The Case for Doom and the Case for Gloom

The Case for Doom and the Case for Gloom

Welcome to the subscriber-only Odd Lots newsletter. Every week, Joe Weisenthal and Tracy Alloway bring you their thoughts on the most interesting developments in markets, finance and economics.

Are we on the verge of a spike in inflation as the long-feared un-anchoring of expectations takes place? Or are we about to see all these price pressures turn into a deflationary bust as rapid rate hikes tip us into recession?

Those are two extreme scenarios of course, but they’re both worth pondering as this week gives us evidence on both sides.

In the red (hot inflation) corner: We have the tentative agreement struck between US railroads and their workers. Many analysts have understandably been focused on the fact that the agreement looks set to avoid huge disruption to the US economy — disruption that would likely roil supply chains and further fan price increases.

But there’s another way to read this, which is as the first hint of the “wage price spiral” the Federal Reserve has been so worried about, as analysts largely expect that rail companies will pass on increased costs to consumers. (“Terms of the contract will result in a roughly 7-8% Ebitda headwind for the rails, which we expect will be passed