Ammo shortages don't make sense in a free market economy,

This is a discussion on Ammo shortages don't make sense in a free market economy, within the Defensive Ammunition & Ballistics forums, part of the Defensive Carry Discussions category; there has been an increasing demand and shortage on ammo for some time now, why wouldn't the ammo manufactures want to ramp up the output ...

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Thread: Ammo shortages don't make sense in a free market economy,

  1. #1
    Member Array 40S&WMAN's Avatar
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    Ammo shortages don't make sense in a free market economy,

    there has been an increasing demand and shortage on ammo for some time now, why wouldn't the ammo manufactures want to ramp up the output more, increase the staff and take advantage of the demand?

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    Member Array blinkstafoo1's Avatar
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    I think they are...
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    Member Array OMEGA2669's Avatar
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    I believe this topic may have been addressed here:
    http://www.defensivecarry.com/vbulle...our-fault.html
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    Ramping up may not be a simple thing. It may mean a significant investment in another production line, employees, training etc. Then when supply catches up, the manufacturer may be caught with too much investment.
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    VIP Member Array sgtD's Avatar
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    There are also many causes for "market failures." One of those is a when demand suddenly increases and no one saw it coming. Free markets are not perfect. They adjust quicker and more efficiently than controlled markets, but not instantaneously.

    Free market theory says that when demand increases, price will increase, production will increase (due to higher profits), and/or demand will fall (due to higher prices), until equilibrium is reached.

    Exacerbating factors are in play now. The last few years of price increases were largely due to both military ammo demand and rising commodity prices caused by increased demand for industrial metals in the developing world. With the war slowing, and comodity prices decreasing due to the recession, ammo prices should be going down. However, the panic caused by fears of "market interference" by the new Pres and his crew has kept both demand and prices rising. Eventually the market will correct if allowed.
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    Senior Member Array Jmac00's Avatar
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    I think things will start to level out long about June or early July. Unless one of those idiots in Washington opens there mouth again. Sometimes I thing Holder, Pelosi and Kennedy have shares in S&W and Ruger. if they need more money, they just open there mouths and the stock price goes up

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    Senior Member Array Jmac00's Avatar
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    Quote Originally Posted by sgtD View Post
    There are also many causes for "market failures." One of those is a when demand suddenly increases and no one saw it coming. Free markets are not perfect. They adjust quicker and more efficiently than controlled markets, but not instantaneously.

    Free market theory says that when demand increases, price will increase, production will increase (due to higher profits), and/or demand will fall (due to higher prices), until equilibrium is reached.

    Exacerbating factors are in play now. The last few years of price increases were largely due to both military ammo demand and rising commodity prices caused by increased demand for industrial metals in the developing world. With the war slowing, and comodity prices decreasing due to the recession, ammo prices should be going down. However, the panic caused by fears of "market interference" by the new Pres and his crew has kept both demand and prices rising. Eventually the market will correct if allowed.
    A bunch of us at "the club" ordered 65,000 projectiles from a bullet manufacture. We ordered them in early February and they just shipped last Monday The weird part is they (bullet manufacture) said they were working as fast as they could to keep up with demand, but when contacted last Thursday to confirm shipping dates, they said they take FRIDAY's off ?????????

    wth???? i guess they take weekends off to so it looks like they aren't working all that hard. maybe they are trying to keep prices up by not producing enough bullets.......who knows??
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    Theory v reality

    Quote Originally Posted by sgtD View Post
    There are also many causes for "market failures." One of those is a when demand suddenly increases and no one saw it coming. Free markets are not perfect. They adjust quicker and more efficiently than controlled markets, but not instantaneously.

    Free market theory says that when demand increases, price will increase, production will increase (due to higher profits), and/or demand will fall (due to higher prices), until equilibrium is reached.

    Unfortunately market theory and reality don't work quite the way they should. If they did, financial markets, as just one example, wouldn't fluctuate drastically from day to day and week to week. Oil prices would be relatively stable and ammo prices would have stabilized by now of course, and shortages would not exist.

    The part left out is that the old saw about markets being "efficient" is incorrect. Lots of really rich dudes lost big time learning that lesson the last few months.

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    Distinguished Member Array tinkerinWstuff's Avatar
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    From the horses mouth so to speak -

    One of my customers is a firearms manufacturer. He could really use a new machine that I could sell him which would make him both more profitable and be able to pump out more guns.

    His response, "we don't want to invest any money in the firearms manufacturing side of the business because we don't know what this new administration will bring within the next two years."
    "Run for your life from the man who tells you that money is evil. That sentence is the leper's bell of an approaching looter. So long as men live together on earth and need means to deal with one another-their only substitute, if they abandon money, is the muzzle of a gun."

