One of the early signs of the pending economic collapse in 2007 and 2008 was a sharp drop in truck rental rates. As a result of the severe economic downturn the domestic truck fleet shrunk about 9%. New trucking regulations reduced the number of hours the drivers are allowed to drive and increased the requirements to become a driver. The result of fewer trucks with fewer drivers driving fewer hours is a squeeze on available freight hauling capability to serve an economy that is starting to show signs of a recovery.
This will drive up freight costs even before you factor in the inflation effects of higher fuel costs. And freight costs drive up the costs of almost everything, from food to steel.
And while we now want to blame the price of fuel on the unrest in the middle east, we cannot help but notice that steel prices have risen almost 25% in the last few months. Silver, gold, copper, ferrous scrap and a host of other industrial commodities have risen sharply, even before the trigger actions in Tunisia and Egypt.
Part of this is due to the demands of a recovering economy, but much of this is likely due to the weakness of the dollar. The official inflation rate means little to those who estimated a construction job in September and now must buy steel at February prices. Without escalation clauses, which few small contractors are able to negotiate, these higher steel prices come out of their profits.
The government can provide any program or benefit. It must only decide how to pay for it: higher taxes, higher debt, or inflation.
Under this administration we are subject to all three.