Inflation Alert! Back in June, The Fertilizer Institute asked the Surface Transportation Board to look into service problems at CSX and if precision scheduled railroading has left it trying to do too much with too few workers. CSX responded yesterday.
Keeping with the topic, I want to try and start this post with a joke (I know comedy isn't my strong point, but hang with me on this?)
A coworker of mine told me that JPow said eating fertilizer cures the economy of rampant inflation, but I bet he was just full of crap...
Background: The Economy of Shit
https://prod.stb.gov/wp-content/uploads/Fertilizer-Institute-to-Board-relating-to-CSX_20210602.pdf
Ok, Corey Rosenbusch from the FTI comes out hot to establish why congress needs to read this letter--his industry is Big Shit โข (500k jobs and $130 billion annually) and they are not happy with CSX since most (56%) of their shit gets moved by rail and CSX is messing this up by being cheap on labor!
My goodness does he keep up the slinging!
What an indictment of CSX to immediately say they are chasing the bottom line with Wall Street vs. servicing the customers paying them. He then goes on to list a myriad of issues across the country. This isn't localized or hyper regionalized, it is happening everywhere. The delays called out are nuts!
Wow, he just keeps bringing the ๐ฅ๐ฅ๐ฅ
Wow, he really takes them to task while calling out the monopolistic power CSX has for having 2/3 of all railways under their control, with the fertilizer industry stuck with really only being able to use them efficiently. This sounds a whole heck of a lot like how Wall Street is regulated, another thing to explore further post MOASS...
Man, I wish congresspeople lobbied for the people like this guy does for shit. He's come to throw down and earn that paycheck.
Yesterday, CSX dropped their rebuttal to all this:
There you have it! The biggest rail carrier (a monopoly) is clogging up the distribution of fertilizer in the country. The trade group lobbying on fertilizer's behalf coming out strong, but all depends on congress doing its job, especially since it is hard for the market to self-correct in a Monopoly...
The entire transportation network is already facing spikes in costs and supply/labor shortages, and you can bet any of the severe weather we have discussed above will exacerbate and compound those issues. This will continue to raise costs and those costs will get passed down the line. More fun to look forward to over the coming months. The CPI number from last week is a lie and a joke and this inflation is not transitory--as Covid-19, Suez Canal, and Mother Nature all have continued roles to play in seeing it stick around.
With farmer's current inventories depleting, trouble likely on the horizon from Mother Nature, how is there any chance of prices going down? This inflation beast in the 'real economy' is insatiable and wants EVERYTHING!! (sidenote, I do think we will see deflation in asset prices when all of this goes down).
All of this pain in the transportation system happening in the backdrop of the Fed still plowing away with $120 billion in assets purchases each month:
$40 billion a month in mortgage-backed securities. This will continue to depress mortgage rates and only continues to add gasoline to the inflation fire.
$80 billion in Treasury securities a month (with policy rates near 0%): represses short-term and long-term interest rates in general, and inflates asset prices and consumer prices, which further DESTROYS the purchasing power of the dollar.
TL:DR The Dollar losing purchasing power + Inflation = Permanent Loss of purchasing power. This will likely be amplified by the demand created from extreme weather events and the lack of current inventory.
Unless one of the many other catalysts triggers the MOASS, I believe inflation is the match that has been lit that will light the fuse of the rocket.
Buckle Up.
