#supply shock

[erebusvincent]

The global economy may have entered a new era: "The Great Volatility"

Pandemic, war and climate change have created rolling crises

[erebusvincent]

It’s the Supply Shock, Stupid

Washington has finally begun taking emergency action over the coronavirus pandemic. Unemployment insurance, food stamps, and other safety net programs are being expanded. European travelers are being turned away. The Federal Reserve is pumping liquidity. And there are plans for all sorts of bailouts and stimulus packages.

But so far there is no legislation—there is not even any talk—of one of the easiest and most helpful actions to address the economic (and health!) effects of the outbreak: removing trade barriers.

As several commentators have noted, many of the adverse economic effects of coronavirus will result from a supply shock.

Worker illness will reduce labor while quarantines and transport disruptions will isolate supply centers, constraining the flow of raw materials and intermediate and finished goods. At the same time, the sick and people trying to avoid illness will increase their demand for health care and some other goods—resulting in many of the same economic effects as a supply shock.

The result will be higher prices and large, unmet demand.... Fortunately, we can boost supply quickly by removing the many unreasonable obstacles government has put in its way. For starters, we can open America’s borders to all foreign-made goods—now.

[economr]

Supply Shock

A supply shock is an event that suddenly increases or decreases the supply of a commodity or service, or of commodities and services in general. This sudden change affects the equilibrium price of the good or service or the economy's general price level.

[casuist]

As if anyone actually needed another reason to move out of the crazy state of California, now it is being reported that conditions in some areas of the state “are like a third-world country” due to the multi-year megadrought that has hit the state. In one California county alone, more than 1,000 wells have gone dry as the groundwater has disappeared. The state is turning back into a desert, and an increasing number of homes no longer have any water coming out of their taps or showerheads.

Another Reason To Move Away From California: "Conditions Are Like A Third-World Country" | Zero Hedge

[romeconomics-blog]

Core Inflation Explained

[wpspoiler name="Quick Definition" ]Core inflation is the long-run, underlying rate of inflation in an economy.[/wpspoiler]

  Also known as

Underlying inflation

What is core inflation?

Inflation, as most of us know, is when an economy experiences an increase in the general level of prices. Core inflation is a term to describe the long-term rate of inflation in an economy.

Not all inflation in an…

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[economiesoflife-blog]

V for Veiled

In every economic formula, there is a hidden variable, lurking, unbeknownst, invisible to economics students.  Similar to the Guy Fawkes masked English terrorist, this variable goes by a single "V" and is out solely to disrupt the natural regiments of men.  

Well, maybe it's not quite that dramatic.  Simply put, V represents an unexpected supply shock.  Much as people are unpredictable, so is the world we live in.  At any moment an earthquake may destroy a country's entire manufacturing base, a tornado may sweep the fields of a crucial crop, or a war may (and usually will) break out in a leading oil providing nation.  

Think back to supply and demand in any intro level economics class.  What happened to a price-quantity graph when there was a shortage of corn?  The supply curve shifts left, right?  Mathematically, why did it do this?  V.  Conversely: there is an unexpected increase in an area's population causing the demand curve to shift right.  That's also V.  Anytime a curve moves parallel to it's original position, this is due to the variable going from 0 to either a positive or negative value.  

Of course, it's simpler to just say "the curve shifts" than to say "a variable that once didn't exist in the formula because it's usually zero has now changed and affected the Y axis," so it remains absent.  That is, until you discuss the Phillips curve which, as was noted before, shows the correlation between inflation and unemployment.  Because a supply shock is drastically different in concept to the other factor affecting the Y axis, the Expected Rate of Inflation, it is here that the distinction is made before the two variables are mushed together when solving the equation like in most other curves.  

As the doors of Economic possibilities keep getting more and more numerous, I begin to wonder how many other variables are forever a silent zero when studying a perfect world.  You can add an infinite number of zeroes to an equation and never see their existence.  Perhaps there are an infinite number of factors and variables similar to V that we will only be made aware of after they have drastically shaken our graphs, and subsequently, our world.