The PBOC Is Doing the Opposite of the Federal Reserve
Steve Klise/America\'s Test Kitchen via AP
The PBOC Is Doing the Opposite of the Federal Reserve
Steve Klise/America\'s Test Kitchen via AP
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It was disaster averted. Joy would actually reign in Mudville after all. Whereas the Mighty Casey had fallen short in his mythologized turn at the bat, the beleaguered Bills of Buffalo, who had already come up just short in their first contest earlier during a snow-filled hurricane, the team would not fail in their football rematch(es) against their ultimate tormentor, the Patriots of New England.

Josh Allen and his gang of history-making stalwarts then squashed Bill Belichick’s squad to take the division crown in the regular season, before they’d unleash the first perfect (offensive) game in NFL history to complete the changing of the guard to begin Buffalo’s postseason push – while sending New England home to face the same sort of heartache and depression they once punished Bills fans with over a two-decade period of sheer dominance.

Given this history, you could probably understand why Western New York’s diehard fanatics had approached the latter two contests with heightened trepidation. Up there, there’s even a term for it, a sort of sports enthusiasts’ version of PTSD: Battered Buffalo Fan Syndrome (BBFS) as a result of largely Massachusetts origins.

And to make matters worse, as the calendar had turned December, more anxiety was piled onto the faithful as the season reached for its climax: the very real prospects for the absence of the game-day absolute essential.

You don’t call them “chicken wings” in Buffalo, nor would you use the term “Buffalo wings” – both mere recognizable tautologies. Everyone knows, or should, that wings come from chickens and the way in which they’re now consumed had long since been invented then perfected in the Queen City (at a place appropriately called the Anchor Bar).  

The most suitable setting for devouring these deep-fried, crispy golden meat-sticks by the dozens is by the light and disquiet of wintry, high-stakes football.

Was this some particularly cruel ill-omen? A conspiracy! The chance to strike back and settle the future of football in the AFC’s Eastern Division for years to come, to right all those on-field wrongs of so many seasons past, suddenly there’s no wings to be found?

Store shelves empty, national chicken chains complaining, whispers of a grand shortage were everywhere.

Those who hadn’t yet escaped their BBFS hatched the wildest conspiracies, an unmistakable sign, they may have claimed, perhaps that the fix was in.  Something sure smelled funny, and it wasn’t drumettes sizzling in all the juicy fat. What most sinister means to acknowledge this wink-wink, not-so-subtle cue about how the NFL had always favored the sexier team in New England over the hardscrabble few who invoke only long-faded images of past glories (amounting to four straight lost Super Bowls) way past their best days.

Nobody wants to see the Bills (didn’t you see that episode on the X-files!) get very far, the powers-that-be are going to make sure New England makes it through come Hell or High Water, so many afflicted with BBFS dreadfully worried the message had already been sent down through the back-alley channels to first deprive the hearty souls in Buffalo of their wings before further depriving them of the Bills’ long-sought glory.

Conspiracy theory? Hell no. Chicken facts.

As it would turn out, on more rational terms there wouldn’t be any cause for effect. Buffalo’s team heaped not one but two massive victories (without once punting) over their rivals, such joys in Mudville to be celebrated for some long time, fully topped off in fine style by the restored abundance of wings. Blue cheese, never ranch.

The chicken problem, however, that actually had been a very real problem and not just for the nation’s true football fans up in Erie County and surrounding. 

That first week in December, McDonald’s, for example, had temporarily removed chicken tenders from some of its regional menus. KFC halted advertising for the same. Tyson’s grocery store versions went missing from their normal refrigerated shelf spots. Costco like Publix reinstituted purchase limits for them.

Not for lack of supply, though. There were and are chickens, they just aren’t so easily moved around nimbly and quickly to where demand is at any given time. An official for the National Chicken Council (yes, there is such a thing) blamed, among several factors, “trucking challenges” that were plaguing “most other industries right now.”

