Over the past twelve months, conversations surrounding national debt have been introduced and then reintroduced after President Biden took office. While it can be said that national debt is money that we, as a country, may potentially owe, there are many schools of thought that either support it or negate it.
In one school of thought, it is assumed that having national debt is logical as long as the growth rate of deficit spending is less than the rate of inflation. In other words, if a country’s spending below the rate at which the value of money depreciates, the government can potentially print enough money to pay off its debt.
In another school of thought, it is considered that deficit spending is good as long as it is used to create long-term assets. When assets like roadways, railways, etc. become usable, they provide a capital rate of return to the economy. Economists believe that as long as the said rate of return is greater than the rate of lending, it makes sense for a government to spend more than its revenues.
Parallelly, another school of thought that has lost its popularity in economic circles dwells in the comparison between the size of the national debt and the size of the economy. The theory was debunked when the US’s national debt crossed its level of GDP.

Charting America’s Debt: $27 Trillion and Counting

While economists are split between the level of deficit spending, they agree that as long as money is used for the creation of capital stock, the economy will continue to expand in the long run.

• Suez Canal, the most valuable sea route in the world, got disrupted on March 23rd, 2021
• Cost of damages are said to be over a billion dollars
• Catastrophic temporary effects on global supply chain health

The Suez Canal is an artificial waterway that connects the Mediterranean Sea to the Black Sea through the Isthmus of Suez in Egypt. This waterway is one of the most valuable sea routes that connects Europe to the rest of the world without needing to go across Africa through the Cape of Good Hope. Since goods with an evaluation of over US $3 billion pass through this waterway daily, it is considered to be a keystone of global supply chain systems. (Tunnelbuilder, 2021). In other words, the blockage of the Suez Canal, if ever, could have catastrophic effects on global supply chain systems.

The unforeseen incident of the blockage of the Suez Canal happened during the early hours of March 23rd, 2021. Since the Suez Canal is narrow, the blocked ship disrupted the supply chain that involved passing through the said canal. As a result, nearly 300 ships were forced to either stand before the Suez canal or go around the African gulf.

While the Suez Canal was unblocked on March 29th, 2021, the insurers of the Evergreen Ship have said that damages could amount to approximately US $1.2 to 2.1 billion (Business Insider, 2021)

However, the global supply chain was deeply affected by the blockage. While some experts in the US like Jeffrey Bergstrand, professor of finance at the University of Notre Dame’s Mendoza College of Business, anticipate a minimal effect, some experts believe that the disruption will have a long-lasting impact on US consumer prices and supply systems. While the time frame is unclear, it can be expected that it could take over three weeks for supply chain systems to re-establish (Pippa Stevens, 2021).

Source:

1. http://tunnelbuilder.com/News/Six-tunnels-under-Suez-Canal-.aspx
2. https://www.businessinsider.com/ever-given-forbidden-leave-suez-canal-until-owners-pay-compensation-2021-4
3. https://www.cnbc.com/2021/03/29/suez-canal-is-moving-but-the-supply-chain-impact-could-last-months.html

• Vincent Kosuga, the king of the onion markets, introduces a plan to manipulate the market
• Purchases and sells batches of onions to ensure high profitability
• Strategy involved extensive use of commodity trading skills

Vincent Kosuga, a New York-based Onion farmer of the 1930s is infamous, not for his success in cultivating onion crops but for his ability to successfully manipulate the onion commodity market.

Vincent Kosuga, ’68, talking to media about his story

After Kosuga finished the cultivation of crops for the season, he would trade on the futures market by betting for or against the rise in onion and other commodity prices. While he started with small bets initially, he decided on securing the onion supply market in 1955. To store the cornered supply, he decided to build warehouses with his partners and associates across the country.

Once his infrastructure was ready, he started buying onions from farmers directly at the time of harvesting. This allowed him to maintain a stronghold on the market. In the meantime, Kosuga with his trading partner Sam Siegel began buying up futures of onion commodities on the Chicago stock market. By the end of the fall, Vincent and Siegel were able to capture 98% of the onion market.

When prices began to rise Kosuga offered onions to small-scale merchants across the country. He sold around 9 million pounds of onion to small-scale merchants and realized profits from high onion prices. Following this, he sold all his commodity holdings and made bets on the decline of retail onion prices.

Stacks of onion

This act of manipulation not just disrupted the onion market but also the commodity market. With onion prices shelved in the hands of one person, the agro-economy had become unstable. The government, heeding pled and requests from Onion farmers, decided to ban Kosuga from trading in commodities for six months, and quite humorously, banned the trading of Onion commodities under the “Onion Futures Act”.

These financial frauds are the brainchild of mastermind strategies, coupled with their doer’s ability to explore loopholes in the system. When Kosuga realized that the onion markets were disorganized and disintegrated, he procedurally unified his contacts, built warehouses, and transported onions from across the country. Subsequently, his purchase of commodities provided him a guarantee against losses. Farmers in his network were too naïve to understand his strategy of cornering all the supplies of onions.

While Kosuga was determined to exploit the onion market. The impact of Kosuga’s acts is still evident. Several regulations like but not limited to, “Onion Futures Act” and “Securities Moderation Act” were made or amended to prevent the occurrence of such an act in the future.

Source: https://www.betterworldbooks.com/product/detail/vincent-kosuga-6135033174