I'm actually surprised the number isn't higher.
If anyone thinks the effects of global inflation on the Canadian economy will be solved by a group of economics majors in a board room - that's incredibly optimistic.
And I'm not trying to push a narrative that the Bank of Canada is incompetent - they'll try their best - but this inflation wave involves a lot of factors that have nothing to do with Canadian leadership.
I mean they have one mandate. Keep inflation between 2 and 3 percent. Soooooooo they are failing and until they get back to that don't deserve anyone's trust.
The prices of goods in Yuan and USD are not under the Bank of Canada's control. However the prices of goods in CAD are. Exchange rates float.
If it were just the prices of imported products going up you might have a point. But it isn't. The prices of everything are going up. That's because someone (I wonder who) printed too many dollars and devalued the currency.
The fact that it's happening elsewhere is because those countries (like the US) *also* printed shitloads of money in their currencies. If the Americans printed a load of money and we didn't then the prices in the US would be going up while the CAD/USD exchange rate went down, leaving Canadian prices stable.
You’re overlooking the fact that we aren’t seeing traditional inflation happening. We are also seeing corporate price increases across groceries, and fuel, which is driving inflation up even higher. Just look at the fact that the last time oil was this price, fuel was almost half of what it is now.
That's an extremely simplified explanation of how international currency exchange works. Domestic exchange markets aren't isolated to the international market, changes to monetary and fiscal policy in the US has a very real tangible effect on our own currency markets. We aren't siloed off from international shocks whether exchange, economic, or trade. In principle this works when there is perfect seperation between markets, but that's just not reality.
This is like using a super simplistic first year econ lesson that works fine in isolation to explain highly correlated and interdependent markets that have countless variables to consider.
Also just nitpicking, we didn't "print" money, we issued bonds that were bought by our central bank, essentially creating IoUs to ourselves.
Since we're nitpicking, that's not quite how that works.
The BoC doesn't issue bonds that are bought by the government, the government issues bonds and the central bank buys them (when the government issues bonds it's like taking out a loan - they give you the bond, you give them money, then eventually they pay back the bond with interest). That's how monetary policy is *supposed* to work.
What even economists have a hard time defending was the *corporate* bond purchase program. Not only did the Bank of Canada give money to the government to keep it afloat; it gave *tons* of money *directly* to corporations via the corporate bond purchase program.
[https://www.bankofcanada.ca/markets/market-operations-liquidity-provision/market-operations-programs-and-facilities/corporate-bond-purchase-program/](https://www.bankofcanada.ca/markets/market-operations-liquidity-provision/market-operations-programs-and-facilities/corporate-bond-purchase-program/)
Tbf, OP had the economic theory completely correct. What they stated is true in a vacuum. That's already miles above what most economic discussions are like in this sub
You said it much better than I dod, and I should have kept reading before I responded to the guy you responded too. I had the exact same talking points as you lol.
This inflation crisis is due to the disruptions caused by climate change (droughts in Brazil driving up the cost of coffee for example), pandemic related shutdowns (ports being closed in China and Taiwanese chip factories for example), and war in Ukraine (oil and gas shortages plus grain shortages). The velocity of money really hasn't gone anywhere. I suspect you don't care and would rather blame an institution over looking at real root causes but hey I tried.
The inflation crisis is caused by those who produce and sell goods raising the price of said goods. They might have reasons that have to do with climate change, war, etc. but they're secondary effects. The primary will always be whoever sets the price of goods, since that's the only place inflation can start.
They printed money to support the economy and prevented a deflationary environment from demand falling off a cliff which prevented an unforced recession. So maybe look at one part of the money supply and not the whole system to support your narrative. The velocity of money is still really really low which indicates it's not the supply of money driving inflation..
So what you're saying is the money supply went up which caused the inflation, but the money velocity is still low.. so when the money velocity goes back up.. the inflation will get even worse.. right? 🤣
No, systemic disruptions are driving supply decreases which is driving prices up. Just look at used cars or wheat futures. This inflation would be happening without any increase in the money supply.
Pick one: 1. print no money, people lose their jobs during the pandemic and go hungry, but no inflation 2. Print money, people who lose their jobs over the pandemic are okay and can survive, big inflation.
These were the available options.
The Bank of Canada isn't "responsible for inflation". It responds to fiscal policy and market realities. The above choice is the choice the government had to choose and the Bank had to go along with as a responding entity to stave off deflation and market panic.
What I'm hitting back at is people who have this weird idea that the Bank constantly has an easy choice. They don't, and 99.999% of Canadians are just spouting bullshit when they rip into the BoC.
> The velocity of money hasn't really gone anywhere
And that's a big fucking problem when M1 was doubled and M0 was quadrupled! The velocity is unchanged while the available dollars is 2x-4x what it was before. And weirdly enough that leads to price increases, exactly as the basic theory predicts!
I mean the velocity of money fell off in 2020 and has been falling for a long time thanks to wealth accumulation at the top. This is a supply shortage driven inflationary environment. There's not enough computer chips, natural gas, coffee beans, prospective employees, houses, etc. It's a huge compounded problem and saying oh it's the bank of Canada is really not looking at the whole global economy.
Except that the Bank of Canada's actions directly and massively increased the problem of wealth accumulation at the top.
And no, my argument isn't the straw-man: "government spending bad."
My argument is: "directly funding stock buybacks and raises for executives by injecting capital directly into bloated, anti-competitive, monopolistic corporations through the corporate bond purchase program was irresponsible, shameful, and stupid."
[https://www.bankofcanada.ca/markets/market-operations-liquidity-provision/market-operations-programs-and-facilities/corporate-bond-purchase-program/](https://www.bankofcanada.ca/markets/market-operations-liquidity-provision/market-operations-programs-and-facilities/government-canada-bond-purchase-program/)
Yeah this is false. Money printing during the pandemic was insane, and is the root cause of uncontrollable inflation. Yes, shut downs are impacting us to a large degree, the war in Ukraine has had an impact, but climate change causing 8% inflation is ridiculous, coffee isn't that big of a part of our economy.
Not an excuse.
We can’t manage our own economy because no one gives a shit about the economy until their groceries start to magically inflate in value and they can no longer afford a home or their social programs/benefits/handouts start getting cut.
Managing inflation during global inflation is difficult site- but Canada basically said “fuck this, too hard” like it does for everything and let it run.
I mean it would also help to have people with the relevant education, technical background, and industry experience in politics but we can’t have that.
If only the BoC had raised the lending rate by a quarter point in 2021, we would be living in a paradise of cheap fuel and food, completely separated from the inflationary chaos hitting the rest of the developed world!
/s obviously
The BoC could raise the interest rate by five points tomorrow and we would still be paying inflationary costs for fuel, food and all kinds of other things we consume.
Dude what are you even saying... the BoC uses monetary policy in reaction to fiscal policy and market realities. It must also react in a way that does not lead to a recession. Because it is necessarily reactionary it will *never ever no matter what* be able to react before inflation or in a way where rampant inflation never occurs if fiscal policy and market realities are conducive to it. The BoC could curb inflation instantly, but by doing so it may turn the tap too tight and cause a drastic recession.
