Taps Coogan – June 26th, 2023

The following chart, via Science is Strategic, shows the Global Supply Chain Volatility Index which has flipped to ‘overcapacity’ for the first time since early 2020.

There are many drivers of our inflation problem: monetary policy, fiscal policy, helicopter money and debt forbearance, supply chain disruptions, etc…

However, as the chart above highlights, the supply chain issues are, on balance, back to normal. So is the perception of labor shortages.

For those that are keeping track, monetary policy is also no longer accommodative and the helicopter money and debt forbearance are basically over. The only major remaining driver of inflation is the fiscal spending which remains excessive but, on a rate of change basis, is slowing too.

The risks of recession are now significantly greater than a renewed rise in inflation.