by Brendan Brown
The nearest example in modern history to the present medical emergency supply shock is the Organization of the Petroleum Exporting Countries (OPEC) oil embargo of autumn and winter 1973. That earlier shock was the catalyst to the Federal Reserve leading the world (except for Germany) along the path of intensified monetary inflation. Now, in response to the COVID-19 (coronavirus disease 2019) shock, the US is set to take the world into a new severe phase of fiat money degradation. All of this is subject to the normal proviso that history echoes but does not repeat itself.
A note on supply shocks: their essence is a sudden dislocation impeding the application of resources, whether labor or capital, to creating output. In the present situation, the spread of illness and enforced quarantines have been the first cause of production stops, starting in China. Global supply chains have seized up.