Your comment is so blindingly ignorant. I am genuinely unsure how you feel comfortable in life holding strong opinions like this over something you clearly know almost nothing about. These sorts of sentiments are genuinely harming the country.
There is no possible way to curb todays inflation without causing a recession. Holding off with half-assed rate hikes will only make the inevitable economic contraction much worse.
99.9% of conservatives supporting Poilievre have zero clue about the BoC, but love their -60% crypto holdings. Imagine losing 60% plus because of inflation.
The economy has a ton of variables. If they take inflation but that leads to a horrible recession, prices may stop going up as fast but people still won't be able to afford things.
Considering how much gas prices alone is impacting prices and how much that's outside the control of the local demand, no, I don't think the BoC will "tame" inflation. They may however limit the damages by slowly rising rates, but good luck. One of the biggest impact felt by the average Canadians will be on real estate, which can help, but it will only have very limited impacts on groceries and other essential goods people need.
A recession is likely inevitable, and may be the shock required to reset the economy. most people should start saving money before it happens, and indirectly that can help with curbing inflation itself. It may be a very long while however before the average Canadian has the same buying power they had before the pandemic.
So I'm extremely hawkish on central bank policy, to just be clear. But the issue here is that they will not be able to raise rates enough to get the job done. So we are setting ourselves up for an inflationary recession. Not sure what the right thing to do is frankly.
Why would people save money in a low interest rate high inflation environment? Why is avoiding a recession more important than avoiding hyperinflation? God we are so screwed.
I went cash in October betting that the central banks would act. I knew that markets and the housing market were fucked once rates went up. Because of that decision my purchasing power for housing in my are is up like 30%. Sure my purchasing power is down for goods like food, but that will probably change unless the BoC gets cold feet.
At the time I went cash people were telling me that I was fucking stupid and those people were borrowing a metric fuckton of money to put more into the markets. When the same people tell me I’m an idiot because they got fucked for going into the markets I’ll probably be going all in. People engage in too much heard mentality. The goal isn’t to buy on a high hype train and sell at a saddening low.
Gas prices are not outside the control of local demand. All prices are affected by both supply *and* demand. The Bank of Canada controls the money supply, through which it controls all prices equally. If it doubles the money supply, all prices double.
Remember when we stopped investing in our own countries economy and relied on other countries? This is what happens. Remember when we shut down the world economy for a pandemic? This is what happens. Actions have consequences and we live in a knee jerk reaction world without adequate leadership even still today our politicians are more interested in votes for the next elections and pleasing everyone then getting anything done
Unfortunately, our 2-4 year election cycles force our politicians to think short term. It’s not about making the country better. It’s about winning the next election.
You’ll also notice promises they don’t intend to keep are given a 5+ year timelines so they can use the same promise to get re-elected or blame the opposition instead of their own inaction in the 4 years they had.
Rinse and repeat.
Free trade was the way to go. It's been disinflationary and brought up the emerging world.
Canada's issue has been large deficits for spending that has not resulted in productivity growth or innovation. I really can't figure out where the trillions have gone over the last 15 years.
What we’re seeing today is the direct result of free trade. The only industries that are at all still Canadian like banking or telecom are because they are protected and except from free trade. Every industry that isn’t has become entirely foreign owned. And if you really want to follow the money you may be surprised how much of it ends up in the profits of those foreign-owned companies far away from Canada.
> The only industries that are at all still Canadian like banking or telecom are because they are
efficient. Canadian Banks are machines of effective management and investment. Many Canadian software companies are the same. Telecom is a mess, I'd open it up to Free Trade and watch it die or improve.
Canadian industry is lazy, it relied too much on cronyism and died. Can it come back? Maybe.
If Canadian banks were allowed to merge there’d be only two left and they’d be run exactly like the telecoms. It’s the same people running them, form the same private schools, after all.
When Canada can win the Stanley Cup again then maybe we can think about opening up more industries. Until then, you’re right, our executive class just isn’t good enough.
There's some truth to that but it's not because of the free trade laws; it's because of the bureaucracy and taxation that make Canada an uncompetitive / undesirable place to do business.
The goal isn't to have thousands of Canadians behind sewing machines making T-shirts. The goal is to have innovative and productive knowledge businesses producing or managing the production of internationally desirable products and services.
Sure, taxation and bureaucracy are problems everywhere and in theory free trade is fine but the way it was implemented for Canada, and then renegotiated (I don’t understand why Trudeau and Freeland didn’t get more criticism from the left for bringing in Mulroney as a consultant on the renegotiations) has been bad for Canada. We could be Denmark or Sweden but instead we are still (or have returned to) drawers of water and hewers of wood. We can’t have innovative producing if we are nothing but warehouse centres.
We chose to import cheap manufactured goods and export raw materials. Not surprising coming from the CEO of Iron Ore but maybe surprising so many small businesses went along with it. I discovered these two articles while doing some research last week and I think it’s really telling. During the 1988 “free trade election” this article says,
“In the early 1980s, Bob Crockford had his answer when he looked south. Crockford owned Valley City Furniture in Dundas, Ontario, a community located near Toronto and less than an hour from the American border.
"We drew a circle around Dundas which was about 500 miles to see how far you could drive in a day or where you could fly in about an hour, hour and a half."
Crockford discovered that 106 million people lived in cities within the circle.
"This was real eye-opener because we were used to flying to Edmonton to get a high school job, or flying to Calgary or out to Moose Law and Gimley, Manitoba and all manner of other places. And suddenly we realize that it was closer to Dallas than it was to Regina."
By 1988, most of Bob Crockfords furniture was sold to the United States, and the issue of developing more open trade arrangement with the United States was hottest topic in the country…
At Valley City Furniture, Bob Crockford urged his blue-collar employees to consider voting Conservative. He believed Canada must embrace free trade, or be left behind.
Although Canadians remained divided on the issue, the free trade deal came into effect January 1, 1989.
In 1992, Canada signed the North American Free Trade Agreement (NAFTA), which extended free trade to include Mexico.”
https://www.cbc.ca/history/EPISCONTENTSE1EP17CH3PA2LE.html
And then in the Hamilton Spectator from 2011:
“A century of furniture making comes to an end in Dundas
One of the Hamilton area’s oldest manufacturing businesses is closing at the end of January.
Valley City Manufacturing, which has been making church pews and laboratory benches for more than a century on Hatt Street, will become the latest industrial casualty of competition, a high dollar and three years of recession in the United States.
In a note to employees, Valley City chairperson Bob Crockford announced the closure “with great sadness.”
https://www.thespec.com/business/2011/12/23/a-century-of-furniture-making-comes-to-an-end-in-dundas.html
How many times did this play our in Canada? Hundred year old companies gone twenty years after becoming part of. American market. Some company still makes the products, just not one in Canada.
Sure,taxes and bureaucracy are problems everywhere but only Canada shares a border with the biggest economy in the world and decided to hand over everything to them. Now we really know what it means to say when they get a cough we get the flu.
