Month: January 2022

Authored by Michael Snyder via The Economic Collapse blog,

This was supposed to be the year that things “got back to normal”, but here we are at the end of January and things have only gotten worse. 

As we move forward into February and beyond, there are two key global shortages that we are going to want to keep a very close eye on.

One of them is the rapidly growing fertilizer shortage.  A few days ago, the Wall Street Journal ominously warned that “high fertilizer prices are weighing on farmers across the developing world”…

From South America’s avocado, corn and coffee farms to Southeast Asia’s plantations of coconuts and oil palms, high fertilizer prices are weighing on farmers across the developing world, making it much costlier to cultivate and forcing many to cut back on production.

That means grocery bills could go up even more in 2022, following a year in which global food prices rose to decade highs. An uptick would exacerbate hunger—already acute in some parts of the world because of pandemic-linked job losses—and thwart efforts by politicians and central bankers to subdue inflation.

According to the International Fertilizer Development Center, exceedingly high fertilizer prices could result in a reduction of agricultural output in Africa alone “equivalent to the food needs of 100 million people”.

So this is a really, really big deal.

And this crisis is going to deeply affect us here in the United States too.  The following comes from a recent piece authored by U.S. Senator Roger Marshall…

It’s no secret farmers are faced with a fertilizer crisis. Prices for phosphorus-based and potassium-based (potash) fertilizers have more than doubled in Kansas while Nitrogen-based fertilizers have more than quadrupled. Fertilizer is vital to feeding not only the country, but the world. It contains essential nutrients for plant life, and without it, American agricultural yields will quickly suffer as well as food prices in local grocery stores.

As I discussed the other day, these crazy prices for fertilizer are going to make it impossible for many U.S. farmers to profitably plant crops this year.

That means that a lot less food is going to be grown.

On the other side of the world, the North Korean government is asking their citizens to start creating “homemade” fertilizer from their own waste…

State-run media has also been encouraging people to make “homemade” manure, The Daily Beast reported. A source in North Hamgyong Province told Daily NK that residents had started “producing fertilizer from human waste” after authorities launched a 10-day drive to increase production.

Perhaps U.S. citizens should give this a try, because a lot of us are certainly full of crap.

The other major shortage that I want to highlight in this article is the ongoing computer chip shortage.

According to a report that was just put out by the Department of Commerce, chip inventories around the nation have become dangerously thin…

Today, the U.S. Department of Commerce released the results from the Risks in the Semiconductor Supply Chain Request for Information (RFI) issued in Sept. 2021. Key findings from the report provided data-driven information about the depths of the semiconductor shortage and underscored the need for the President’s proposed $52 billion in domestic semiconductor production.

The RFI showed that median inventory held by chips consumers (including automakers or medical device manufacturers, as examples) has fallen from 40 days in 2019 to less than 5 days in 2021. If a COVID outbreak, a natural disaster, or political instability disrupts a foreign semiconductor facility for even just a few weeks, it has the potential to shut down a manufacturing facility in the U.S., putting American workers and their families at risk.

At this point, computer chips used to produce automobiles and medical devices are particularly in short supply.

In a blog post, Commerce Secretary Gina Raimando explained that a lack of chips resulted in “$210 billion in lost revenue” for automakers in 2021…

“In 2021, auto prices drove one-third of all inflation, primarily because we don’t have enough chips,” Raimando wrote in her blogpost. “Automakers produced nearly 8 million fewer cars last year than expected, which some analysts believe resulted in more than $210 billion in lost revenue.”

If there is additional disruption to chip production this year, 2022 could easily be even worse.

Many may wonder why we just don’t plop down a bunch of factories and start pumping out more chips.

Unfortunately, it isn’t that easy.  Chip factories take a very long time to build, and we are being warned that it could take “until 2023” before things return to normal…

But industry executives aren’t optimistic that the funding would help alleviate the crisis, the Washington Post reported. They argued federal funding could help build up the long-term supply of chips but wouldn’t help in the short term because chip factories take years to build.

Chip consumers that were surveyed by the department similarly estimated that shortages wouldn’t go away in the next six months, and some suggested it could take until 2023.

