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At the end of the day, the blame lies at China’s doorstep for releasing Wuhan flu, regardless of whether intentional or by accident. But, the Brandon Administration is more invested in casting blame at American companies, demonizing them, than actually fixing anything or helping

Inflation has ‘direct correlation’ with America’s chip shortage: Commerce Secretary

The Biden Administration has recently taken to targeting the industries and companies contributing the most to high inflation, from “greedy meatpackers” to oil and gas companies.

In an interview this week, Secretary of Commerce Gina Raimondo linked yet another industry to the problem, drawing a “direct correlation” between inflation and the shortage of semiconductors, the computer chips needed to manufacture automobiles.

Indeed, the automobile sector has been a major cause of inflation in the last 12 months: Between December 2020 and December 2021, the prices for new vehicles jumped 11.8% and the prices of used cars rose an astounding 37.3%.

The inflation for all items was 7%, the fastest year-over year increase since 1982.

The auto price jumps stem largely from a decline in production “because car companies can’t get their hands on enough chips,” according to Raimondo, who added that business leaders agree with the assessment.

“We need to increase the supply of cars so prices will come down. In order to do that, we need an increase in semiconductor chips,” Raimondo told Yahoo Finance’s editor-in-chief, Andy Serwer.

OK, let’s put this in full context: anyone who simply blames a lack of computer chips is not in full knowledge. Here’s the way it works, as I explain to customers (if they’re worth the explanation, like, they’re actually looking to do something, rather than living in 2019 and “exploring their options”). First, COVID started making everyone really anxious in February 2020. You remember what was going on. Then things started slowing down, then closing. This included the production lines for autos and all the parts for them. Plus, all the mines where they get the metals and precious metals for autos. Reopening all these lines was difficult, and saw some opening faster than others, many with reduced personnel. The manufacturers do not make every part. Lots are made by other companies. So, how did they do? Well, we sat on a used Odyssey for 4 months because we couldn’t get a backup camera due to a recall.

Many manufacturers moved production of parts to other countries, because you couldn’t get them on ships to send them. You had production being shut down off an on, like with Toyota RAV4s, which are assembled in Canada. Once they’re made, you then have to ship them, sometimes on ships, sometimes on trains. There’s a massive backup at a South Carolina depot because one automaker is offering low pay to truckers, so cars are sitting there not getting shipped, and they can’t get more cars off the trains. We know where they are. We just can’t get them to the stores.

With no production, dealers mostly ran out of new. With production down a third to a half, you cannot meet demand, so, at least 90% of those in shipping already have deposits. Anywhere from 50% to 100% of those in production have deposits. I wanted a Civic EX. Can’t get it. None available in production. So, getting a Civic Hatch EXL (I might switch to an Accord Sport SE, though). And people won’t trade in till their car is here. Some straight out sell their cars to some used dealers who will pay silly money, which inflates the price. Like I tell people, you can buy a new Civic LX 2022 for around $23K. A used car megastore had the same car, used, with 1,000 miles, for $6,073 above MSRP.

Since sales are around half, some stores won’t discount. We have to make money to stay in business. Some sell for above MSRP, especially smaller stores. We know one store slapping $3200 in accessories then “offering a $1,500 discount.”

Yes, chips matter. Because their lines were shut down, and autos need lots. So do computers, TVs, phones, and so much more. None of those lines have fully recovered. The profit level is much higher, so, you haven’t seen much in the way of price increases, just limited amounts. Retailers tend to keep more in central warehouses and ship to the stores when you purchase. Try going to buy shoes, jackets, and pants. Not much at stores, right? I had zero luck finding a new winter coat. I’m simply ordering the same cool weather pants from Amazon.

So, it’s not as simple as “chip makers bad”. It sounds good in demonizing them and car makers, right? And, I do not necessarily blame Biden, nor should Trump be blamed. This is around the world. But, Trump tried to reopen the economy and provide assistance. Same as in many other 1st world countries, where the government is trying to help, not hinder. Biden is mostly just being uninvolved in some areas and hindering others. While being focused on anything but the economy

Raimondo has pointed to a need for transparency in the industry, noting there are times where “suppliers wonder who’s hoarding, who’s stockpiling.”

No one is hoarding or stockpiling. We’re a top 40 dealer, and we have around 5 brand new which are available. Dealers and manufacturers want to sell what they get. Parts suppliers want to sell, to make money to stay in business. Nice of the Commerce Secretary to totally misunderstand what’s actually happening, eh?

So how does the U.S. solve its semiconductor problem?

“We need Congress to act,” Raimondo says. “It’s stalled in Congress, to be very honest.”

The CHIPS for America Act — which passed the Senate last June and awaits a vote in the House — includes $52 billion to prod semiconductor companies to base fabrication plants in the U.S. If lawmakers send the money, Raimondo said, her Department will “work in partnership with semiconductor companies, asking them to set up shop in America making chips in America.”

So, the Democratic Party run House is failing to vote for this. Not that it would do a damned thing for years.

Read: Commerce Secretary Continues Blamestorming Economic Sectors For Inflation »