On my very excellent Prius...

Covid is still raging in some parts of the world, the pandemic label still sticks, and the supply chain snare is still ongoing.

And then, Russia attacks Ukraine.

The inflation ensued has scared the shit out of most everyone. It's hard to overestimate that impact, both perceived and real. Afterall for more than a few generations, they have never experienced the hyperinflation in the 1970s, and they are the same folks who have so taken for granted that inflation should stay low. And why shouldn't they? Since the Alan Greenspan days when he's pushed interest rate to effective zero. GOP and fiscal hawks have tried to talk up the prospect of returning inflation coming to bite our arse, but it never happened. 

The usual economic theories seem to have stopped working, Supposedly when interest rate is low, it would stimulate the economy, the overheating of which should bring about inflation. But that didn't pan out for the past thirty years. US economy still keeps humming along. Wages level never climb, yet people can still maintain the consumption level. What gives?

Economists try so hard to cover their arse. But on a macro level, the few converging facts simply cannot be ignored:

• Since US helped championing the WTO entry of China in 2001, China has become the sweatshop of the world.
• That combines with the huge slack in labor force that China could call upon to produce everything cheaply, often with dirt-cheap loan from state-owned banks and government subsidies. That allows China to keep producing, sometimes even at below-costs, then dump the excess inventory to western markets. Case in point: solar panels.
• That works well for multinational conglomerates who packed up the manufacturing shops in the west (not just in US, but in other western countries too), and migrated them to China so as to arbitrage with the cheap labor.
• Cheap chinese imports are like fentanyl. They produce a sugar-rush high, allowing those whose wages never keep up with even the low inflation to continue maintaining a façade of living standard. But, sooner or later, addicts will have to come down from that high.  
• Adding insult to the injury, US Treasury is gladly accepting the fentanyl from China too, issuing Treasury bonds at dirt-cheap interest rate that the chinese buy up with abundance, using the proceeds that China earns from the exports to - alas! - US consumers. It's, like, perfecting the whole supply chain of fentanyl production, shipping them to US, and then producing Narcan so that addicts can live for another day and - alas! - consume more fentanyl.

And then, Covid hits everyone and everything, all at once. Suddenly the cheap imports are not arriving, and when they arrive, they don't look so cheap anymore (due to rising transportation and materials and even labor costs in China). US government did its part by printing more money (effectively, like magically creating more Narcan) to throw lifeline to these addicts. But, that is never sustainable.

And then, suddenly inflation goes from below 2% to more than 7%. Such is the WTF moment.

When you have wage gain of 5%, yet inflation is 7%, you're not even treading water, you're swimming backwards.

The energy crisis was already here prior to the Russian attack, but the sudden surge in energy crisis in EU brings everything in sharp focus. Suddenly it's not just China, but it's the energy markets too (which is something US has much less say on).

Far-left progressives like Bernie Sanders would have us believe that US government should simply keep printing money, and give free money away, so that people can maintain the same lifestyle (even if it's a lifestyle on low-income). But this will never work either, since it's simply adding more fentanyl to the mix.  

The silver lining is, finally, economic theories seem to be "working" again, in explaining why inflation is (or should be) rising. The Fed changes its tune on inflation, from transitory, to alarm.  After a couple of quarters of inflation where inflation stays elevated in the 5%-7% range, the Fed is finally hiking interest rate. And there'll be more to come in 2022/23.

None of these should be surprises to anyone born before 1970s. 

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Why was I rambling on about the economy, and inflation, and interest rate?

For the longest time, I held onto my Toyota Corolla. I doubt if there are that many people who would hold onto a car for twenty years. It's highly logical:

• My Corolla was reliable, with low maintenance needs.
• I don't drive that often, so the mileage is low for its 20-year track record.
• Vehicles, as anyone would know, start depreciating the moment the rubber hits the road. Hence the longer you hang onto to it, it becomes a sunk cost that, after just a few years, it's effective free (saved for the insurance costs, license fees and annual inspection costs).  
• The only variable, is the gas mileage.

The overarching requirements are, high gas mileage, low maintenance, and AWD. 

For that reason, I don't want an SUV. Subaru seems like a logical choice, but gas mileage has been low.

In 2019, Toyota finally came out with the Prius that offers AWD. It finally meets all three requirements, plus the hybrid technology (having been on the road for 20+ years) has matured dramatically.

So, after some 20 years, I finally swapped my Corolla (which has at best 26-28mpg highway driving, and just 22mpg city driving) with a Prius that has AWD (with gas mileage between 50-70mpg). This is so awesome. The Prius is practically seeping gas that I can pump just once a month instead of every week.

Three years on, I'm loving my Prius even more. And now, with the high gas price, I suddenly look like a genius.

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There's a lot of talks about EV. Tesla is of course one reason for it. But I haven't even considered it (when I was weighing hybrids, among other options).

For one, infrastructure is still not quite up to it. Sure, there are more charging stations these days. But it still has a very long way to go toward the coast-to-coast coverage, urban or rural, of gas stations that one can use, which effectively clip the wings of an EV due to the limited range. 

Hybrids offer the best of both world. And it has everything that I need. (No, I don't want auto-pilots like those that Tesla might proposition, I like to in be in the driver's seat, literally and metaphorically, thank you very much.) It has high gas mileage, allowing me to use less gas (and spend less as a result) which is great for the environment, while offering me AWD for better control in wintry weather. 

I love my Prius. Having waited for 20 years, it honestly worth the while, and worth every penny of it.

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On hindsight, Toyota is looking very smart, having bet big on hybrids, rather than jumping onto the bandwagon of EV.