We should have never become so dependent on chip production in Asia.

Today, Taiwan accounts for a whopping 63 percent of all computer chip production in the world…

The majority of chip factories are currently based in Asia, which houses about 87% of the market share of semiconductor factories (with Taiwan alone accounting for some 63%), separate industry data indicates. The political climate in the region, and tensions between Taiwan and China, has come under renewed scrutiny as the shortage has exposed how much U.S. industry relies on these sources.

So what is going to happen to our economy if China invades Taiwan and our main supply of computer chips gets completely cut off?

I have been warning for years that military conflict with China is coming, and now we are closer than ever.

What is our economy going to look like if a Chinese invasion of Taiwan this year instantly puts us into a state of war with the Chinese?

How in the world will we even be able to function as a society?

You might want to start thinking about such questions, because what was once “unimaginable” threatens to become reality in 2022.

*  *  *

It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon.

It looks as though those sky-high auto prices aren’t going to be coming down anytime soon.

In addition to numerous automotive CEOs – the latest of which was Elon Musk on yesterday’s Tesla conference call – blaming continued supply chain and semiconductor issues for their lack of inventory, a new report from J.D. Power released this week shows that prices will likely remain high despite sales declining from January 2021. 

J.D. Power’s most recent estimates including that “new-vehicle sales for January 2022, including retail and non-retail transactions, are projected to reach 932,100 units, a 15.6% decrease from January 2021”. 

The consumer intelligence company also predicted that the “seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 14.1 million units, down 2.6 million units from 2021”. 

“Despite optimism towards the end of 2021 that diminishing supply chain disruption would result in more vehicles being delivered to dealerships, the new-vehicle supply situation has shown no meaningful improvement. January month-end retail inventory is expected to be below one million units for the eighth consecutive month. The volume of new vehicles being delivered to dealerships in January has been insufficient to meet strong consumer demand, resulting in a significantly diminished sales pace,” said Thomas King, president of the data and analytics division at J.D. Power.

Consumers are projected to spend more, despite the lower volumes, the report notes: “Despite lower volumes, higher prices mean that consumers are on track to spend a healthy $37.2 billion on new vehicles this month, the highest on record for the month of January and 10% above January 2020.”

King continued: “Dealers also are continuing to benefit from high transaction prices with total retailer profit per unit—inclusive of grosses and finance & insurance income—being on pace to reach a $5,138, an increase of $2,969 from a year ago and the fourth consecutive month above $5,000. The gains in per-unit profit are offsetting the drop in sales volume as the total aggregate retailer profit from new-vehicle sales is projected to be up 117% from January 2021, reaching $4.3 billion.”

“Record new-vehicle prices are being supported by exceptionally strong used-vehicle prices, as new-vehicle buyers benefit from more equity on their trade-in vehicles,” the report continues. “The average trade-in equity for January is trending towards $9,852, an 88% increase of $4,611 from a year ago. Also, interest rates are favorable when compared with a year ago. The average interest rate for loans in January is expected to decrease 14 basis points to 4.14%. Even with lower interest rates and increased trade-in values, the average monthly finance payment is on pace to hit a record high for the month of January of $669, up $73 from January 2021.

Despite the lack of supply, Power’s King says that the underlying metrics of the auto industry “have never been stronger”: 

“Although the start of 2022 is disappointing from a sales standpoint, the underlying health metrics of the industry have never been stronger. Looking forward to February, the overall industry sales pace will continue to be constrained by procurement, production and distribution and all indications are that deliveries will not rise substantially for the industry in aggregate. This means February will likely be another month of suppressed sales volume offset by near record level pricing and profitability.”

