What did you think would happen?
1: Lockdowns and unemployment subsidies constrain production
2: Print trillions of dollars and throw it out of helicopters
3: Consumers start spending stimulus money
4: Manufacturing shifts to the production of consumption goods
5: Producers bid up prices of production goods and labor
6: Price increases, shortages, and unfilled jobs everywhere.
It has nothing to do with a “chip shortage,” or the Suez canal blockage, or just-in-time manufacturing. These are only the symptoms. The root cause of the “everything shortage” is the government’s manipulation of the money supply.
One of the most important concepts I learned from Austrian Economics is capital has structure.
In order to produce consumer goods, capital must be employed. To make your Venti Frappuccino (first-order good), a barista uses an espresso grinder (second-order good). The grinder requires steel and microchips (third-order goods).
The stimulus money went to consumers, who voted with their wallets to shift the structure of capital from the production of higher-order (production) goods to lower-order (consumption) goods. In other words, the government robbed producers with low time preference and redistributed the loot to consumers with high time preference. The rest is inevitable.
What should happen when an external shock (such as pandemics and lockdown policies) constrains production? The economy needs to re-structure to rebuild the structure of production to reflect the new reality. Uncertainty causes consumers to save more, which frees up higher-order capital to shift to new demand trends. Capital can focus on producing PPE, webcams, home exercise equipment, and consumer groceries rather than restaurant supplies, office buildings, airliners, etc.
By attempting to “freeze” the economy in pre-pandemic spending levels, the government crippled the adjustment to the new reality. The rest will be inevitable.