I’m not at all convinced that the monetary policy of the Fed is responsible for car shortages and production delays in both the Euro zone and UK. Whatever is going on with US monetary policy, that is but a small factor in the global supply chain crisis.
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agree. stimulus is not why there are no cars in the market. blatantly wrong comment.
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I for one would love to know the thought process, like how too much money in the economy leads to lower production, supply chain issues for every aspect of life.
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Same thought process as the ‘toiler paper crisis’. A perceived shortage causes a run (no pun intended), a spin on FOMO.
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But how is that caused by the monetary policy?
People are not hoarding toilet paper nor cars because they got too much money in the bank & don’t know what to do with it.
Do you think the ‘peak insanity’ bell curve would be as pronounced without the funny money?
jpow said its over
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Yeah, I get how stimulus would goose demand but no idea how stimulus would have such a delirious effect on supply/production.
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Could the monetary policy have pushed the curve higher than it should have been? May be…but it sure wasn’t the cause for the start of the shortages…
Exactly. Would definitely love to learn the thought process… maybe learn something along the way
Q1 '20 PRC Lockdowns, March '20 Stock market meltdown
Q2 '20 Rest of World/US COVID lockdowns - massive Q2 economic contraction, industries with large capital expenses cut back heavily.
Q3 '20-current - US/Western Europe helicopter money raining down on a Biblical scale
Mid Q3 '20+ - US economy rebounds much, much faster than expected, massive demand for electonics from working from home, crypto mining, gaming etc.
Many low margin auto makers still trying to catch up to demand
Also mass transit is still largely dead so there has been pent up demand for Millenials and others in urban/suburban area to get a car/2nd car. And the move to suburbs/vacation destinations with remote work becoming mainstream also feeding into need for more cars.
Also more time people are at home. Being bored. Surfing internet. Buying stuff and 1-click cars on Carvana, et. al. like drunken sailors.
That’s what I got…
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That accounts for demand, not supply.
US dealers currently have 900k vehicles on the lot. Last year that was 3 million. Demand has to do with part of that but the supply issue has to do with product shortages. That is illustrated by the thousands of vehicles built incomplete and sitting in storage lots.
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Naturally a COVID disruption. It would be normal to expect a spike in prices upon supply disruption, but we had a perfect storm of subsequent demand (rental companies refilling after a huge dump last year, chips and chains, etc.) on top of funny money (for both consumer and silly valley money) making the curve ‘insanity’. If there is excess meat on the bone (how did it get there?) it will be found and extracted (hence 4xE flips, 3rd party buyouts,etc). The meat is getting scarce, and sanity will be returning, in part due to some players exhausting their funny money.
Hookers and blow, and Palisades.
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Automotives are a captial intensive business.
We had a historic shock to the supply/demand curve with economic output cratering last Spring.
Then demand going to the moon fueled by Helicopter money and other demographic mobility factors related to the Pandemic (mass transit no bueno, flight to suburbs/rural areas, demand for chips with electronics/devices/appliances/autos).
Some manufacturers have been slower to respond than others to the supply/demand shock and awe of the past ~18 months
Seems the supply curve will overshoot at some point in 2022 and some automakers will be swimming in inventory just as consumer demand/helicopter money starts to run dry…
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By way of comparison, even my local Tesla ‘dealer’ has dozens ‘on the lot’. It would appear demand is waning even for NEW fixed-cost (relatively) items. I conclude we are regressing from ‘Peak Insanity’ to simply ‘irrational exhuberance’.
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People are buying newer cars bc they’re getting their child tax credits monthly, along with all that other stimulus. The average family of four prob has an extra $1000+/mo coming in now over the last 18 months. I know the tax credit was always there but giving it to people monthly means they spend it monthly as opposed to once a year. When they got a large lump sum tax return that prob influenced them to purchase used or put larger down payments on new cars.
So yes money printing def is a factor in the shortages. Not the only factor but certainly part of it.
Also have to factor in that many businesses are booming due to stimulus/pent up demand. So if I’m making more money bc other people have more disposable income, then the average American says “let’s buy a new car”.
The stock market and housing market is also booming due to fed policy ala interest rates. Therefore giving people a false sense of security and in turn influencing more discretionary spending.
All through out this circus all I can think is how this played into hands of those who kept on rolling negative equity into infinity now got a bailout with such price.
Well if they had the time to bailout from such cars before selling their lease to 3rd party was being blocked by almost all companies.
According to this the Auto Sales are lowered by about 3 million units in 2020 compared to prior years.
https://apnews.com/article/a7069cd7ca9a40a59adf3cd7a0d314fe
Per the article above regarding 2017 & 2018 sales,
“The growing popularity of leasing will also have a big impact on 2018 sales. Almost one-third of new vehicle sales were leases in 2015, and many of those 4 million lessees will be trading in their vehicles for new ones”
So if extrapolate that to 2021, approx 4 million lease vehicles need replacement.
So increase in demand may be there cuz of increased money in People’s pockets but the lack of production be it due to natural disasters, supply chain interuptions, or be covid restrictions is a bigger factor, IMO
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I don’t think it’s entirely responsible for what we’re seeing but it certainly has contributed as far as market arbitrage.
If we weren’t flush with fugazi money no one would be paying more for a used car than it sold for new no matter how scarce new cars got. People would make do with what they had. Like we did in the past.
That being said, anyone buying and not leasing in this market is going to get a serious gut punch once the correction comes and they’re looking to upgrade.
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I think the money supply has definitely contributed to the inflated prices but it definitely is not the sole or the main source of the “scarcity” of vehicle on the lot.