The release also broke down key details for the auto sales market in the U.S.:

• The average new-vehicle retail transaction price in January is expected to reach $44,905. The previous high for any month, $45,283, was set in December 2021.
• Average incentive spending per unit in January is expected to reach $1,319, down from $3,482 in January 2021. Spending as a percentage of the average MSRP is expected to fall to 2.9%, down 5.2 percentage points from January 2021.
• Average incentive spending per unit on trucks/SUVs in January is expected to be $1,310, down $2,202 from a year ago, while the average spending on cars is expected to be $1,353, down $2,019 from a year ago.
• Buyers are on pace to spend $38.2 billion on new vehicles, up $4.4 billion from January 2021.
• Truck/SUVs are on pace to account for a record 80.1% of new-vehicle retail sales in January.
• Fleet sales are expected to total 103,200 units in January, down 48.6% from January 2021 on a selling day adjusted basis. Fleet volume is expected to account for 11% of total light-vehicle sales, down from 18% a year ago.

By Haley Zaremba of OilPrice.com,

Summary

• Europe’s energy crisis has already cost governments tens of billions of dollars and a looming confrontation with Russia would only make that worse.

• European households are already set to see a 54% increase in the cost of gas and electricity despite the best efforts by governments to keep prices down

• Russia provides about 40% of Europe’s natural gas, and if Russia does invade Ukraine and European governments respond with sanctions, there is a chance that supply could be cut off

Europe’s energy crunch is intensifying even as governments across the continent struggle to stop the crisis through stop-gap policy measures and subsidies. The past year has seen a stunning 330% surge in gas prices across European markets, hitting consumers extremely hard at the same time that the global economy is attempting to recover from and adapt to the ongoing novel coronavirus pandemic. To date, European governments have been largely helpless to stop skyrocketing inflation. The forces they are up against – economic, health, and political – far outgun the abilities of the European Union. 

So far European leaders “have spent tens of billions of euros trying to shield consumers from record-high energy prices, and themselves from voters’ wrath” according to reporting and analysis by Reuters, but the efforts are going to fall far, far short of the economic fallout continuing to batter European consumers. “BofA analysts estimate the average western European households spent around 1,200 euros ($1,370) a year on gas and electricity in 2020,” Reuters writes. “Based on current wholesale prices, they estimate this will rise by 54% to 1,850 euros.”

Efforts to protect consumers and impose damage control on energy markets have included removing VAT taxes on home energy bills, sending relief directly to impoverished households, and, in some cases, staking moratoriums on crypto-currency mining, a remarkably energy-intensive practice that is sapping many Eastern European energy grids dry as miners capitalize on subsidized energy costs in poor countries including Kazakhstan and Kosovo. However, these measures don’t hold a candle to the crisis continuing to unfold. “Measures announced so far in western Europe will only cover about a quarter of the price rises on average,” Harry Wyburd, European utilities analyst at Bank of America Securities, was quoted by Reuters.

With inadequate policy power to combat the crisis and increasing geopolitical tensions in the region, the crisis is set to get much, much worse. Ubiquitous supply chain woes continue to disrupt the energy sector and render supplies unable to keep up with demand. Furthermore, geopolitics are making the situation worse as oil-rich Russia tightens its grip on Europe as the continent becomes increasingly dependent on the Kremlin to keep the lights on. Russia provides around 40% of Europe’s natural gas and over 50% of Germany’s. It has been speculated that Russian President Vladimir Putin is refusing to open the taps and meet Europe’s need for natural gas because of the leveraging power it gives Moscow to further their interests and push through initiatives such as the Nord Stream 2 pipeline.

The pipeline, which would pump Russian liquefied natural gas straight to Germany, bypassing Ukraine entirely by way of the Baltic Sea, is a point of major geopolitical tensions, as many in the west think that it would give the Kremlin far too much power over European markets, increasing Russia’s already prodigious political sway in the region. While the pipeline is already under construction, Moscow is waiting on the greenlight from Berlin to bring it online. Berlin, however, is under severe pressure to hold off on the project and avoid kowtowing to Russia, especially at a time when the nation’s aggression is becoming worryingly unchecked and an invasion of Ukraine is on the cards. 

The potential coup brewing presents a major energy security threat to Europe at a time that the energy economy is already in crisis. “Should Russia choose to cut off the supplies in the middle of winter in response to the imposition of Ukraine-related sanctions, energy costs would skyrocket and millions could shiver amid power outages,” Axios reported on Monday in an article titled “Europe’s energy reliance on Russia is a crucial shield for Putin.” If this supply cut-off does indeed come to pass in retaliation to sanctions being threatened by world leaders including United States President Joe Biden, Goldman Sachs projects that the conflict could curb gas supply to Europe indefinitely. 