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    Senior Member Array Jmac00's Avatar
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    Quote Originally Posted by tinkerinWstuff View Post
    From the horses mouth so to speak -

    One of my customers is a firearms manufacturer. He could really use a new machine that I could sell him which would make him both more profitable and be able to pump out more guns.

    His response, "we don't want to invest any money in the firearms manufacturing side of the business because we don't know what this new administration will bring within the next two years."
    I don't blame the guy, if you look at the "stimulus package" there is NOTHING IN IT for manufacturing~~~any manufacturing of any kind. I think gun manufactures will be safe for a couple of years, if this administration goes a second term, that when the SHTF.

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    VIP Member Array sgtD's Avatar
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    Quote Originally Posted by Hopyard View Post
    Unfortunately market theory and reality don't work quite the way they should. If they did, financial markets, as just one example, wouldn't fluctuate drastically from day to day and week to week. Oil prices would be relatively stable and ammo prices would have stabilized by now of course, and shortages would not exist.

    The part left out is that the old saw about markets being "efficient" is incorrect. Lots of really rich dudes lost big time learning that lesson the last few months.
    Yes, I was speaking about market "theory" in my post, not reality for the most part. However, in the context of a comparison between free markets, and command and control economies, I believe markets are more efficient. They are not perfect and are subject to failures and manipulation.

    If ammo prices stay high and comodities (cost of producing) stay low, more manufacturers will eventually step in where there is money to be made. (yes, in theory) That is, if we were in a free market. However, with the threat of government intervention looming on the horizon, the market is not free. Secondarily, the tight credit market makes it difficult for expansion of existing manufacturers and for new businesses to come on line.

    The whole bank mess is too much to delve into. Suffice it to say that they are all crooks; the bankers, traders, the Fed. and Congress.
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    VIP Member Array Guns and more's Avatar
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    Quote Originally Posted by 40S&WMAN View Post
    there has been an increasing demand and shortage on ammo for some time now, why wouldn't the ammo manufactures want to ramp up the output more, increase the staff and take advantage of the demand?
    No business will buy new equipment and hire staff for a temporary shortage. I suspect they are running full capacity now. When the shortage is over, they won't be stuck with equipment and people they can't use.
    Remember, this shortage was created by panic buying. Not a long term increase of shooters. Yes, gun sales are up, but I'll bet most people never go to the range with them.

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    VIP Member Array farronwolf's Avatar
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    The manufacturing companies are not going to spend possible millions of dollars for a short term shortage of ammo/guns. Especially like someone posted when they don't know what the future political climate may bring.

    One of the reason I would not if I were in that business, is that eventually the market will drop off. All these folks that have bought guns and ammo, and those that have stocked up on ammo will get enough. Then the demand will drop way off.

    Think of the folks that have bought a new gun, one of my brothers in one of them, he has bought 4 or 5 new guns, and some ammo to go along with it. He is not a shooter, just like many new owners are not shooters, so they will by the gun, buy the ammo, shoot it a couple of times and it will be put up.

    Those folks that are buying 3-4-500 rds of ammo to go along with their gun, heck those few hundred rounds may last them for the next 5 or 10 years. Why would a manufacturer invest so much money when it is guarranteed that there will be a lull in the market in the next 12-24 months. Either legislation will come through hindering their ability to produce, we hope not, or folks will get their fill and purchases will stop due to market saturation and folks who have run out of places to store ammo.

    As far as the manufacturers taking Friday off. I don't blame them. If they have put in their time for the week, so be it. I don't fault them for having a personal life just because some folks think they need to buy something that they didn't think they needed 3 to 6 months ago.
    Just remember that shot placement is much more important with what you carry than how big a bang you get with each trigger pull.
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    Maximizing profits

    Quote Originally Posted by Guns and more View Post
    No business will buy new equipment and hire staff for a temporary shortage. I suspect they are running full capacity .
    Indeed. Why would any business invest in producing more of a scarce product when the scarcity is causing the prices to rise and stay high?

    Ammo production is not a monopoly, nowhere near it, and if one of the manufacturers thought they could beat their competition to the ground by producing more and underpricing, they would do it.

    (Assuming of course, no price fixing collusion.)

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    What I'd like to know is who is getting the cash from the increased costs?

    If it's the manufacturers themselves, then part of the price increases could be attributed to increased production costs. During a temporary shortage, it wouldn't be a prudent business move to hire & train additional employees or invest in additional equipment, but it may be productive to work current employees more (overtime) to increase production. Overtime costs would definitely increase the base cost of the product.

    If it isn't the manufacturers getting the cash, then it falls to the wholesaler or retailer and IMO, that falls into simple profiteering.

    It would be interesting to talk with someone who purchases directly from the manufacturers (Federal, Speer, Hornady, etc.) and compare the manufacturers current price to the price 6 months ago. We all know how much it has increased in the last 6 months, but where is the additional money going and why would be a legitimate question.

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