As I write this (mid-September), reports are already reaching me from United States and European vendors of a slow-down in sales as the cyclical nature of our market sees parts and accessories demand hibernate. In theory, in normal times, that would also result in an inventory build-up.
However, these times are many things, but 'normal' certainly is not one of them. Despite the supply chain issues of the past 18 months showing some signs of improvement recently, with even some critical raw material prices and shipping rates coming off their peaks, what will happen in the coming months is that some sense of equilibrium may return, despite the US Federal Reserve's admitted policy of weaponizing the employment numbers as an additional tool to interest rates as it continues to wonder just how it could have got its inflation forecasts just so wrong.
Demand has been running ahead of our ability to supply for at least two full seasons now. Famously, it has been semiconductors, and the microchips and ICs that need them, that has been the most visible supply issue in terms of public consciousness.
But as anybody who has tried to book a shipping slot or secure a raw materials delivery knows only too well - the scope of the issues has been running much deeper than just electronic component shortage impacts. The availability of labor has been as much a principal factor holding businesses back from being able to meet the demand in their markets as any other.
“we do not need to be staring down the barrels of a recession”
I'm not going to go anywhere near the politics of it, but for so long as low birth rates, higher than ever levels of population age-out, lower immigration rates that are required for growth, workplace churn and 'The Great Retirement' continue to change the jobs landscape, then the old orthodoxies can be thrown away.
Any economists or analysts (and especially any politicians) who claim they know what is going on and how to fix it are deluding themselves. They do not. This is a new cocktail of traditionally contradictory forces now pulling in the same direction - towards lower growth.
Anyone who claims they know the answers hasn't even heard the question properly, never mind understood it. Factor in a major war - the Ukraine/Russia front may be small in the scheme of things, but the global impact of the fighting is huge - and there are no maps to guide us out of this.
With the West trying to keep the war cold and win it by turning sanctions into a weapon of mass destruction (they patently are not going to work in anything less than a three to five year time frame), the cause of freedom looks set to bleed on the fields of Ukraine for a long time yet.
Far from crippling the Russian economy, sanctions against buying Russian energy have most western markets circling the 'Big R' and are providing Russia with a very big stick with which to beat wavering western European governments into submission. Far from being brought to heel by shortages of Big Macs, Levis, Volkswagens and access to the global financial services and capital network, it is Russia that has found an additional new weapon as it successfully weaponizes western dependency on its energy.
In the years following the collapse of the Soviet Union, Putin blindsided the G7 by appearing to play nice and be in the market to take a seat at the top table of respectable capitalist nations and got Europe (in particular Germany) hooked on the drug of gas.
It is ironic that in the face of the battle to try and understand what our energy use is doing to our children's and grandchildren's futures, 'Vlad the Bad' has turned the tables and now has the West's balls in a vice-like grip.
Our economies are screwed if we tell Russia to shove its pipelines where the sun never shines, or freedom and democracy are screwed if we don't. Three months ago, I said that nothing good would come of pretending to be a little bit pregnant. Now that we finally have incontrovertible proof that that Russian forces are no match for the Ukrainians if we give them the ammo and kit needed to get the job done, there is still no apparent willingness to act decisively.
The result is that the perfect storm of malign and aligned economic problems will continue to fester like a toxic cocktail that our governments, central banks and capital markets are swallowing through shear cowardice.
We do not need to be staring down the barrels of a recession. It is fixable. Think about it. If we help kick Russia out of the Ukraine and thereby trigger regime change (Brezhnev after the Afghan humiliation is the reference point), the hope would be that we will be able to build a civilized trading relationship with a more mainstream Russian government.
That would mean being able to afford its gas while we in the West, all the world hopefully, plow the ground in order to be able to avoid being held to ransom ever again. The green energy revolution means we are already rebuilding our energy consumption profile away from dependency on murdering, freedom-hating fascist regimes and what they happen to have in the ground.
Admittedly, we are still at the early stages of doing that, and regardless of what CARB and the EU may think, we will not be ready to switch off the gas pipelines and oil wells by 2035. So, meantime we need an interim solution, and arming the Ukrainians so they can get the oil and gas switched back on in the interim is the best game in town - for capitalist as well as for ideological reasons.
We need oil to be able to sell motorcycles. We need electricity to be able to sell motorcycles. We certainly do not need a recession.
Questions? See you at the barricades!