He then quickly added:

“In the face of all of these supply chain challenges, chicken production will actually be up this year."

The USDA said the benchmark price for chicken breast tenders (yes, there is such a thing) had skyrocketed to $3.98 at the time of this chicken challenge last December, up from an-already pricey $3.02 the December prior. This must be from all that money printing, right?

Obviously, no.

These same problems linger on into the New Year, with the Twitter hashtag #bareshelvesBiden taking social media by storm just eleven or so days ago. The top-trending (for the second time in a few months) pics of empty grocery store shelves and even whole aisles ably answers the price issue.

When goods are in short supply, absent any commensurate change to demand prices have to adjust. In classic supply shock fashion, no additional money is required.

True inflation, of the monetary variety, in it you’d see prices surge across overstocked as well as bare shelves. Whether the goods are scarce or plentiful, prices rise relentlessly because when actual inflation it’s not about the goods. Belatedly, about a week ago Transportation Secretary Pete Buttigieg finally admitted:

“There’s no question that when you have a scarcity of access to shipping, you’re going to see upward pressure on prices, and that’s going to part of our challenge when it comes to inflation.”

“Access to shipping” is a euphemism. A more appropriate term would be expedience brought on by short-sightedness.

Truckers paid by the individual load aren’t going to wait in long lines queued up at the nation’s ports. Railroads have a Chicago bottleneck to sort out (thus, chickens). Those ports had long ago stopped sending empty cargo containers back to largely China from whence they had originated filled up with goods. Those instead began to pile up domestically by the thousands, tens of thousands and more.

The world then waited as the Chinese eventually decided to just start making more of them so that they could then make a one-way trip rather than fit easily in the just-in-time two-way conveyor belt of pre-COVID globalized commerce. It was a free-for-all.

And why wouldn’t anyone do this, even if it exacerbated the supply nightmare as they did? The cost of securing an ocean-going container had surged from about $2,000 per forty-foot standard in the early summer of 2020, according to the Freightos Baltic Index, to about $4,000 by the end of that year.

Then, flush with first Uncle Sam Trump and then Uncle Sam Biden’s two-fold helicopter cash, Americans went nuts spending on goods if only to spend what they no longer would on services like going to the movies, traveling, or eating out. As demand for goods, specifically foreign-produced goods, expanded by leaps and bounds, the ability of the system to supply them was stretched especially in how they might come to be transported all the way through a complex maze fraught with hung up potential from producer to consumer.

By July 2021, at the height of the frenzy, the global benchmark price for the same container reached an unthinkable $10,000. For anyone wanting the same but for Asian routes to the US West Coast, the quote reached $18,000! The cost of making one of these things is about $1,000 to $1,500 equivalent for the Chinese who manufacture them.

It was easy for containers to become disposable, essentially; except the more that were made, the worse it made the problems of managing what is, or soon will be, an enormous surplus.

Supply issues, however, eventually get sorted out even if it takes longer than anyone would like, to the point it might occasionally threaten to upset the delicate psychological chicken balance on any given Buffalo Sunday (or Saturday, in last week’s case).

By its very nature, supply shocks are, dare I write, transitory. For one, these are not impossible impasses. They may become stubborn and inconvenient, hardly a megalith of insurmountable economic crime (from the ridiculous charges of “gouging” from the political peanut gallery).

More importantly, the longer the supply shock wears on the more economic damage it will do. The historical examples of oil prices skyrocketing on such imbalances are innumerable, though it needn’t always be crude which spurs on to accomplish the eventual far-reaching economic setback. At some point, because this isn’t real inflation, the money runs out (pun intended) to keep the whole game afloat.

To that point, Freightos data shows that container pricing globally was around $9,500 last week. For those bound from China and East Asia to the US West Coast, lately about $17,500, down from a mid-September top north of $20,000.

