Shortages and Supply Chain Problems

First, the money creation is much faster than normal as seen in this M1 Money Stock graph.  Does not seem transitory.

 

If banks pays no interest on money and the prices of things are going up fast, it is  rational to buy stuff needed ahead of time, before prices go up further.  In these conditions, storing real goods is better than storing cash.   Of course this only works for things that you can store for some period of time.   So diapers, cans of tuna, cement blocks, and computer chips, work well, but not bananas.

Personal Consumption Expenditures: Durable Goods

 

 

When money is no longer a good store of value, it is better to store extra value in extra physical things that you know you will use eventually.   This is called a flight into real goods (Flucht in die Sachwerte) or crack-up boom.  It is part of "how fiat dies".  We are probably seeing some of this now.

Misses put it well long ago:

 

Once public opinion is convinced that the increase in the quantity of money will continue and never come to an end, and that consequently the prices of all commodities and services will not cease to rise, everybody becomes eager to buy as much as possible and to restrict his cash holding to a minimum size. 

 

You have to look at it from a Game Theory point of view.  The government is printing way too much money.  The value of the money is dropping.  So each player is better off holding real goods than money.   So as each player has extra money, they buy extra stuff, even if they don't need it right away.   Also, if there are shortages and they might not be able to get all they want in the future it is better to order extra stuff now.

If people spend their extra money right away, this has the effect of increasing the velocity of money.   From the Equation of Exchange, we can see that increasing the velocity of money makes prices go up even more. 

You can also see it as an increased demand with no matching increase in supply, so prices should go up.   The supply was enough for regular use but not enough for goods to be used as a store of value.  So it can show up as "shortages".

If many people are ordering extra real good we could expect to see increased demand for shipping.  Sure enough, there is:

Drewry’s composite World Container index:

The above container price index does not look like a "transitory" problem.

Politicians will try to divert blame for the inflation from their money printing to "hoarding" or "panic buying".  The only reason people are buying extra stuff is that the prices are going up fast.  If the government/central-bank stopped printing money the prices would stop going up fast.   The hoarding is a symptom of the inflation (and part of the natural process) and not the core cause of the inflation.

That money is no longer a good store of value is probably the core problem causing the "shortages" and "supply chain" problems.  In the coming months it will become more clear if this is in fact what is going on.