That inflation scare was quite something. Glad that's over.

(inflation is just an 'old-people' thing anyway, like Bingo) 👇

But now that everyone has panicked and started to calm down again, what does the future look like?

  • Today's problems are yesterday's solutions
  • Tomorrow's problems are today's solutions.

Not very snappy is it?

I'll work on a better name.

Luckily we have the perfect example happening right before our eyes...

When lockdowns started, companies assumed demand would fall off a cliff and got it wrong.

Basically this 👇

(Snippet taken from here 👇)

Premium: How high can the Aussie fly?
Bank models see the Australian dollar at 0.82 by the end of the year... Can the Aussie fly higher as China pulls back?

Shipping rates have gone through the roof, and this supply congestion looks set to continue for a while longer: Covid outbreaks in Shenzhen and Guangzhou are the latest disruption...

It's only June and there are already warnings about Christmas shortages...

Disruption to shipping could delay Christmas orders
Global transport of goods has suffered blockages, delays and bottlenecks and won’t be resolved quickly.

(Maybe I won't leave the shopping until Christmas Eve this year...)

Freight rates are increasing...

Even though it's ongoing, we're going to call it yesterday's problem. Because at some point within the next year, it probably will be.

What are today's solutions then?

Home Depot to Freight Providers:

"How DARE you rip us off like this! Home Depot is the third largest U.S. sea-freight importer, I'll have you know*"

*Not an actual quote

Home Depot got sick of being told 'F**k You, Pay Me' so they went and got their own ship...

Home Depot has contracted its own container ship, trying to sidestep a global shipping crisis that threatens to disrupt holiday orders
“We have a ship that’s solely going to be ours. It’s just going to go back and forth with 100% dedicated to Home Depot,” Home Depot’s COO said.

Problem solved!

Well for Home Depot at least...

If you're one of the big boys you can justify a dedicated ship.

Everyone else still has to wait in line...

Naturally, carriers want more ships so that they can meet the demand...

Ship Orders Surge as Carriers Rush to Add Capacity
Orders for new container ships in the first five months of this year were nearly double the orders for all of both 2019 and 2020, with the biggest gains going to shipyards in South Korea and China.

  • Orders for new container ships in the first five months of this year were nearly double the orders for all of both 2019 and 2020

These quotes tell the story:

  • “They are making bucketloads of money and when that happens, owners invest in new ships,”
  • “Orders have doubled so far in 2021, nearly reaching the total tonnage ordered for all of last year. I won’t be surprised if there is another wave of ordering.”
  • “The orders are mostly for bigger ships with all the extras to emit less, which is good for margins. We are almost out of slots to build new ships until late 2023.”
  • “I’ve never seen such demand in 20 years,”

At some point, today's solutions become tomorrow's problems.

Just as today's 'over-demand' generates a bidding war that leads to higher freight prices, tomorrow's carrier over-supply should lead to the opposite: A race to the bottom...  

Especially as passenger planes take to the skies again, and wide-bodied freighters join the party too...

Planes won't be shipping containers, but ships are currently carrying goods that air freight can soon take over...

How about Amazon (and others)?

Will they stay out of the ocean freight business or look to take greater control of their supply chain, like Home Depot?

Once freight normalises, can we finally declare inflation dead?

At least until we try debt monetisation with a side order of MMT...?