The author of this article in the FT argues that the current rise in inflation is a demand side event and not due to supply shortages. He argues that the statistics show that global supply has risen in 2021 but not as fast as global demand.
hank you for this insightful email and related article. Here is a section:
There may be a case for such a policy turn, but the main factual premise of the new resilience-cum-autonomy doctrine is false. The pandemic put capitalist globalisation to the test, with sudden and enormous surges in demand, and it passed with flying colours.
Take durable goods. Headlines about shortages are the only thing that seem in ample supply, and everyone is experiencing delays in obtaining items, such as cars, that could previously be had with instant gratification. But the actual supply of durable goods is at record highs. Since the summer of last year, American consumers have been obtaining them in volumes much larger than the pre-pandemic trend. Many EU economies, including Germany, Italy and the Netherlands, have also matched or exceeded 2019 levels of durable goods consumption.
What about semiconductors? In a short paper published a month ago, Daniel Rees and Phurichai Rungcharoenkitkul of the Bank for International Settlements showed that semiconductor exports from Taiwan and Korea in 2020 exceeded the volumes recorded in 2019, and 2021 exceeded 2020. Exports currently appear to be running at a good 30 per cent above two years ago. The BIS’s Hyun Song Shin has added that semiconductor sales in the US are much higher than in the years before the pandemic.