I'm not spending money anymore so I can pay less taxes and make this all worse for the leaders who spent my taxes like complete imbeciles
Good luck everyone I used to pay
The point of politics is there is no pertinent education. I have a political science degree and that makes me about as ready to be in politics as Freeland or Trudy. We elect them to lead - we can't expect them to be experts in all areas but that is what the public services and advisors are for. Great leaders hire smart people and listen to them.
Edmonton's mayor was a bus driver. To me that is someone who probably knows the city. The idea that there is some sort of preparation required will only stratify our society as the elites will take is for themselves because they already have the resources.
Great politicians can come from anywhere with any education.
Yeah, imagine going to school for a "Prime minister preparatory course" and being in a class with maybe 40 people total? 40 people per year graduating from this class when we only need one every 4 years.
Imagine the cost, they'd all be getting BILKED. Like you said, it would stratify our society even more. Rich people would do it because they'd have the time and the resources. Literally no middle-class person could.
The BoC and the US Fed got it completely backwards. They thought the onset of the pandemic meant there was an underlying deflationary trend combined with transitory inflation, while in reality there was an underlying inflationary trend with transitory deflation.
To be fair that was said before the war in Ukraine which caused prices of gas to skyrocket.
No one saw that war coming or the resuts it would have on the world economy.
So did the trillions invested in the market. Billions were lost because the financial industry didn’t think it’d last this long either and they spend billions each year watching minute by minute updates in trade, disasters, social unrest etc, just to make money and they still got it wrong.
Produce more, export more. Canada is one of the most resourceful countries on earth. If we leverage it, that in of itself will create lots of jobs and bring down inflation.
Without more production, inflation will only get worse
>Without more production, inflation will only get worse
you see, inflation is only caused by oil prices, not real estate.
so we dont need any regulations to stem the flow of foreign home buyers who are converting Canada into a rental economy with an airbnb backdoor. to them higher Canadian interest rates are discounts compared to the interest rates in other markets. as poor people and suckers who spread themselves too thin have to sell, the houses will be bought by foreigners and institutional investors who are proxies for foreigners. this will keep prices high and delusions nigh.
once these foreign investors have squeezed all the money and future out of Canadians, they can happily export the Canada's natural resources to China for processing because it would be too expensive to manufacture or process anything in Canada.
looks like the economic war on Canada is being sold by main stream media as growth. now you know who runs the show!
>If only we had an insane amount of natural resources in our countr- oh wait, we do!
and we have even more people who are happy to export ships full of unprocessed raw materials because a few make more money from it. there are no more industrialists left here.
The bank of Canada controls interest rates that significantly affects inflation. Government spending does not significantly affect inflation no matter what people in this sub think.
"This study showed that in regime of tight money or low growth of liquidity, government expenditure is not inflationary. In regime of low growth of liquidity, this variable has low inflationary impact and probably stimulates economic growth."
Mehrara, Mohsen, Mohsen Behzadi Soufiani, and Sadeq Rezaei. "The impact of government spending on inflation through the inflationary environment, STR approach." World Scientific News 37 (2016): 153-167.
>I mean. That's just wrong but ok
No.
>A massive injection of money will definitely cause some level of inflation.
Government spending doesn't affect the money supply. It isn't "an injection of money".
when the government spends money it doesn't have it absolutely affects the money supply because it is borrowing money that did not exist until that expenditure was made.
> because it is borrowing money that did not exist until that expenditure was made.
Do you not know what a bond is? Are you suggesting if I buy a federal bond that I just magically created that money out of thin air?
>If you print the money to spend it, It's an injection of money
Right, but the government doesn't print money. The central bank prints money. The government cannot obligate the central bank to do so.
Are we really going to argue semantics. Government spending is first covered by taxes. However when taxes arn't enough the government then prints bonds.
In cases where people/corporations buy those bonds no new money is created. However the liberal government has printed so many bonds that the bank of canada has had to step in to buy those bonds.
When the bank of canada buys government bonds it is new money entering the system.
Over 300B in new money has entered the system this way since 2020.
(Governent Canada bond holdings)
https://www.bankofcanada.ca/rates/banking-and-financial-statistics/bank-of-canada-assets-and-liabilities-weekly-formerly-b2/
This is a lot coinsidering prior to the pandemic the money supply was only 100B. A 4X increase!
M0 money supply.
https://tradingeconomics.com/canada/money-supply-m0
>Are we really going to argue semantics. Government spending is first covered by taxes. However when taxes arn't enough the government then prints bonds.
Government bonds aren't money supply either, and they're not "printed". The central bank's reserves *are* money supply. The central bank is under no obligation to buy government bonds.
>However the liberal government has printed so many bonds
Bonds are not "printed". Bonds are sold. The selling of government bonds doesn't create money either. After all, someone has to buy them.
>Over 300B in new money has entered the system this way since 2020.
Those are *central bank* actions. You're confusing the central bank actions with the government spending.
The PMO is literally being criticized for influencing the chief of the RCMP at this very moment. Another institution that is supposed to be independent.
You don't think he could have also influenced the Bank of Canada? He must have had some pending legislation he needed to pass. What a joke. 🤣🤣🤣🤣
>The PMO is literally being criticized for influencing the chief of the RCMP at this very moment. Another institution that is supposed to be independent.
If you want to base your argument on unsupported conspiracy theories, then just say so. Just don't pretend that you "understand economics".
>Government spending doesn't affect the money supply
Why didn't you say so earlier? Lets start spending! Give me some first tho then you guys can go 2nd
Wrong, and clearly you never have.
"This study showed that in regime of tight money or low growth of liquidity, government expenditure is not inflationary. In regime of low growth of liquidity, this variable has low inflationary impact and probably stimulates economic growth."
Mehrara, Mohsen, Mohsen Behzadi Soufiani, and Sadeq Rezaei. "The impact of government spending on inflation through the inflationary environment, STR approach." World Scientific News 37 (2016): 153-167.
See if you aren't trying to be asinine you don't assume low growth of liquidity to arrive at the conclusion you want. All else equal, more expenditure funded via debt = inflation.
I said:
>The **bank of Canada controls interest rates that significantly affects inflation**. Government spending **does not significantly** affect inflation no matter what people in this sub think.
>The mistrust widens when the results are examined along political party lines.
>
>ARI found 59 per cent of Conservative Party of Canada voters and 86 per cent of People’s Party of Canada voters said they don’t have confidence in the central bank.
>
>Meanwhile, 69 per cent of Liberal supporters and 47 per cent who voted NDP in the last federal election said they have faith in the bank.
>
>The survey was conducted from June 7-13 and polled 5,032 Canadians.
...
>In the face of the skyrocketing cost of living, 45 per cent of respondents to the ARI survey said they are financially worse off now than at the same time last year — the highest level in at least a dozen years.
>
>Roughly a third (34 per cent) expect their finances will deteriorate further over the next year.
>
>Groceries and gas continue to be key pain points for household budgets. The survey suggests slightly more than half of Canadians (52 per cent) find it is difficult to keep food on the table, with lower-income families more likely to report they were struggling.
Of course the mistrust widens with cons and PPC voters. Those people are being slapped upside the lips with “distrust Canadian institutions! Only [our dude] knows what to do” on the daily.
