Inflation, Russia, Oil, e-Commerce Returns and...
… Elbridge Spaulding.
Inflation is at…
7.9%
That’s high, but it seems that with the Russian war in the news, inflation has taken a back seat as a headline.
Speaking of back seats, covid is closer to the trunk of the car than the back seat. That sure dropped out of the news in a big hurry.
The worrying part of inflation is that fewer people are thinking it is going to go away soon. It could stick around so build that into your plan.
So, is inflation impacted by Russia? Yep, Russia did that too, but not how you think.
In addition to oil and natural gas, between Ukraine and Russia, the other two commodities are wheat and steel.
Wheat: Ukraine 26.2M metric tons; Russia, 85.9M MT – a metric ton is 1000kg or 2,205 pounds.
World production is 772M MT.
Between Russia and Ukraine, they supply 14.5% of wheat production for the entire world. You take out 14.5% of anything and that anything will go up in price. Yes, that is a simplified explanation, and there are a metric ton of other variables, but stay with me.
Steel: Between the two of them, they produce 92.2M MT of the total world production of 1,877.5M MT, or 5%.
While not the impact of wheat, 5% of steel missing in the world will be felt by a lot of folks.
This is not to minimalize the impact of oil; Europe gets a significant portion of its energy (oil and natural gas) from Russia.
2020 total world crude oil output is 76,124,800 barrels per day.
United States: 11,307,560 – 14.9%. Yep, we produce more oil than anyone else, but we do not control the market.
Exxon Mobil, the largest US energy company, produced 2.3 million barrels of oil per day in 2018. That’s #6 in the world. China, Russia, and the Middle East are the top 5.
For politicians to say that US Big Oil controls the price of oil is ignorant. Apologies, I was being redundant. I could have just said politicians because ignorant should be assumed.
Russia: 9,865,495 – 12.9% - some people say that Russia is a gas station masquerading as a country.
Saudi Arabia: 9,264,921 – 12.2%.
Energy, steel, and wheat. That’s a trifecta of price increases.
Amazon Returns – where do they go?
That’s always been the issue for e-tailers – first, how do you minimize the returns and second, what do you do with the returns?
Well, Amazon Warehouse takes the best returns, the stuff that really doesn’t look like it’s been purchased before.
You can find that on the Amazon website here.
Other returns go to liquidation.com. Don’t go – it’s a nasty rabbit hole to get lost in. However, you will be stunned at the amount of stuff they are selling, all of it returns, not just from Amazon but Best Buy, Home Depot, and other big box stores.
You can bid too, assuming you can do something with a pallet of five smart TVs for $450.
Impact of Covid – continued…
Covid-19 has made consumers embrace self-diagnostic tests, so get ready to do the same for other medical problems.
Companies are developing at-home tests for illnesses ranging from the flu to strep throat. DIY tests can help more people know whether they are sick in a faster, cheaper and more convenient way, provided they are accurate and can be made widely accessible.
Some rapid-testing options that are already on the market recommend that patients confirm results with lab tests. If that’s the case, what’s the point of taking an in-home test?
Regardless, “seeing” doctors via video and in-home diagnosis will continue as healthcare costs continue to go up.
Who was Elbridge Spaulding?
No, not the founder of Spaulding Sports; he was a New York congressman in the early 1860’s.
Back then, there was no national or federal paper currency; banks issued their own paper notes.
Elbridge proposed a federal “legal tender”, an outrageous idea. Someone who had contracted a debt in gold could be paid back with paper. That is nuts!
The intent was to use the legal tender to fund the Union side of the Civil War, since they were running out of gold to borrow (it’s a long story – google it).
Long story short, the bill passed and was a big hit.
Merchants liked it because it stimulated trade because it was very convenient.
“Greenbacks” were popular among consumers for the same reason.
It was so successful that two more issues were done for a total of $450,000,000 but Congress stopped at that, showing that the government actually had restraint. If it makes you feel any better, inflation was running 80% back then. That kind of makes 7.9% look like a screaming deal.
At the end of the day, Legal Tender gave the country a trusted currency and kept the government afloat at a key moment in its history, and preserved the currency’s value by not continuing to print money, although I’m sure it had to be tempting.
Congress showing constraint. Now there’s a thought.
Finally…
What do Conor MacGregor, Saoirse Ronan, Oscar Wilde, C.S. Lewis, Sinead O’Connor, Bono, George Bernard Shaw, Maureen O’Hara and Michael Gambon have in common? Thursday, March 17 is St. Patrick’s Day! In addition to the Irish Cream and the green beer, here is an old Irish blessing:
May the road rise up to meet you.
May the wind be always at your back.
May the sun shine warm upon your face,
And the rains fall soft upon your fields.
And until we meet again,
May God hold you in the palm of His hand.
