Cheap Prosperity Or A Logistics Trick? Time Will Tell.

“They’re expecting transports, not gunships.” – Die Hard

Meat is murder.  And cake is battery.

I was sitting around Stately Wilder Mansion the other night thinking about beer and steak.  I like both beer and steak, so it was a pleasant thought.  Then I remembered that a ribeye was technically more valuable on a per-pound basis than my liver, especially with the number of miles I have on it, and began to think about just how important energy is to, well, all of it.

Let’s go back to the steak.  Chances are, this steak was raised in Texas.  Or Nebraska.  Or Colorado.  I bought my last steak at Wal-Mart™, so chances are really good that it came out of one of the 11 beef packing plants in the country that produce half of the beef for consumption.  Four are in Nebraska, three each in Kansas and Texas, and two in Colorado.

I still can’t believe they use that land to raise cattle rather than put in data centers.

Since Meat Loaf died, is he now Ground Beef?

Regardless, my steak probably came from one of those places.  It was raised on a ranch, probably in one of those states, since, if you add in Iowa, and who wouldn’t, those states produce 77% of the beef in the nation.  Then the beef is flung across the nation, as if from a merry-go-round whipping along at 37,000 rpm (40,000 kiloPascals).

This requires a lot of energy after the steak has so kindly and peacefully disassembled itself into its tasty parts and its leathery bits.  Almost all of the cow is used and sold in some fashion, so there’s not a lot of waste.  But it has to be cooled or frozen, otherwise by the time the beautiful steak reaches the counter, it won’t be very tasty at all and will smell like, well, not good.

The fact that steak could be shipped from Nebraska to New York for about $0.10 to $0.15 per pound is astonishing.  And it requires fuel and coordination on a continental scale.  Any disruption and the price of my steak goes . . . oh, my.

It’s already disrupted.

I once buried someone in the wrong hole.  What a grave mistake!

The same thing occurs with that fish I bought at Wal-Mart©, except now we’ve moved up the chain to a global scale.  It was caught off the coast of Chile, shipped to (checks notes) Vietnam for packaging, frozen, shipped to the United States for distribution, and then The Mrs. buys it because you’d never catch me eating fish while there are cows, chickens, and pigs still hoofing it around.

All in, this costs only $0.50 a pound or so.  Oh, and 60-90 days.  The fish has now moved thousands of miles.

Then, the Big Kahuna, oil.  Let’s take a barrel of oil and transport it from Saudi Arabia to the United States, and then take it (as a gallon of finished gasoline) to Iowa.  That can be done in good times for the astonishingly low price of about a quarter.  Nowadays when the transport market is whacked because of Iran?

Still less than $0.40 a gallon.  And that price whips that gallon of hydrocarbon halfway around the world.

We determined that the leading cause of dry skin in our house was towels.

Cool story.  What does it mean?  I mean, I know I’m not planning on eating fish, but cool story bro, but who cares?  The world is a web in 2026, interconnected in amazing ways to create supply lines that no human could manage, and yet that are brutally efficient.

Efficient, as I’ve mentioned again and again, means vulnerable.

Purchasing is done at the margin.  That’s economic nerd speak for, “Yeah, sure, but how much does it cost?”

If I look at taking a shower and water is $0.01 a gallon, I might sit there for half an hour until every part of my skin wrinkles up like Hillary Clinton’s face.  If water is $10.00 a gallon, that means I’ll likely have an entirely different relationship with showering and start rubbing myself with small fur-bearing animals to dry-scrub the stink off.

The ducks at the park keep biting my dog.  Shouldn’t have gotten one that was pure bread.

Right now, gasoline and diesel demand are dropping because their costs are going up in a painful way.  This is impacting the cost of every physical good, from water to steak, and not in the good way.  There are only two results from this situation:

1. Recession, or,
2. Inflation.

We have gone far beyond the time when politicians will allow a recession.  At any sign of those, the money printer goes brrrrrrrrr.  The result?  Huge inflation in things like wheat in poor countries, which leads to revolutions and uprisings.  People can’t eat, governments can’t govern.

Building a grain processing facility can be profitable.  I’m hoping to make a mill by the end of the year.

The time, though, when other countries can soak up the money-printing recession plot armor seems to be passing, at least based on everything that I can see.  This year?  Maybe.  Next year?  Possibly.  Six years from now?  Almost certainly.

The webs that brought us cheap prosperity and ludicrous supply lines seem to be under stress.  I’m thinking that opening up more data centers might help, just like a second dishwasher might stop a drought.