Trudeau's head in the sand as inflation soars

Biden's climate driven policies won't alter nature but will make inflation worse

The United States inflation rate was reported to day as 7.9% year over year. That is a 40 year high and understates the underlying inflationary forces. It is worth noting that energy, fuel, transportation and commodity inflation rates are well into double digits already.

So why do I say inflation is understated? That takes a bit of explanation.

Out of control government debt is the first plank in the scaffold of higher inflation. U.S. federal government debt rose $2.8 trillion in 2020 to a record $19.6 trillion. Global government debt rose to $62.5 trillion. The massive debt levels are barely manageable with interest rates steady at record lows close to 2%. Higher rates will be necessary to limit inflation which is a tax on the poorest people affected.

Canada is not immune to the debt binge. Under Justin Trudeau, Canada will have doubled its national debt from just over $600 billion when Trudeau became Prime Minister to a staggering $1.4 trillion in the current budget forecast from Ottawa. As Central banks raise interest rates to slow the rate of inflation, the carrying costs of the national debt will rise and add to deficits already bloated by left wing policy spending.

There is no sign of any abatement in the Biden or Trudeau spending policies. Biden, with the support of the Democrat Party in control of the both houses of Congress keeps encouraging huge spending programs targeted at favorite left wing priorities like the specious “climate change” nonsense that pervades both Washington and Ottawa. Radical elements of the Democrat and Liberal parties in Canada and United States persist witht their dangerous Net Zero rhetoric and dream of plans to eliminate the use of fossil fuels within one generation. McKinsey & Company, Inc. puts the estimated cost of Net Zero worldwide at $275 trillion. A lot of that spending will require enormous amounts of copper, nickel, lithium, cobalt and iron ore to build the electric grid needed to power the accompanying hope of displacing fossil fuels with costly and unreliable wind and solar power and supplying the electric motors to replace the worldwide fleet of over 1 billion gasoline powered internal combustino engine (ICE) vehicles with electric vehicles (EV’s).

In capable of applying common sense to policy, left wing governments started the attack on the fossil fuel industry long before the wind, solar or EV industries had reached a scale capable of any meaningful degree of replacement of fossil fuels or ICE vehicles. That policy attack which has seen needed pipelines scrubbed, major energy projects shelved and capital flee the oil & gas sector has resulted in a global energy shortage driving oil & natural gas prices to levels not seen in over a decade with higher prices more likely than any easing. Biden, who cancelled the Keystone XL (KXL) pipeline (then under construction) the day he was inaugurated (to outpourings of glee from climate activists) is now running around to dictatorships like Venezuela, Iran and Saudi Arabia begging them to expand oil production while persisting to stifle expansion of U.S. oil output. In parallel, Trudeau’s cabinet full of climate zealots remain adamant that no new pipelines will be built in Canada and tout plans to eliminate the oil & gas industry within 30 years and cheer plans to end financing for oil development.

The combined effect of this blatant stupidity is higher commodity prices, with oil itself at decade highs. The London Metal Exchange stopped trading in nickel when the price of this essential component of EV’s rose 250% in one day. Copper prices have more than doubled during Trudeau’s reign and higher prices are forecast not only for copper but also for nickel, aluminum, tin , lead and zinc. It seems to have escaped Biden and Trudeau that base metals and hydrocarbons comprise the primary materials in pretty well all consumer goods other than food, and that transportation is a major cost contributor to food production and distribution.

Higher commodity prices compel higher inflation. As those higher prices impact pocketbooks, organized labor will be driven to demand higher wages and employers will have to accede to those demands and pass on the higher costs in price, or cut employment levels to avoid insolvency. This is the recipe for stagflation that Canada suffered during the tenure of Justin Trudeau’s father, but it seems the son didn’t learn anything from his father’s experience.

Both Biden and Trudeau seem to have their heads in the sand, both almost silent about inflation and devoid of policy initiatives to combat the rising prices probably since they have no idea what to do that will not result in the electorate tossing them out of office. History has shown that very high interest rates are needed to quell inflation (as high as 20% in the early 1980’s version of stagflation) and the corollary of such high rates is personal bankruptcies, business failures, high unemployment and unhappy voters.

Mark my words - the die has been cast. Conservative leadership Pierre Poilievre has captured the essence of the necessary policies to mitigate the calamitous result of Liberal government, promising to repeal the anti-energy measures of Trudeau’s government, build pipelines and expand Canada’s enery production. These are necessary steps to ease the inflationary pressure of the current set of inane policies and will ease global oil & gas prices through expanded output (if a Republican governments replaces the disastrous Biden administration in paralled) and build the strength of Canada’s economy with oil & gas royalties and taxes paying the freight to cover the interest charges on Trudeau’s debt rampage.

A Republican government in United States would do the same, restoring that country’s energy independence and taking the pressure off commodity prices generally by abandoning the “Green New Deal” nonsense and letting free markets determine the pace of any transition to “renewables” and the rate of expansion of EV production which will continue its growth but be tempered by the parallel need to produce enough battery metals to make EV’s affordable for ordinary citizens.

I hope I live long enough to see the transition from left wing governments deluded by their climate change religion to sensible centrist governments who can bring common sense and balance back to Ottawa and Washington and enact policies that show respect for the citizens who elected them. That could happen in the next election. I can’t wait.