Ouch!!
I assume a big part of that shipping?

I was in my local Hardwood dealer M.L.Condon boat lumber today and while I was standing there a lady comes down from the office and posts a new price sheet....

So, quarter sawn Sitka spruce went up $6. a board foot from $7 to $13!

Unreal.

We printed Trillions of dollars. There's no free lunch.

In Germany? In Japan? There is inflation all throughout the Western world. It’s a little provincial to think US monetary policy is the main cause.


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If the international reserve and trading currency is USD then other countries need to inflate their prices to keep up with US inflation.

Burning 5 trillion dollars when the recovery was already well under way in late 2020 did not help, but if you think this is COVID or Janet missing stuff she should have caught (yeah... she did, and heads the list of the five cabinet secs that should have already been canned), you have not been reading the stuff I've been sending. It is the end of the world as we know it, or more specifically, the end of the global lash-up the US built after WW2 to terminate the USSR. 31 years after we won that one, the wheels are coming off because of two key things.

1) Since 1988, we have not had an administration that had any interest in maintaining the US commitment to the global trade system because we never really benefited from it once the USSR collapsed. By design, the US purposefully has never integrated itself in the system we designed and built for everyone else as a bribe to support us in the Cold War period. Just 7% of US trade is with the rest of the world, and much of that with Mexico and Canada, so if the rest of the globe shut down, we'd see just a mild recession (think 1989-90) and we'd be good. On the other hand, things would really, really suck for China, the EU, and the other beneficiaries of the global trade system... which leads to the second thing...

2) This decade was always going to be when things fell apart...not due to Putin or Xi or whomever occupies the Oval Office, but because the demographic collapse of most nations was going to occur starting in 2020. COVID sped that up a bit, but just by a few years. China misplacing 100M subjects on their 2020 census was weird, but all that did was tell us that instead of China's population being half of what it was in 2020 by 2100, the new date is 2050. The mass retirement of the Boomers in every country on Earth tees up the greatest re-balancing of production, consumption, and capital formation that we've ever seen, with the shakeout likely to take the remainder of the 2020's and most of the 2030's. Some countries will fall, some will degrade, some will be sorta OK, and some will rise.

So what does this mean for us? Well, honestly, we're good here in the US... really better than good. All this chaos ultimately benefits us, the Mexicans, and to a moderate extent, Canada. We just have to double our industrial output in the next 5 years to make up for all the stuff we actually buy from the rest of the world - mostly sneakers and tech. Energy? we have enough courtesy of ND/SD, but we could probably scrape together the capital to continue building out solar and wind, and we - unlike Germany - actually have a lot of sunshine and wind. Reasonable gap technologies until fusion, but not necessary unless the Bakken plays out a few decades early. You mentioned new battery technologies, but those need CAPITAL, and that is going to be tough to find for a while.

What will suck is that inflation will be here to stay for a bit... because all that build-out and all that capital loss (key concept... no one feeds their retirement accounts twice a month after retirement... so no sugar rush to the equities markets).

Anyway, you asked why Russia had to invade Ukraine now, and that answer is related to the general demographic collapse I mentioned above. Putin had a choice - Russia dies a slow death with a forward-deployed, ever shrinking Russian army guarding 600 miles of borders or a much faster one if the traditional invasion routes are not controlled by the Russian army. That simple. What is not is what happens if Putin wins in Ukraine. Russia still has to close the Polish Gap and the Baltic Gap... both lead to war with NATO, which - because we finally know just how Russian troops and weapons systems stack up to NATO troops (summary...they don't) - will result in a nuclear exchange because that is doctrine for the Russians (existential threat to the Motherland is one of four trip-wires for Russian nuclear employment). And because getting their butt kicked by the Pols or the Lithuanians or the Estonians and having to retreat back to Russia is #2 on Putin's total embarrassment option list following 'pop some nukes' it is far more likely than not. The good news is that 16 dudes in 8 HIMARS systems are bleeding the Russians to the point where they are pulling 1950's vintage artillery rounds out of Belarusian warehouses to continue to try to feed the artillery offensive. That is a good sign, as well as the cascade failures of the oil and gas fields in Siberia as lack of Western tech support is felt.

We don't have that issue with China. They will die quietly, and we see the early signs of this as their systems break down and lock-downs are the only way to address the pandemic. Wage growth is China has been about 22x since Nixon enlisted China in the fight against the USSR, to the point where it makes more sense to manufacture in North America (with interior logistics lines and cheap energy) than to move out of China to another low-wage part of Asia. China bit on the ZPG thing hard, which sets up what we see today, while Xi's isolation (worse - way worse than even 44) limits what they can do to soften the landing. The question is not whether China survives as a nation, but whether we see 500 million starve as things collapse.

So in summary: long term inflation, high interest rates due to tight capital markets, wind and solar 'revolution' not doable right now (ask the Germans about the trillion dollars they paid to move 4% of their grid to wind and solar in a cloudy country without much wind). Great employment opportunities for Gen X and Gen Y (all those Boomers GONE... Gen X finally gets to be something other than interns.

Anyway... we can discuss next week if you make it over.

LOL... seriously? Even the Euro has pegged itself to the dollar. Stop living in the last decade and start paying attention to what getting cut out of the US-defined international banking system and Swift has done to the Russians (besides that default on debt payments due to lack of access to make payment). Just say 'Dollar, Dollar, Dollar' and you'll have a head-start on understanding international financial and monetary systems.

I just had this conversation with the fellows at Greenridge, and this is the follow-up note from Mr. Stock:



I did mention the currency thing. He laughed. To quote:

LOL... seriously? Even the Euro has pegged itself to the dollar. Stop living in the last decade and start paying attention to what getting cut out of the US-defined international banking system and Swift has done to the Russians (besides that default on debt payments due to lack of access to make payment). Just say 'Dollar, Dollar, Dollar' and you'll have a head-start on understanding international financial and monetary systems.

Hi Brad,
It was BOAT lumber - Break Out Another Thousand! Having owned and worked on boats I have seen how many vendors take advantage of boat owners. Hyper inflation on boating stuff has been de rigueur for many years.

It’s a little provincial to think US monetary policy is the main cause.


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We printed Trillions of dollars.......