These are still extremely high, but each significantly lower from the ridiculous and ridiculously painful pricings from those few months ago. As they’ve slightly abated over the final parts of last year, and to begin this year, it appears as what John Dizard of the Financial Times had reported early in October has indeed so far held up:

“Lars Jensen, a container specialist with Vespucci Maritime in Copenhagen, did very well during the pandemic. I caught him in Kenya just as he was disconnecting from the grid for a long anticipated safari. ‘I would agree with you that it’s over,’ he said.”

The only caveat Mr. Jensen expressed in the article was whether the Chinese might come to close more ports as part of their insane zero-COVID goal (which may not really be as much about the coronavirus outbreak, rather using it as an excuse to excuse the economic results coming in very differently from recovery promises). There’s been delta and now omicron, a few port slowdowns and shutdowns since, yet container prices have held on the gentle downslope to where they are now.

Jay Powell and Christine Lagarde rush to hike short-term interest rates because their econometric models which don’t model money (they can’t) have modeled consumers acclimatizing to recent CPI rates by virtue of nothing more than assumptions about public feelings without regard to these other facts and factors.

While the Fed and ECB do that, their Chinese counterparts are going in the reverse direction. The PBOC cut its RRR, required rate of reserves, for the second time last year in December (in response to expected tight global money conditions), as well as dropping its Loan Prime Rate (LPR) for the first time since 2020.

Then, earlier this week, the PBOC acted again with another cut to the LPR to go along with a reduction in interbank RMB financing at medium terms (what they call the MLF). Sparked by weakening economic data as well as majorly sour anecdotes across China, it’s become much more difficult to benignly blame pollution controls and the spread of various coronavirus variants.

Speaking virtually at Davos, Chinese dictator Xi Jinping waxed poetically about China’s upcoming Year of the Tiger and how this year’s economic tiger is in sudden need of “wings”; yes, that’s actually what he said and I don’t think he meant the best from Buffalo for the animal to munch on.

Just what kind of Great Cat needs wings to get up off the ground? Certainly not an exceedingly healthy and robust one.

Historically speaking, rate cuts in China don’t turn out to be salvation, either. On the contrary, they’ve been very keen and accurate warning signs of that economy, for the global economy, falling down beyond the assigned and calculated internal government thresholds. You know it’s not really going well whenever the Communists reluctantly attempt to fine-tune a growing slowdown.

Even Chinese producer prices have taken a noticeably huge step back since October; flat month-over-month in November for the first time since October 2020, and then down an especially sharp 1.2% month-over-month in December. That wasn’t just the largest monthly drop since April 2020, it practically matched what had been among the worst in the series.

Container quotes are still exceptionally high as are shipping prices more broadly. The costs of moving goods around are reflected in both recent US CPI numbers as well as social media hashtags highlighting the derelict intermittent unavailability of goods. The supply shock continues to shock.

And it’s still not inflation.

What it will turn out to be in 2022 is anyone’s guess. Some have claimed last year was the harbinger of things to come, yet these are mostly the same people who make the same claim every three years or so regardless of the situation. Others worry the supply issues will linger, one of the prerequisite causes causing Jay Powell to, apologies, flip his bird.

Hawks over here, doves over there whose tigers in demand for bird-ly anatomy. Wings across the planet.

Flat curves (and one inverted) have unfortunately sided with the Communists in their worries.

Whatever the case, there remains, for another week, at least the chance for the Buffalo Bills to beat the odds, beat the conspiracies (the Smoking-man did die, probably from a rocket fired by the rocket-armed Buffalo QB, too!), beat Kansas City’s Chiefs, and perhaps go all the way this time.


And if so, it is to be celebrated, properly, with a healthy helping of wings, chicken rather than hawk or dove and nowhere, I’d hope, affixed in some way to some poor Chinese tiger. Provided our wings don’t vanish from the grocery store again, that is.

Jeffrey Snider is the Head of Global Research at Alhambra Partners. 

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