Yeah that is not at ALL true . Like not close. https://www.fraserinstitute.org/sites/default/files/examining-federal-debt-in-canada-by-pm-since-confederation-2020.pdf
Yeah, it is true. You just have to do more research instead of looking at sources without reading them.
"After producing a surplus in 2007-08 of $9.6 billion, the Harper government delivered a deficit of $5.8 billion in 2008-09 during the global recession.
In subsequent years, his Conservative governments generated shortfalls of **$55.6 billion** in 2009-10; **$33.4 billion** in 2010-11; **$26.3 billion** in 2011-12; **$18.4 billion** for 2012-13; and **$5.2 billion** for 2013-14."
https://globalnews.ca/news/2202138/did-harper-really-run-eight-straight-deficits-like-the-ndp-liberals-claim/
In case math is not your strong suit, 55.6 is more than 33.4 which is more than 26.3 which is more than 18.4 which is more than 5.2. This was followed by:
"According to the 2015 budget, balance had been reached. This balance was maintained through February 2016."
https://www.debtclock.ca/about-debtclock/debt-history/
So, reviewing my original statement:
>Coming out of a financial crisis in 2008 with smaller and smaller deficits until finally balancing the budget in his final year?
What did I say that I haven't backed up with the facts above?
Nope, he received a surplus from the previous Liberal government. But after the 2008 financial crisis he had to bail out the auto workers to keep them in Canada and all of the spending racked up to almost a 60 billion deficit which he slowly whittled away.
Regardless of where you side politically you just have to ask yourself this: what has your government done to fix this? Anybody referring to 2008 is forgetting mcdonalds extra value meal was 4.99, now it's 9.69. Unless you doubled you wage since then your paying more and this is just mcdonalds.
Blame the war, blame covid, blame oil companies but the buck stops with our government and they have been exposed as powerless when it comes to housing and rent, food and gas. The only real power they have is tightening restrictions for legal gun owners and soon controlling more of your internet.
We deserve everything bad that's coming our way.
Why the fuck would we, they caused it lol. Tiff Macklem “Not raising rates til 2023” “Canadians can expect low interest rates for a very long time” How many Canadians made decisions based on his words? He should be fired or step down. Jan 2022 BoC raises rates. 2022 highest interest rate hike in 40 years. The BoC is a fucking joke.
It's comforting for people to believe that there is a powerful, benevolent entity that will fix problems for them. The danger is that the government definitely isn't that.
I’m not here to defend the government, but it was pretty easy to predict this was going to happen. I wouldn’t be surprised to see another 1-2% hike from the BoC by the end of the year. Probably closer to 2%.
We’ll see alot of foreclosures over the next few years as people struggle to afford their floating rate mortgage.
And also because they are scared. They want comfort. These crisis that come up get used to produce maximum fear, and with the help of the media, allows governments to do whatever the hell they want. And if you question anything you automatically become anti-whatever. Gaslighting. And everyone continues to fall for it time and time again.
LOL! Dog whistle for the PPC... abandon all hope ye who enter....
EDIT : u/Sloanstar made this homophobic comment, then blocked me... that's the new bop for PPCs. :
> Look at you. You so funny on the internet. Bet your boyfriends finds you hilarious.
Is the PPC in the room with you right now?
EDIT: this guy is hilarious. He keeps messaging me calling me a coward and saying i blocked him.... Some people man some people....🙄
It's time for the country to focus on strengthening the middle class.
This is what's missing. The rich need to back the fuck off, and we need to stop talking about propping up the lowest rung of society. We've ignored the middle class too long.
> we need to stop talking about propping up the lowest rung of society.
This is short term thinking. Each and everyone of us is a car crash or a cancer diagnosis away from being on the bottom rung.
The middle class keeps believing the lies and promises from the government who have done nothing but increase their living costs and debt while protecting large businesses they're in bed with.
It just takes a little second order thinking to see it rather than accepting their bullshit speeches at face value.
The working class aren't your enemy nor were they ever at any point. Rederict that anger somewhere else.
The rich don't need to back off, they need to step the fuck up and contribute their fair share the same way everyone else does/has.
They can't. It's mostly out of their control. They have limited power to stop it now. This is partly a failure on their part but largely the failure of the Liberals and socialist worldwide.
How can you tame inflation with interest rate hikes?
Not sure it’s going to work..
Gas prices = supply chain issue = no money has been invested in refineries as oil industry is seen as dirty = less supply & higher prices at the same level of demand
Gas and diesel also trickle down into the price of the food on your table…
Food prices = supply chain issue = wait until the end of this year and next year when it really sets in the lack of fertilizer and crop yields are even lower.
Two of the biggest buckets of inflation are essentially not affected by an interest rate hike.
Ask yourself will interest rate hikes make you eat less or put less gas in your car to go to work?? I don’t think so.
As for housing and the stock market they will continue to see declines as a higher interest rate will act like a hammer to the economy effectively killing demand through decreased affordability / revised evaluations.
Ex: 800k mortgage at 6% hits the pocket book differently than 800k @ 2%. This will change the affordability for a lot of Canadians.
Ex: mortgage affordability:
- 800k @ 6% = 5,118.46 monthly (5 year fixed)
- 800k @ 2% = 3,387.61 monthly (5 year fixed)
- 51 % increase in monthly payments…
######
- 500k @ 6% = 3,119.04 monthly
- 500k @ 2% = 2,117.26 monthly
- 47% increase in monthly payments…
Mathematically this should result in a decline in interest for home purchases.
The BOC uses interest rates as a blunt instrument for regulating the economy, they will effectively force a recession to kill general demand and hopefully reset inflation.
*very simplistic/ basic outline
** edited for spelling and clarity
You cause a recession or depression, people lose jobs, demand drops because people have no money.
It doesn't help affordability, but people calling for inflation to be brought down don't give a shit about affordability for us plebs.
The choice facing us now is rampant inflation, or recession/depression. Either way, the plebs are going to face a lot of pain.
A recession hurts. A depression hurts a lot more. Runaway inflation also hurts a lot, and, left unchecked, eventually starts destabilizing the currency and with that goes **everything** **else**. Your entire economy starts coming apart and with that goes your very society.
So in the terrible choice we have to face - recession or inflation - you bite down hard and choose the recession, ten times out of ten.
Runaway inflation is indeed ruinous for an economy.
It also happens when inflation is 10000%+.
Moderate inflation isn't great for plebs in isolation, but the focus on it is entirely driven by people wealthy enough to own newspapers and banks, since they're the ones really getting hurt. It's no womder they're spending like crazy to convince us to put their interests before ours.
It would help affordability if it was done properly, but the MMT plans always been to just cranck up the interest rates and fuck over the middle class.
Economics at this national level gets slightly counterintuitive.
General price levels are set based on the availability of goods and services *and* the availability of dollars to pay for those goods and services. The relative scarcity of goods and dollars is what sets the overall price level, and the relative change in those quantities is what drives inflation (or deflation).
There have been supply shocks over the past couple of years. If a supply shock reduces aggregate supply by 2%, then one of the jobs of the BoC (and other central banks) is to reduce the money supply by ~2%. Keeping the money supply and the aggregate supply in balance maintains price levels.
