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The Biden administration is actively involved in resolving the core problem of US port congestion. This is a basic measure to prevent the threat of stagflation.

22 Oct 2021

By Arthur Chen 

Under the high producer price index (PPI), China is becoming more and more likely to export inflation to worldwide.

In my article on October 8th, I pointed out that the president of Japanese Mitsui Merchant Marine called on governments to intervene in the key issues of the maritime supply chain in order to solve the phenomenon of global logistics disconnection in the past six months. The Biden administration of the United States finally actively intervened in the core issue of port congestion. Biden met with the leaders of the two busiest ports from Asia for imports to the United States, the Port of Los Angeles and the Port of Long Beach, and the leaders of the International Coast and Warehouse Alliance, and jointly announced that the Port of Los Angeles will start operating 24 hours a day, hoping to ease the supply chain of bottleneck. Prior to this, the Port of Long Beach had started 24-hour operations a few weeks ago. Biden previously stated at the White House press conference  -- This is a critical first step towards the national freight and logistics supply chain to achieve 24/7 operations. And pointed out -- This is to speed up the supply of our raw materials and commodities. This is an important first step for on-chain mobility, but now we need other private companies to step up their actions too. Then, large logistics providers and large retailers also announced they would extend their working hours and move towards 24/7 operations. Including Wal-Mart, Home Depot, Target, Samsung, FedEx, United Parcel, etc. The U.S. government has finally learned the benefits of requiring the supply chain logistics to operate 24 hours a day, especially in the evening with smooth traffic, which is 25% more efficient than during the daytime. Transporting goods during off-peak hours can help goods to be shipped out of the port faster, which means that the current congestion situation can be resolved more quickly.

The White House pointed out a problem that was deliberately ignored in the past-US port operators who did not fully realize the possibility of night and weekend operations. The White House stated that the efforts of those private sectors such as Walmart, Target, UPS, etc. will result in an increase of 3,500 containers shipped out at night every week at these two ports by the end of this year. This step is a correct step towards solving the core problem. This time, the Biden government actively intervened in port improvement measures, focusing on the chaos in the global supply chain that caused large-scale delays in the transportation and delivery of raw materials and finished products, which pushed up the prices of many commodities. Rising prices will reduce consumer spending, block economic recovery, and have adverse political effects, especially for Democratic Party in midterm election next year. The US consumer price index (CPI) reached 5.4% in September, which has exceeded 5% for five consecutive months. Coupled with many research institutions and economics, financial scholars have raised concerns about stagnant inflation from time to time. All these have forced the U.S. FED to reduce monthly debt purchases in November this year until the June of next year, and then interest rates will begin to accrue. It is hoped that inflation can be suppressed by reducing the supply of liquidity assets. This is the level of monetary policy to guide the slow decrease in demand. In this way, inflation can be effectively controlled and gradually decreased. To achieve this goal, it is necessary to solve port congestion, logistics backlog, supply chain disconnection that cause high prices to be eliminated as first step.

The delta virus outbreak in May this year in Southeast Asian countries has affected exports, which is almost equal to a suspension. The United States can only switch a large number of orders for basic consumer goods and seasonal goods to China. However, it has been encountered that due to the current increase of electricity ration and raw material prices from the beginning of this year in China, the production costs of factories have increased. It has announced the Producer Price Index ( PPI) at 10.7% on September in China. These will be the inflation of China's supply side and export to the United States and the world. This is a big challenge for the United States and the global economy to recover while controlling commodity prices. Beginning in October, the price of oil has been formed to be no less than US$80 per barrel, and even Russia has announced that next year’s oil price will be at least US$100 per barrel. It is expected that the high prices of raw materials will bring extreme potential crises. In the previous articles, the author has repeatedly pointed out that various economic conditions are evolving into a perfect storm of stagflation. We hope that governments of all countries can actively plan to avoid the occurrence of this storm.

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