SUPPLY CHAINS
(thread from May 2019)
The reason economists are widely mocked nowadays is because nobody pays attention to supply chains.
1/
(I'll remake this thread again in order to Unroll it with @threadreaderapp , as it appears twitter disallows unrolling old threads.)
(thread from May 2019)
The reason economists are widely mocked nowadays is because nobody pays attention to supply chains.
1/
(I'll remake this thread again in order to Unroll it with @threadreaderapp , as it appears twitter disallows unrolling old threads.)
https://twitter.com/ektrit/status/1125780931250393088
You know why MMT is now famous?
Because nobody ever thinks that supply of goods and services from raw materials to consumable products could ever be disrupted.
2/
Because nobody ever thinks that supply of goods and services from raw materials to consumable products could ever be disrupted.
2/
It never occurs to any single theoretician who teaches economics to the masses that crude oil might NOT arrive from point A to B for any reason at all.
They always assume that anybody on earth would produce any goods and services at anytime instantly as needed.
3/
They always assume that anybody on earth would produce any goods and services at anytime instantly as needed.
3/
Which of course, for a Sales Engineer like me, who had to pay attention to quality, price and delivery time of any single piece of equipment I was responsible for, including mechanical, electrical and sheet metal components incoming globally to make up the final assembly.
4/
4/
As I often told my boss, "I am the toilet bowl everybody shits in".
I was responsible for literally everything.
5/
I was responsible for literally everything.
5/
When Schneider Electric moved one single valve factory from China to India, it took (hold your breath).....one year.
Lead time for water valves for a big project I had sold to Indianapolis, with Schneider valves, was extended to 12 weeks.
My promise to customer was 12 weeks
6/
Lead time for water valves for a big project I had sold to Indianapolis, with Schneider valves, was extended to 12 weeks.
My promise to customer was 12 weeks
6/
It would normally take 4 weeks to start and finish an assembly of all equipment, so all major parts had to come to the factory in Toronto within 8 weeks.
Now I had valves at 12 weeks.
7/
Now I had valves at 12 weeks.
7/
So, I was obligated to source another major supplier of valves, Belimo, from Switzerland, of the same quality, which supplied the valves in 3 weeks, AT TRIPLE THE PRICE.
8/
8/
In the meantime, the customer in Indianapolis, had told me that every single day that equipment were delivered late, our company would be billed for idle work which the final installer was contracted about would charge, as their crews were allocated only for our equipment.
9/
9/
So, long story short, we had to do some calcs, better absord the price of valves than pay idle workers on site in Indianapolis for X days we had no clue about how long it would last.
10/
10/
Now, folks, this JUST ONE FACTORY move from China to India, which caused mayhem to us and to all other Schneider Electric global customers.
THIS IS JUST ONE FACTORY.
11/
THIS IS JUST ONE FACTORY.
11/
Now, imagine, thousands and thousands and thousands of factories which have already moved from USA, Canada, EU to China and East Asia in general.
12/
12/
Could you imagine the global economic absolute disaster that "instant reshoring" would cause?
Do you get it, folks?
13/
Do you get it, folks?
13/
So, all these "economists" and "journalists" teaching economics to the masses, NEVER EVER EVER EVER think that supply chains ever seize up, eveeeeeeeeeeer.
All these theoreticians always talk about .... POLICY, POLICY, POLICY in a world which functions entirely differently.
14/
All these theoreticians always talk about .... POLICY, POLICY, POLICY in a world which functions entirely differently.
14/
So, folks, same with Federal Reserve.
These guys think that they could raise and lower rates with zero effect on global supply chains.
Same for Congress or the WH.
15/
These guys think that they could raise and lower rates with zero effect on global supply chains.
Same for Congress or the WH.
15/
It is quite self evident that none of these people who lead us ever analyse whether supply chains gets disrupted or even break down, if Interest Rates are lowered or raised, and the time lag of such effects.
16/
16/
Because I have been telling you folks, since 2013 QE3 activation, that global supply chains would end up being disrupted and breaking down from 0 interest rate policy held up for too long.
17/
17/
Everybody assumes that just by one executive order coming from the WH and/or Congress laws, all global supply chains would instantly react positively always and at anytime.
18/
18/
As I gave the example with Schneider Electric, ANY sudden CHANGE affects global supply chains NEGATIVELY, never positively.
That applies to financial policy, economic policy, tariffs, anything you can imagine, any instant change causes seizing up of supply chains.
19/
That applies to financial policy, economic policy, tariffs, anything you can imagine, any instant change causes seizing up of supply chains.
19/
Hence, Trump tariffs and Trump iran sanctions, just because Trump thinks that way, are causing so much suffering in America and globally.
Supply chains are being disrupted, and some are breaking down.
20/
Supply chains are being disrupted, and some are breaking down.
20/
So, folks, that is why we all mock all theoreticians, who always get it wrong and always have wrong predictions, and always keep their jobs and still remain famous.
Because none of them ever worked inside supply chains.
21/
Because none of them ever worked inside supply chains.
21/
So, to conclude, unless you co-analyse effect on global supply chains for any economic and financial policy, your analysis will always be dumb, and you won't know it that it is dumb, because you never knew what supply chains are.
PERIOD.
22/
end of thread
PERIOD.
22/
end of thread
@threadreaderapp unroll
• • •
Missing some Tweet in this thread? You can try to
force a refresh