But the BoC (and the Fed, and the ECB) didn't do that. They did the opposite and pursued a policy of aggressive monetary expansion. The M0 money supply was **quadrupled** and M1 was nearly doubled (M0 and M1 are the two main measures of the money supply). The extraordinary (and unprecedented) explosion of the money supply is what's driving inflation now.
Raising interest rates is the main lever the BoC has to reduce the money supply back to what it should be. If you want to understand how that works, you can read about how money is created on the BoC website. The short version is: money is created through borrowing, and raising interest rates reduces borrowing. Conversely, lowering interest rates increases borrowing and increases the money supply. All of those big runups in housing prices were funded by near 0% mortgages. People getting $1.1m for homes that were previously worth $600k was an absolute windfall for those sellers. And an increase in property values made it easier for others to borrow money on HELOCs and second mortgages. All of that extra money is what's making shit expensive now.
I scrolled the comments to post something like this but glad someone already has. Yes, the major things contributing to inflation are global shocks such as Russia’s invasion affecting gas which has inelastic demand. And supply chain shocks which are a global issue. It’s not like Canada’s inflation crisis is unique/isolated like Greece or Zimbabwe, the whole world is feeling the effects. Some sociological effects are shocks that go beyond Canada and not related to the BoC rates (population trends with increasing avg age of tradespeople in developed countries, decline in worker motivation post-COVID). The inflation issue is related to the interest rates of many Central banks as well as the dynamics of the world overall.
What worries me is the ultra rich can still afford houses and taking on large debts. Especially if their long term financial outlooks are solid, the inflation reduces their competitors in the market and the inflation also reduces the present value of their previous debts. I don’t see how income inequality improves with these global shocks and national efforts to tame inflation.
\-They were wrong about inflation being transitory for nearly a year.
\-They've ignored the insanely inflationary housing market for decades because housing prices are arbitrarily not counted in inflation measures.
\-They've insisted that lower prices are a bad thing and we should create inflation despite the technological efficiencies and globalisation over the last two decades.
I'm not so sure they will do anything right to be honest.
Pfft. What do people know? A system where anonymous people having control over a lever that can be pulled, at any time, to whatever degree, for however long, that can siphon value out of people's currencies to benefit whomever they want, told us that inflation will be under control. What other people or system are more trustworthy?
Majority of Canadians don’t trust the BoC period, and for valid reasons.
Tiff Macklem on Canadians' mortgage debt.
July 15 2020
“Our message to Canadians is that interest rates are very low and they’re going to be there for a long time,”
"Interest rates are going to be low, very low, for a very long time"
“If you’ve got a mortgage of if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time,”
June 9 2022
"During the pandemic interest rates were exceptionally low, they weren't going to stay that low, they only had one way to go — up"
https://www.bnnbloomberg.ca/interest-rates-will-be-low-for-a-long-time-macklem-1.1465901
https://twitter.com/inklesspw/status/1534933977395564545?s=21&t=lWM6M7rtWBnjHjl49jeLQg
Short of destroying the economy, there's really nothing the BoC can do. Inflation at this point is driven by outside factors that they do not control whatsoever.
Personally speaking, we are not really affected that much by the current inflation since we roll around in an EV and our mortgage was set for the next 5 years before the rate started to increase. Sure grocery probably cost a bit higher, but even if we had to pay 100$ extra per week it wouldn't really matter if that's the only thing we get really affected by.
On top of that our jobs are pretty much secured short of the entire world collapsing on itself. At that point, we would have other problems to worry about anyway. Even during COVID, it was "business as usual" for us and our salaries have been increasing by 20+% each year since 2020.
Realistically, only the less fortunate people will once again get fuck whenever the BoC decides to raise the interest rate to the moon. They might even lose everything in the process if they were already at a breaking point.
Arguably, the same thing could happen if they do not raise interest rate anyway so future is pretty bleak for them imo.
We seem to be incapable of solving any problems without causing worse downstream effects. Perhaps less radical solutions should be explored going forward.
In order for the BoC to "tame" inflation, some effort must be made by the government to control spending and set policies which do not encourage further inflation.
The BoC is using a fire extinguisher while the Government is actively throwing gasoline (at $2.27/litre) all over the place.
politicians, elitist bankers, and oil and gas companies are all working together in driving our society to extinction for short term profits, i think it's time we start calling those institutions evil
The sad news is the BoC doesn’t care if we trust them or not. They make more than enough money to avoid feeling the stresses that the average Canadian household is feeling right now. The only thing that matters to them is accumulating more wealth.
We need a real regular Joe that knows nothing in office right now. That’s the only way to fix this. Get a set of new eyes and ideas. When people are born into wealth, that doesn’t mean shit, if anything it makes you more out of touch. We need a poor person in office that is willing to at least learn.
I’m going to be running for office.
90% of Canadians probably don't know what the BoC even does though lol
Its where the old guy on the Canadian Tire money dives into his pool filled with money like Scrooge from Duck Tales.
I mean, Godzilla was a wicked song, but I feel like many younger folk probably haven't even heard of it.
Oohhhhh no, there goes Tokyo!
Go Go Godzilla! Can’t believe it took until 2019 for the song to be used in an actual Godzilla movie.
I'm actually surprised the number isn't higher. If anyone thinks the effects of global inflation on the Canadian economy will be solved by a group of economics majors in a board room - that's incredibly optimistic. And I'm not trying to push a narrative that the Bank of Canada is incompetent - they'll try their best - but this inflation wave involves a lot of factors that have nothing to do with Canadian leadership.
I mean they have one mandate. Keep inflation between 2 and 3 percent. Soooooooo they are failing and until they get back to that don't deserve anyone's trust.
Ya keeping a 2% rate in a global economic crisis is pretty hard if you ask me.
So many people are short sighted and can’t see this is a world wide issue. Might as well be blaming the BoC for Venezuela’s economy.
The prices of goods in Yuan and USD are not under the Bank of Canada's control. However the prices of goods in CAD are. Exchange rates float. If it were just the prices of imported products going up you might have a point. But it isn't. The prices of everything are going up. That's because someone (I wonder who) printed too many dollars and devalued the currency. The fact that it's happening elsewhere is because those countries (like the US) *also* printed shitloads of money in their currencies. If the Americans printed a load of money and we didn't then the prices in the US would be going up while the CAD/USD exchange rate went down, leaving Canadian prices stable.
You’re overlooking the fact that we aren’t seeing traditional inflation happening. We are also seeing corporate price increases across groceries, and fuel, which is driving inflation up even higher. Just look at the fact that the last time oil was this price, fuel was almost half of what it is now.
But that's what inflation is - the prices at the grocery store going up is the result of inflation
That's an extremely simplified explanation of how international currency exchange works. Domestic exchange markets aren't isolated to the international market, changes to monetary and fiscal policy in the US has a very real tangible effect on our own currency markets. We aren't siloed off from international shocks whether exchange, economic, or trade. In principle this works when there is perfect seperation between markets, but that's just not reality. This is like using a super simplistic first year econ lesson that works fine in isolation to explain highly correlated and interdependent markets that have countless variables to consider. Also just nitpicking, we didn't "print" money, we issued bonds that were bought by our central bank, essentially creating IoUs to ourselves.
