Experts agree that high prices and low supplies aren\u2019t going away just yet.<\/b>
\nFederal Reserve chair Jerome Powell said on Friday that Americans should be prepared for the global supply chain to remain in crisis through 2022 \u2014 and that the central bank is preparing to deal with the attendant challenges for the US economy. Speaking at a Bank for International Settlements-South African Reserve Bank centenary conference, Powell warned that \u201csupply-side constraints have gotten worse\u201d over the course of the pandemic, while the supply chain and economic risks are \u201cclearly now to longer and more-persistent bottlenecks, and thus to higher inflation.\u201d Already, those bottlenecks have slowed international commerce to a crawl as shipping containers loaded with goods wait to be unloaded and experts advise making an early start on holiday shopping. In addition to packages taking longer to show up, consumers are likely also feeling the resulting inflation: The Consumer Price Index, a measure of the increase in the price of goods over a specific period, rose more than 5 percent in the 12 months ending in September, as Vox\u2019s German Lopez explained. However, Americans\u2019 appetite to consume hasn\u2019t diminished. After a brief dip at the beginning of the pandemic, people have embraced both e-commerce and brick-and-mortar retail as pandemic restrictions have eased. That\u2019s good for an economy blitzed by Covid-19, but it\u2019s also created its own set of challenges in the form of a backed-up supply chain that wasn\u2019t built to weather a pandemic, and accompanying inflation as people buoyed by an economic recovery keep spending. As Treasury Secretary Janet Yellen told CNN Sunday, that likely won\u2019t be a permanent problem: She expects \u201cimprovement by the middle to end of [2022],\u201d and pointed out that monthly rates of inflation are already declining from earlier this year. For now, though, the Fed has some steps it can take to ease inflation, both in the short term and the long term. In the immediate term, as Powell said in September and reiterated Friday, the central bank will likely begin the process of \u201c tapering,\u201d or scaling back its purchases of government assets like Treasury bonds and mortgage-backed securities. The Federal Reserve spends about $120 billion per month on these assets to help fill the government\u2019s coffers and fund the trillions in stimulus spending, which helped keep American markets afloat during the pandemic. High demand, as partially represented by inflation and made visible by the current supply chain crunch, signals to the Fed that its stimulus purchases are having the intended effect and won\u2019t be needed much longer, and it\u2019s safe to gradually reduce them \u2014 probably by about $15 billion per month starting in November. That could also ease supply chain issues by decreasing demand. In the long term, the Fed could also increase interest rates, which limits the amount of money in circulation, thus decreasing demand and thereby inflation. But that\u2019s on the back burner for now, Powell said Friday, as the Fed watches and waits to see if inflation will slow and the labor market will regain its strength. However Powell and the Fed respond to inflation concerns, though, they won\u2019t be able to fix the broken global supply chain \u2014 part of the reason inflation is so high in the first place \u2014 on their own. The supply chain was already strained; Covid-19 pushed it to the breaking point As Powell said Friday, inflation is being driven by high demand straining a supply chain that had issues even before the pandemic. But the global onslaught of Covid-19 knocked down that particular house of cards, and a healthy supply chain is still a fair ways off. Out in the real world, the supply chain has been disrupted at practically every level, from the factories producing goods, to the ports where they\u2019re supposed to be unloaded and sent to store shelves, as Vox\u2019s Sean Rameswaram detailed on Today, Explained last week. Starting at the manufacturing level, many businesses operate on a hair-trigger, \u201con demand\u201d principle; they tend to make only what is projected to meet demand, because storing excess product in case of a supply chain or other crisis means manufacturers are spending more money on storage facilities \u2014 which they then can\u2019t spend elsewhere, including on \u201cbonuses for executives or dividends for shareholders,\u201d as the New York Times\u2019s Peter Goodman points out. But during the pandemic, shuttered or understaffed factories couldn\u2019t produce what people needed, and large manufacturers didn\u2019t have reserve supplies because they weren\u2019t designed to operate that way \u2014 meaning goods like toilet paper and hand sanitizer were missing from grocery store shelves. Industry consolidation also contributes to supply chain chokepoints; if only one company produces computer chips, for example, there aren\u2019t alternatives to draw on when the chip factory is closed, as many factories have been in different stages of the pandemic and continue to be in countries where vaccination rates are low. When manufacturing powerhouses, particularly China, were able to manufacture and ship necessary equipment like PPE, those products were shipped in large containers to lots of places that don\u2019t ordinarily export goods to China. So shipping containers full of PPE sent to places like Southeast Asian and African countries couldn\u2019t easily justify a return journey. Now, a global shortage \u2014 or really, misplacement \u2014 of shipping containers has driven up the cost of shipping goods by tens of thousands of dollars, which then passes down to the consumer. A shortage of truckers to deliver goods by land has contributed to the crisis, too. There\u2019s also been a labor shortage as people fall ill or have to care for sick relatives, juggle child care and work, or, understandably, refuse to work for low wages in unsatisfactory conditions during a pandemic. In the US, vaccinations are helping tackle one side of the problem; people are able to return to work safely, and child care outside the home is becoming increasingly available as schools and day cares reopen. Vaccine mandates have helped improve workplace safety, but widespread strikes and resignations over the general state of work in America also contribute to the supply chain crunch, and don\u2019t appear to be ending any time soon. All this leads to an astounding backup at ports on both coasts, with cargo ships anchored off the coasts of Savannah and Los Angeles, sometimes for days, as the ports scramble to store and ship all the cargo \u2014 otherwise known as the goods Americans are purchasing. And now that global manufacturing is back up \u2014 and so is demand \u2014 the system is in shambles, writes Recode\u2019s Rebecca Heilweil: How American consumerism breaks the supply chain Since the supply chain is a complex organism with lots of distinct parts, experts agree there will be no getting back to normal any time soon. World Trade Organization Director-General Ngozi Okonjo-Iweala predicted last week at the Financial Times Africa Summit that the crisis could last for \u201cseveral months\u201d due to the \u201csupply-demand mismatch,\u201d which is poised to be exacerbated by the upcoming holiday season in many parts of the world. It\u2019s bigger than Christmas shopping, though: As the Atlantic\u2019s Amanda Mull writes, it\u2019s a question of rethinking our lifestyles as American consumers and how our ability and desire to buy affects the rest of the world. If Americans buoyed by stimulus checks and discretionary spending directed more toward goods than experiences \u201ccould simply knock it off,\u201d Mull argues \u2014 \u201cit\u201d being buying things we don\u2019t really need or want \u2014 that would give a global supply chain stretched beyond its limits time to readjust. Will that magically fix the interdependent, logistically complicated machine that is the global supply chain? No \u2014 but reducing outsized demand for a limited supply of goods could reduce both supply chain strain and inflation. As Vox\u2019s Terry Nguyen wrote earlier this week, Americans are not completely at the mercy of targeted Instagram ads or Amazon deals, as much as it can feel that way. Often, the motivation to buy is not based in need, but on our feelings \u2014 like boredom, sadness, or insecurity. Those purchases have repercussions not only for the economy, but also on the environment, and on labor practices throughout the supply chain. While it\u2019s not earth-shattering to decide against buying yet another striped sweater, gaming console, or flat-screen TV \u2014 it won\u2019t fix climate change or give overextended and underpaid laborers better conditions or pay \u2014it\u2019s still a step toward taking some pressure off the broken supply chain.<\/p>\n