GREENSPAN: Prices will spike due to coronavirus supply shock

Global tourism, related industries devastated by COVID-19 pandemic

Mati Greenspan predicts consumer prices will spike, due to China’s COVID-19 shut down in production … and you should consider buying Bitcoin.

Apple, Samsung, Microsoft, Google, IKEA, Peugot, Renault Tesla, Airbus, Hyundai and even Google have all shut down factories and offices in China recently due to the coronavirus.

The impact on supply chains stretches beyond products made entirely in China, to the many components made there too. Many essential products from pharmaceuticals to electronics are now in short supply

Rosemary Coates Executive Director of the Reshoring Institute explained the issue in Logistics Management.

“All supply chains seem vulnerable because so many Chinese supply chains … rely on each other for parts and raw materials. That tiny valve that is inside a motor that you are sourcing for your US-made product is made in China,” said. So are the rare earth elements you require to manufacture magnets and electronics…and on and on.

“Purchasing departments declaring that they have alternate non-Chinese suppliers, may be naïve in thinking that their domestic suppliers don’t rely on parts from China and that shortages are eminent.”

If supply dries up, demand will drive up prices

Market analyst Mati Greenspan from Quantum Economic highlighted recent reports of supply shortages to predict that consumer prices would rise sharply as a result.

Greenspan expanded on his thinking in an email to subscribers.

“Should goods start to become scarce due to the main production country going offline, people will likely be willing to pay more money for less stuff, supermarkets will start raising prices on items, and before you know it…. inflation,” he wrote in a note to subscribers.

“The Fed would then be forced to raise interest rates very quickly. Much quicker than the market can digest and then… foreclosures. Any person or corporation who gets by on thin margins would quickly file for bankruptcy.”

Low interest rates inflate stock prices

Others have noted that the very low or negative interest rates tend to artificially inflate stock market prices, as investors try and find a better return on their money.

Greenspan noted a blog post on the weekend by the Chief Investment Officer of the Guggenheim Institute, Scott Minerd who believes stocks and bonds are currently priced to perfection (i.e over priced) and that the CoronaVirus could be a possible black swan event.

Greenspan suggested to readers that they should consider buying hard assets (those with a limited supply) just in case the worst happens.

“Gold, property, art and Bitcoin come to mind.”

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