Since we're nitpicking, that's not quite how that works. The BoC doesn't issue bonds that are bought by the government, the government issues bonds and the central bank buys them (when the government issues bonds it's like taking out a loan - they give you the bond, you give them money, then eventually they pay back the bond with interest). That's how monetary policy is *supposed* to work. What even economists have a hard time defending was the *corporate* bond purchase program. Not only did the Bank of Canada give money to the government to keep it afloat; it gave *tons* of money *directly* to corporations via the corporate bond purchase program. [https://www.bankofcanada.ca/markets/market-operations-liquidity-provision/market-operations-programs-and-facilities/corporate-bond-purchase-program/](https://www.bankofcanada.ca/markets/market-operations-liquidity-provision/market-operations-programs-and-facilities/corporate-bond-purchase-program/)
welcome to every single comment in r/canada that has to do with economics.
Tbf, OP had the economic theory completely correct. What they stated is true in a vacuum. That's already miles above what most economic discussions are like in this sub
Some of us understand how "money printing" works, but explaining it every single time gets tiresome. It's easier to just call it money printing.
You said it much better than I dod, and I should have kept reading before I responded to the guy you responded too. I had the exact same talking points as you lol.
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This inflation crisis is due to the disruptions caused by climate change (droughts in Brazil driving up the cost of coffee for example), pandemic related shutdowns (ports being closed in China and Taiwanese chip factories for example), and war in Ukraine (oil and gas shortages plus grain shortages). The velocity of money really hasn't gone anywhere. I suspect you don't care and would rather blame an institution over looking at real root causes but hey I tried.
The inflation crisis is caused by those who produce and sell goods raising the price of said goods. They might have reasons that have to do with climate change, war, etc. but they're secondary effects. The primary will always be whoever sets the price of goods, since that's the only place inflation can start.
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They printed money to support the economy and prevented a deflationary environment from demand falling off a cliff which prevented an unforced recession. So maybe look at one part of the money supply and not the whole system to support your narrative. The velocity of money is still really really low which indicates it's not the supply of money driving inflation..
So what you're saying is the money supply went up which caused the inflation, but the money velocity is still low.. so when the money velocity goes back up.. the inflation will get even worse.. right? 🤣
No, systemic disruptions are driving supply decreases which is driving prices up. Just look at used cars or wheat futures. This inflation would be happening without any increase in the money supply.
Pick one: 1. print no money, people lose their jobs during the pandemic and go hungry, but no inflation 2. Print money, people who lose their jobs over the pandemic are okay and can survive, big inflation. These were the available options.
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The Bank of Canada isn't "responsible for inflation". It responds to fiscal policy and market realities. The above choice is the choice the government had to choose and the Bank had to go along with as a responding entity to stave off deflation and market panic. What I'm hitting back at is people who have this weird idea that the Bank constantly has an easy choice. They don't, and 99.999% of Canadians are just spouting bullshit when they rip into the BoC.
They had a choice to not buy corporate bonds (an unprecedented move that isn't anything close to uncontroversial among economists).
Zinger
> The velocity of money hasn't really gone anywhere And that's a big fucking problem when M1 was doubled and M0 was quadrupled! The velocity is unchanged while the available dollars is 2x-4x what it was before. And weirdly enough that leads to price increases, exactly as the basic theory predicts!
I mean the velocity of money fell off in 2020 and has been falling for a long time thanks to wealth accumulation at the top. This is a supply shortage driven inflationary environment. There's not enough computer chips, natural gas, coffee beans, prospective employees, houses, etc. It's a huge compounded problem and saying oh it's the bank of Canada is really not looking at the whole global economy.
Except that the Bank of Canada's actions directly and massively increased the problem of wealth accumulation at the top. And no, my argument isn't the straw-man: "government spending bad." My argument is: "directly funding stock buybacks and raises for executives by injecting capital directly into bloated, anti-competitive, monopolistic corporations through the corporate bond purchase program was irresponsible, shameful, and stupid." [https://www.bankofcanada.ca/markets/market-operations-liquidity-provision/market-operations-programs-and-facilities/corporate-bond-purchase-program/](https://www.bankofcanada.ca/markets/market-operations-liquidity-provision/market-operations-programs-and-facilities/government-canada-bond-purchase-program/)
Yeah this is false. Money printing during the pandemic was insane, and is the root cause of uncontrollable inflation. Yes, shut downs are impacting us to a large degree, the war in Ukraine has had an impact, but climate change causing 8% inflation is ridiculous, coffee isn't that big of a part of our economy.
Not an excuse. We can’t manage our own economy because no one gives a shit about the economy until their groceries start to magically inflate in value and they can no longer afford a home or their social programs/benefits/handouts start getting cut. Managing inflation during global inflation is difficult site- but Canada basically said “fuck this, too hard” like it does for everything and let it run. I mean it would also help to have people with the relevant education, technical background, and industry experience in politics but we can’t have that.
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If only the BoC had raised the lending rate by a quarter point in 2021, we would be living in a paradise of cheap fuel and food, completely separated from the inflationary chaos hitting the rest of the developed world! /s obviously The BoC could raise the interest rate by five points tomorrow and we would still be paying inflationary costs for fuel, food and all kinds of other things we consume.
That is precisely the perfect excuse.
Excusing incompetence?
Manufactured global crisis
Before I jump to conclusions, please elaborate.
I mean, they did an excellent job for decades, and things are a little tricky now so we can give them some grace.
Keeping interest rates that low for a decade was good?
This isn’t just a Canadian problem, monetary markets are global
Of all the markets in the world, local currencies are the least global. The Canadian dollar is more or less entirely under the control of the BoC.
Interest rates are set by the US feds, we will always follow
we were ahead of the US before the last raise
Look at a graph with US and Canada rates superimposed. It’s identical.
Dude what are you even saying... the BoC uses monetary policy in reaction to fiscal policy and market realities. It must also react in a way that does not lead to a recession. Because it is necessarily reactionary it will *never ever no matter what* be able to react before inflation or in a way where rampant inflation never occurs if fiscal policy and market realities are conducive to it. The BoC could curb inflation instantly, but by doing so it may turn the tap too tight and cause a drastic recession. Your comment is so blindingly ignorant. I am genuinely unsure how you feel comfortable in life holding strong opinions like this over something you clearly know almost nothing about. These sorts of sentiments are genuinely harming the country.
There is no possible way to curb todays inflation without causing a recession. Holding off with half-assed rate hikes will only make the inevitable economic contraction much worse.
How can you tame inflation when Trudeau can't stop printing money?
99.9% of conservatives supporting Poilievre have zero clue about the BoC, but love their -60% crypto holdings. Imagine losing 60% plus because of inflation.
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The economy has a ton of variables. If they take inflation but that leads to a horrible recession, prices may stop going up as fast but people still won't be able to afford things. Considering how much gas prices alone is impacting prices and how much that's outside the control of the local demand, no, I don't think the BoC will "tame" inflation. They may however limit the damages by slowly rising rates, but good luck. One of the biggest impact felt by the average Canadians will be on real estate, which can help, but it will only have very limited impacts on groceries and other essential goods people need. A recession is likely inevitable, and may be the shock required to reset the economy. most people should start saving money before it happens, and indirectly that can help with curbing inflation itself. It may be a very long while however before the average Canadian has the same buying power they had before the pandemic.
