Supply Chain Worries Not Macro-Friendly — Brian Romanchuk

I started a piece and then scrapped it, so I will just make a short comment on what I am seeing. Putting aside the questions of how the pandemic will evolve (I am not the person to ask), inflation and/or supply chain issues are obviously the main concern, with a secondary helping of politics.

Supply chain disruptions were something that always came up in brainstorming about potential macro surprises — what if the “just in time” inventory system and outsourcing broke down? Well, the often-predicted bad outcome has showed up, and the sky is black with chickens coming home to roost.

This is an environment that is unfriendly to aggregated macro theory. Saying that prices went up “because there was a supply shock” is a good way of saying that the theory is mainly useful for explaining what happened yesterday. Meanwhile, stories that the central bank sets the price level via expectations are not looking that good right now....

Bond Economics
Supply Chain Worries Not Macro-Friendly
Brian Romanchuk