North American governments are committed to inflation
They simply lie about it telling you they are "fighting inflation"
When a government sets a policy of targeting 2% annual inflation it is overtly promoting inflation rather than limiting price increases. That government is committed to inflation. At 2% a year, the cost of living will double in about 36 years (1.02^36)=2.03. If your parents earned $100,000 a year when you were born, you need to earn $203,000 annually by the time you are 36 to simply maintain the lifestyle for your family your parents provided for you when you were growing up.
When asked about rising inflation, Prime Minister Trudeau said he doesn’t think about monetary policy. Meanwhile, his policies are stoking high inflation with his crippling attack on the oil & gas industry contributing to a global shortage of fossil fuels that is decimating Europe and the United Kingdom and only going to get worse unless and until there is growth in supply, and with no world leaders encouraging drilling, that isn’t in the cards any time soon.
My father was born in 1915 and died in 2013 at age 98. He left school during the depression to help his parents support their family of eight kids, and joined the RCAF during WWII working for $1.38 a day as a wireless operator/air gunner on over 800 combat hours. He started farming on return but in 1950 lost his dairy farm for missing a single payment on a $3,000 loan from CIBC, and re-entering the RCAF in the lowest rank for a little over $100 a month to support a wife and three children. Most of us today have no concept of supporting a family on $100 a month.
Millenials today see home ownership as out of reach, a result of Liberal policies that drove interest rates to near zero inflating the price of real assets and pouring borrowed money into the economy fueling a massive increase in the money supply and pouring gasoline on the inflation fire. You might be interested in how home prices have risen during most of my lifetime and throughout my Dad’s. Here is a clip from a Sear’s catalogue offering a craftsman home in 1934 for $1,092.
Try to buy a new three-bedroom home anywhere in Canada for less than $1 million today. Assuming $1 million is representative of today’s price for the 1934 home, that price has risen at a cumulative rate of almost 8% a year. That is the outcome of governments that not only tolerate but promote inflation. Their model is simple - they buy your votes with your own money, give a little of it back in “programs”, and tell you what a great job they are doing for you to retain their seats in Parliament (giving themselves pensions indexed for the inflation they are inflicting on you).
Trudeau recently introduced a number of added programs funded with borrowed money to aid people coping with inflation claiming the measures “won’t fuel inflation”. That is nonsense and Scotia Bank’s economist pretty well said as much. Faced with a massive problem that he created, Trudeau’s solution is to toss a few pennies to the people whose lives he has damaged and tell them “he has their backs”. A bit of advice, don’t turn your back towards Trudeau.
Tiff Macklem, Governor of the Bank of Canada, told Canadians inflation was “transitory”, then admitted he was wrong, then reinforced his commitment to price stability (which to him meant more inflation but at a 2% rate verus the 7% Canadians are now experiencing). Pierre Poilievre has stated he would fire Macklem if he became Prime Minister and that makes sense to me.
Liberals are soft-pedalling inflation owing to the minor respite in the latest CPI data which showed a small decline largely attributed to lower gasoline prices. In parallel, food prices continued to accelerate now running 9.8% over 2021. The small decline in gasoline prices will be short-lived since there is no change in the global supply-demand balance for oil and prices will surely rise further. There may be some short term decline in oil prices as higher rates compel slower growth and even recession, but that won’t add to supplies when the down turn ends and prices will surge to even higher levels as the economy begins to expand again.
Governments actually need inflation to depreciate the currency they will use to repay the enormous debts they have taken on in your name. Without a decline in the value of money, there is no possibility taxes can ever be high enough to support necessary programs and repay sovereign debt - not in Canada, not in United States and not in Europe. Canadian federal debt is now over 100% of Gross Domestic Product and if interest rates settle in double digits, 10% of GDP will be necessary to service federal debt alone.
Why do we elect people incapable of critical thinking or even common sense? Beats me, but we have done so and the Trudeau Liberals continue to enjoy popular support despite the damage they are doing.
Beats me too. I think unfortunately that many people want the state to look after them and think for some reason that they are entitled to it. Welfare creates dependency.
How will 10% of gdp be needed to service federal debt for interest rates of double digits? Isn’t the existing debt already issued at much lower interest rates? Perhaps this is the case if we have so high interest rates for a quite extended period