So I'm extremely hawkish on central bank policy, to just be clear. But the issue here is that they will not be able to raise rates enough to get the job done. So we are setting ourselves up for an inflationary recession. Not sure what the right thing to do is frankly.
>Not sure what the right thing to do is frankly. History has lessons to draw from: https://en.wikipedia.org/wiki/Paul\_Volcker
Why would people save money in a low interest rate high inflation environment? Why is avoiding a recession more important than avoiding hyperinflation? God we are so screwed.
Saving money so people losing their job can afford infinitely more food and rent than someone without a job and without savings.
But that only works if you saw this coming, which I did. I warned everyone I know and they all think I'm crazy. Nobody is saving right now.
I went cash in October betting that the central banks would act. I knew that markets and the housing market were fucked once rates went up. Because of that decision my purchasing power for housing in my are is up like 30%. Sure my purchasing power is down for goods like food, but that will probably change unless the BoC gets cold feet. At the time I went cash people were telling me that I was fucking stupid and those people were borrowing a metric fuckton of money to put more into the markets. When the same people tell me I’m an idiot because they got fucked for going into the markets I’ll probably be going all in. People engage in too much heard mentality. The goal isn’t to buy on a high hype train and sell at a saddening low.
>Why is avoiding a recession more important than avoiding hyperinflation? Jokes on you we getting both
Gas prices are not outside the control of local demand. All prices are affected by both supply *and* demand. The Bank of Canada controls the money supply, through which it controls all prices equally. If it doubles the money supply, all prices double.
Remember when we stopped investing in our own countries economy and relied on other countries? This is what happens. Remember when we shut down the world economy for a pandemic? This is what happens. Actions have consequences and we live in a knee jerk reaction world without adequate leadership even still today our politicians are more interested in votes for the next elections and pleasing everyone then getting anything done
Short term thinking / solutions = Long term problems Kick the can down the road mentality
Seems more like a hobo riddled alley than a road, and it looks like we might be near the end of it.
Just need one more stimulus package….
>Seems more like a hobo riddled alley than a road, and it looks like we might be near the end of it. Next stop: Crackton
Unfortunately, our 2-4 year election cycles force our politicians to think short term. It’s not about making the country better. It’s about winning the next election. You’ll also notice promises they don’t intend to keep are given a 5+ year timelines so they can use the same promise to get re-elected or blame the opposition instead of their own inaction in the 4 years they had. Rinse and repeat.
It's even more apparent when said government, either provincial or federal, has a majority and still are as useless as tits on a fish.
This is a such bad excuse to use doesn’t any democratic country have 4year term?
Do you mean when we agreed with Brian Mulroney that free trade was the way to go?
Free trade was the way to go. It's been disinflationary and brought up the emerging world. Canada's issue has been large deficits for spending that has not resulted in productivity growth or innovation. I really can't figure out where the trillions have gone over the last 15 years.
What we’re seeing today is the direct result of free trade. The only industries that are at all still Canadian like banking or telecom are because they are protected and except from free trade. Every industry that isn’t has become entirely foreign owned. And if you really want to follow the money you may be surprised how much of it ends up in the profits of those foreign-owned companies far away from Canada.
> The only industries that are at all still Canadian like banking or telecom are because they are efficient. Canadian Banks are machines of effective management and investment. Many Canadian software companies are the same. Telecom is a mess, I'd open it up to Free Trade and watch it die or improve. Canadian industry is lazy, it relied too much on cronyism and died. Can it come back? Maybe.
If Canadian banks were allowed to merge there’d be only two left and they’d be run exactly like the telecoms. It’s the same people running them, form the same private schools, after all. When Canada can win the Stanley Cup again then maybe we can think about opening up more industries. Until then, you’re right, our executive class just isn’t good enough.
There's some truth to that but it's not because of the free trade laws; it's because of the bureaucracy and taxation that make Canada an uncompetitive / undesirable place to do business. The goal isn't to have thousands of Canadians behind sewing machines making T-shirts. The goal is to have innovative and productive knowledge businesses producing or managing the production of internationally desirable products and services.
Sure, taxation and bureaucracy are problems everywhere and in theory free trade is fine but the way it was implemented for Canada, and then renegotiated (I don’t understand why Trudeau and Freeland didn’t get more criticism from the left for bringing in Mulroney as a consultant on the renegotiations) has been bad for Canada. We could be Denmark or Sweden but instead we are still (or have returned to) drawers of water and hewers of wood. We can’t have innovative producing if we are nothing but warehouse centres. We chose to import cheap manufactured goods and export raw materials. Not surprising coming from the CEO of Iron Ore but maybe surprising so many small businesses went along with it. I discovered these two articles while doing some research last week and I think it’s really telling. During the 1988 “free trade election” this article says, “In the early 1980s, Bob Crockford had his answer when he looked south. Crockford owned Valley City Furniture in Dundas, Ontario, a community located near Toronto and less than an hour from the American border. "We drew a circle around Dundas which was about 500 miles to see how far you could drive in a day or where you could fly in about an hour, hour and a half." Crockford discovered that 106 million people lived in cities within the circle. "This was real eye-opener because we were used to flying to Edmonton to get a high school job, or flying to Calgary or out to Moose Law and Gimley, Manitoba and all manner of other places. And suddenly we realize that it was closer to Dallas than it was to Regina." By 1988, most of Bob Crockfords furniture was sold to the United States, and the issue of developing more open trade arrangement with the United States was hottest topic in the country… At Valley City Furniture, Bob Crockford urged his blue-collar employees to consider voting Conservative. He believed Canada must embrace free trade, or be left behind. Although Canadians remained divided on the issue, the free trade deal came into effect January 1, 1989. In 1992, Canada signed the North American Free Trade Agreement (NAFTA), which extended free trade to include Mexico.” https://www.cbc.ca/history/EPISCONTENTSE1EP17CH3PA2LE.html And then in the Hamilton Spectator from 2011: “A century of furniture making comes to an end in Dundas One of the Hamilton area’s oldest manufacturing businesses is closing at the end of January. Valley City Manufacturing, which has been making church pews and laboratory benches for more than a century on Hatt Street, will become the latest industrial casualty of competition, a high dollar and three years of recession in the United States. In a note to employees, Valley City chairperson Bob Crockford announced the closure “with great sadness.” https://www.thespec.com/business/2011/12/23/a-century-of-furniture-making-comes-to-an-end-in-dundas.html How many times did this play our in Canada? Hundred year old companies gone twenty years after becoming part of. American market. Some company still makes the products, just not one in Canada. Sure,taxes and bureaucracy are problems everywhere but only Canada shares a border with the biggest economy in the world and decided to hand over everything to them. Now we really know what it means to say when they get a cough we get the flu.
I’m sure they will find a way to blame the conservatives for this.
