is it a perfect estimate of inflation? No.
But I would trust it more than hot takes from non experts.
- increased min wage
- supply chain disruptions
- China lockdowns: less goods on the market -> higher prices
- increased price on commodities and energy
All of this already included into current good prices, so there should be something more to push farther inflation.
When you have a supply shock on raw inputs, it takes time for that to make its way through the economy. Businesses along the way keep inventory, they've locked in forward contracts, they can eat the cost increases to avoid losing market share until they're sure the price increases are persistent. But eventually they realize that everyone else in the industry is facing similar price increases and they'll go out of business if they don't, so they raise their prices too. This eventually propagates down the supply chain as inventory runs out and new contracts are negotiated. The price increases of late 2021 were triggered by the initial shock of March 2020. The Ukraine war & China lockdown shocks of early 2022 aren't going to be seen until about 2024.
By the time businesses have adapted to this round of shocks, we may be dealing with new shocks like a war in Europe or the retirement of baby boomers.
It was the biggest shock: panic lockdowns across the world, not just initial. Chances are that supply chains have been adapted, and current localized lockdowns in China will not make significant damage. But we will see.
Fed was aggressively printing starting 2008, and we didn't observe much inflation, meaning those money didn't go to real economy, but went to some big investment speculations and real estate.