A SpaceX rocket launched seven years ago is on a collision course for the moon, according to Ars Technica. 

The Falcon 9 rocket, initially launched from Florida in early 2015, completed an interplanetary mission to send a space weather satellite to a Sun-Earth LaGrange point around 900,000 miles from Earth. 

But after completing the mission and sending NOAA’s Deep Space Climate Observatory into deep orbit, the rocket’s second stage ran out of fuel and has been in a disorderly orbit ever since. 

Bill Gray, who develops software to track near-Earth objects, said the Falcon 9 rocket would impact the moon’s far side, near the equator, in early March. 

Gray wrote in a blog post that the Falcon 9’s second stage “made a close lunar flyby on January 5” and will make “a certain impact at March 4”.

“This is the first unintentional case [of space junk hitting the moon] of which I am aware,” Gray added.

The Falcon 9’s second stage, weighing in at four metric tons, will hit the moon at a velocity of about 2.58 km/s.

The exact area of impact is still unknown to Gray. He added the collision might not be visible from Earth because “the bulk of the moon is in the way, and even if it were on the near side, the impact occurs a couple of days after New Moon.”

We can already see future problems if governments and tech companies want to create moon bases, is that a threat of space junk could jeopardize operations.

Does that mean future moon bases need laser weapon systems to prevent collisions from space debris? 

Authored by Isabel van Brugen via The Epoch Times,

Internal destabilization is a bigger issue for Ukraine at present than a potential Moscow-led invasion, Ukraine’s national security secretary said on Tuesday.

According to state media outlet Ukrinform, Ukraine’s National Security and Defense Council Secretary Oleksiy Danilov told reporters that Russia is benefiting from internal destabilization as tensions mount over a possible Moscow-led invasion.

“Today, according to all intelligence reports that coincide with those of the United States, Britain, and other partners, internal destabilization is No. 1 issue,” said Danilov, at a briefing after a National Security and Defense Council meeting, according to the news outlet.

“Without internal destabilization, the Russians have nothing to do here. They bet on the issue of internal destabilization,” said Danilov, according to the news outlet.

Destabilization within the country serves to sow panic among the population, which in turn, causes the national currency to plunge—further damaging Ukraine’s economy, he said.

Danilov’s comments come as tensions escalate over a potential invasion by Russia. Western officials estimate Russia has amassed about 100,000 troops near the Ukraine border, while Ukrainian officials have estimated as many as 127,000 Russian troops are stationed at the border.

On Monday, White House press secretary Jen Psaki said U.S. citizens in Ukraine should leave the country immediately, noting that there are no plans for a “departure or an evacuation” for American citizens and diplomats from Ukraine in the event of an invasion.

“We are conveying very clearly now that now is the time to leave and that there are means to do that,” Psaki said.

Meanwhile, U.S. Secretary of State Antony Blinken on Wednesday set out a diplomatic path to address sweeping Russian demands in Eastern Europe, as Moscow held security talks with Western countries and carried out military drills.

In a written response to Russia’s demands delivered in person by its ambassador in Moscow, the United States repeated its commitment to upholding NATO’s “open-door” policy, while offering a “principled and pragmatic evaluation” of the Kremlin’s concerns, Blinken said.

Blinken spoke to Chinese Foreign Minister Wang Yi about Ukraine on Wednesday, highlighting the global security and economic risks that could stem from Russian aggression, the State Department said.

Russia has denied it is planning an invasion, but has demanded NATO pull back troops and weapons from Eastern Europe and bar its neighbor Ukraine, a former Soviet state, from ever joining the alliance. Washington and its NATO allies reject that position but say they are ready to discuss other topics such as arms control and confidence-building measures.

Russia seized control of Ukraine’s Crimea Peninsula in 2014 and Ukraine’s Donbas region has since seen violence that has taken more than 14,000 lives. The region is now under de facto control by Russia-backed separatists.