Inflation: Margin Killer Affects Cargo and International Shipping Part I
The Problem
While many are now speaking about the fact that inflation is coming, due to the radical fed policy of hyper quantitative easing, few are detailing what happens to the people of a nation bound by inflation. For those of us who are directly involved in the movement of cargo and international shipping, its good to note outcomes for those we ultimately serve, our end client, the American family.
First, if someone were to tell you that an investment you make would be worth 10% less in 10 years than it is the day you acquired it, would you buy it? Chances are no. All the more, if you knew that the investment would descend in value even more quickly, like 20, 30 or 50% so that 100,000 USD would be worth only 50,000 USD ten years from now, you definitely wouldn't.
But this is precisely the situation. This is what is happening to our currency by those placed in charge of the mechanisms instituted to manipulate currency outside the natural organic forces of economics. But the effects – what are they and are they a benefit?
The Effects
In short, inflation causes rising fuel prices which leads to more expensive everything else: heating & cooling your home, traveling to and from work, and food. As costs increase and as every one deals with these factors – businesses have to add these costs to their goods and services offered which makes a cumulative upward spiral of rising costs.
It’s no different for our industry; shipping and transportation costs are escalating, putting pressure on margins, which translates into less liquidity to invest in growth and what all governments want, new jobs.
However, the upward cost spiral also presses prices higher even without adding the fuel component to the equation. On their own, food items go up, precious and not so precious metals increase in price, the price of services, the price of education, even the price of breathing seems to go up. This, in essence, is what happens. The price of every aspect of life goes up.
The Solution?
Those of us in international shipping and cargo transport try to keep in mind that, those we serve, are in turn serving a population that is continuing to feel the squeeze of “lowered margins” in their personal lives and on their financial balance sheets (which most Americans don’t have). But whether they know it or not, Americans' disposable income is going down even now.
However, those who tabulate the official view of the economy tell us that currently we don’t have enough inflation, thus Q E 3 (Quantitative Easing #3, money printing) is on the way . Thus, creating one of the largest “bubbles” in history. You thought the “real-estate bubble” correction in 2008 was tough and the “tech bubble” correction of 2000 brought hardship – just wait for what awaits. If the entire economy is in a “currency bubble” – what does that correction look like? Stayed tuned for this and more in Part II.
Key Takeway- Be prepared for the continuing increase in the cost of living and the changes that may take place in your community. While everything in our daily lives seems to increase, the friendly staff at Universal Cargo Management tries to keep in mind that everyone needs to save every chance they can. Therefore, we always seek to provide competitive and the most cost-efficient rates to our customers.
For inquires or a rate quote on your shipment, please contact us.
Dave Stover
dave@universalcargo.com