It’s About Stimulus Checks Not Ocean Carriers Like Maersk Says White House Source
by John Konrad (gCaptain) Earlier this month, the Biden Administration signed an order cracking down on anti-competitive behavior in the shipping industry. This week a source close to the administration says the order has little to do with shipping and everything to do with stimulus and federal spending.
When President Joe Biden ordered U.S. transportation agencies to crack down on anti-competitive conduct and unjust fees in the ocean shipping and rail industries a few weeks ago, he claimed the reason was to protect American consumers and exporters. This order prompted the U.S. Federal Maritime Commission and the Department of Justice to sign an agreement to “increase cooperation and communication in oversight and enforcement responsibilities of the ocean liner shipping industry.”
The question is why do Americans need White House protection from companies like Maersk?
While it’s true that containership post-lockdown capacity crunch, US port congestion, and subsequent massive freight rate increases have turbo-charged daily hire rates for containerships, have significantly increased their asset values, and have increased the cost of goods sold but that does not fully explain why the White House is prioritizing the issue.
This is strange because Biden has mostly ignored maritime affairs until now. Despite having been in office for six months, Biden has failed to nominate anyone to head the all-important Maritime Administration, failed to prevent the issuing of Jones Act waivers, and failed to include much in the way of port subsidies (which could help alleviate port congestion problems) in the infrastructure bill. He has even failed to make high-level pentagon nominations critical to the US Navy and its mission to maintain freedom of the seas.
Most industry experts have taken the president’s order at face value, he is cracking down on carriers to protect American businesses and consumers. Still, sources inside Washington tell gCaptain there might be another reason for the sudden crackdown: it’s a cover story for inflation.
According to Bloomberg, inflation has become a major political liability for the White House. The U.S. experienced the largest surge in consumer prices in more than 12 years last month, with a Labor Department gauge rising 5.4% compared to one year ago. Excluding volatile oil and gas prices, core inflation jumped 4.5% over the past year, the largest increase since November 1991. “This level of inflation is a good reason to stop printing and spending money unless you can sell the American public on an alternate narrative,” Says one Wall Street banker we interviewed. “Big foreign companies like Maersk have become part of that narrative.”
The problem is that Biden is having difficulty getting Republican support for his massive spending programs. “Inflation is driving the cost of everything through the roof,” Senate Minority Leader Mitch McConnell of Kentucky said at a news conference Wednesday opposing Democratic calls for Biden’s long-term social and infrastructure spending plan. One way to combat this problem is to blame high costs on external factors other than inflation.
“Central to White House policy is creating new money via the Federal Reserve and widespread spending via congress,” says a gCaptain source in Washington. “But printing and distributing too much money can supercharge inflation which Federal Reserve chairman Jerome Powell is mandated to prevent. If, however, inflation is not systemic but transitory and is caused by giant anti-competitive companies like Maersk and MSC, then the printing press can continue minting cash.”
It is unclear what Biden’s motives are, but it is obvious that the White House lacks expertise and understanding in the maritime domain. It is also clear that politics in 2021 are as much about perception as reality. If increased costs can be blamed on external forces rather than inflation, then it’s more likely that the next spending bill will pass, and the Federal Reserve can keep printing money.
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