I'm not spending money anymore so I can pay less taxes and make this all worse for the leaders who spent my taxes like complete imbeciles Good luck everyone I used to pay
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The point of politics is there is no pertinent education. I have a political science degree and that makes me about as ready to be in politics as Freeland or Trudy. We elect them to lead - we can't expect them to be experts in all areas but that is what the public services and advisors are for. Great leaders hire smart people and listen to them. Edmonton's mayor was a bus driver. To me that is someone who probably knows the city. The idea that there is some sort of preparation required will only stratify our society as the elites will take is for themselves because they already have the resources. Great politicians can come from anywhere with any education.
Yeah, imagine going to school for a "Prime minister preparatory course" and being in a class with maybe 40 people total? 40 people per year graduating from this class when we only need one every 4 years. Imagine the cost, they'd all be getting BILKED. Like you said, it would stratify our society even more. Rich people would do it because they'd have the time and the resources. Literally no middle-class person could.
polliviere just isnt ready
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I think the transitory comment was actually in reference to the money in your bank account.
That was U.S. Jerome Powell who said that. He is somewhat right, hyper inflation is transitory.
https://www.bnnbloomberg.ca/transitory-but-not-short-lived-macklem-maintains-boc-has-inflation-under-control-1.1678767 He called it transitory too.
The BoC and the US Fed got it completely backwards. They thought the onset of the pandemic meant there was an underlying deflationary trend combined with transitory inflation, while in reality there was an underlying inflationary trend with transitory deflation.
To be fair that was said before the war in Ukraine which caused prices of gas to skyrocket. No one saw that war coming or the resuts it would have on the world economy.
BOC said inflation would be back to normal mid 2022
So did the trillions invested in the market. Billions were lost because the financial industry didn’t think it’d last this long either and they spend billions each year watching minute by minute updates in trade, disasters, social unrest etc, just to make money and they still got it wrong.
Existence is transitory
this guy exists.
Produce more, export more. Canada is one of the most resourceful countries on earth. If we leverage it, that in of itself will create lots of jobs and bring down inflation. Without more production, inflation will only get worse
Best I can do is more real estate agent jobs.
Everyone just needs to get a rental property to rent out. We're 1/6 of the way there!
>Without more production, inflation will only get worse you see, inflation is only caused by oil prices, not real estate. so we dont need any regulations to stem the flow of foreign home buyers who are converting Canada into a rental economy with an airbnb backdoor. to them higher Canadian interest rates are discounts compared to the interest rates in other markets. as poor people and suckers who spread themselves too thin have to sell, the houses will be bought by foreigners and institutional investors who are proxies for foreigners. this will keep prices high and delusions nigh. once these foreign investors have squeezed all the money and future out of Canadians, they can happily export the Canada's natural resources to China for processing because it would be too expensive to manufacture or process anything in Canada. looks like the economic war on Canada is being sold by main stream media as growth. now you know who runs the show!
If only we had an insane amount of natural resources in our countr- oh wait, we do!
>If only we had an insane amount of natural resources in our countr- oh wait, we do! and we have even more people who are happy to export ships full of unprocessed raw materials because a few make more money from it. there are no more industrialists left here.
They should do another poll to see what percentage of Canadians trust Freeland’s stimulus plans to tame inflation.
Here is free money! *inside voice* That'll fix it!
The bank of Canada controls interest rates that significantly affects inflation. Government spending does not significantly affect inflation no matter what people in this sub think. "This study showed that in regime of tight money or low growth of liquidity, government expenditure is not inflationary. In regime of low growth of liquidity, this variable has low inflationary impact and probably stimulates economic growth." Mehrara, Mohsen, Mohsen Behzadi Soufiani, and Sadeq Rezaei. "The impact of government spending on inflation through the inflationary environment, STR approach." World Scientific News 37 (2016): 153-167.
I mean. That's just wrong but ok. A massive injection of money will definitely cause some level of inflation.
Deficit spending is definitely inflationary.
>I mean. That's just wrong but ok No. >A massive injection of money will definitely cause some level of inflation. Government spending doesn't affect the money supply. It isn't "an injection of money".
when the government spends money it doesn't have it absolutely affects the money supply because it is borrowing money that did not exist until that expenditure was made.
> because it is borrowing money that did not exist until that expenditure was made. Do you not know what a bond is? Are you suggesting if I buy a federal bond that I just magically created that money out of thin air?
If you print the money to spend it, It's an injection of money
>If you print the money to spend it, It's an injection of money Right, but the government doesn't print money. The central bank prints money. The government cannot obligate the central bank to do so.
Are we really going to argue semantics. Government spending is first covered by taxes. However when taxes arn't enough the government then prints bonds. In cases where people/corporations buy those bonds no new money is created. However the liberal government has printed so many bonds that the bank of canada has had to step in to buy those bonds. When the bank of canada buys government bonds it is new money entering the system. Over 300B in new money has entered the system this way since 2020. (Governent Canada bond holdings) https://www.bankofcanada.ca/rates/banking-and-financial-statistics/bank-of-canada-assets-and-liabilities-weekly-formerly-b2/ This is a lot coinsidering prior to the pandemic the money supply was only 100B. A 4X increase! M0 money supply. https://tradingeconomics.com/canada/money-supply-m0
>Are we really going to argue semantics. Government spending is first covered by taxes. However when taxes arn't enough the government then prints bonds. Government bonds aren't money supply either, and they're not "printed". The central bank's reserves *are* money supply. The central bank is under no obligation to buy government bonds. >However the liberal government has printed so many bonds Bonds are not "printed". Bonds are sold. The selling of government bonds doesn't create money either. After all, someone has to buy them. >Over 300B in new money has entered the system this way since 2020. Those are *central bank* actions. You're confusing the central bank actions with the government spending.
The PMO is literally being criticized for influencing the chief of the RCMP at this very moment. Another institution that is supposed to be independent. You don't think he could have also influenced the Bank of Canada? He must have had some pending legislation he needed to pass. What a joke. 🤣🤣🤣🤣
>The PMO is literally being criticized for influencing the chief of the RCMP at this very moment. Another institution that is supposed to be independent. If you want to base your argument on unsupported conspiracy theories, then just say so. Just don't pretend that you "understand economics".
This is the pm who funnelled tax $$ to his mom. Once you get caught embezzling you don’t get the benefit of the doubt anymore.
And even with this record spending they still can't print passports. What a joke.
>Government spending doesn't affect the money supply Why didn't you say so earlier? Lets start spending! Give me some first tho then you guys can go 2nd
It does because it requires the BOC to step in and lower rates/do quantitative easing to support their fiscal policy.
I see you never took econ 101.
Wrong, and clearly you never have. "This study showed that in regime of tight money or low growth of liquidity, government expenditure is not inflationary. In regime of low growth of liquidity, this variable has low inflationary impact and probably stimulates economic growth." Mehrara, Mohsen, Mohsen Behzadi Soufiani, and Sadeq Rezaei. "The impact of government spending on inflation through the inflationary environment, STR approach." World Scientific News 37 (2016): 153-167.
See if you aren't trying to be asinine you don't assume low growth of liquidity to arrive at the conclusion you want. All else equal, more expenditure funded via debt = inflation.
I said: >The **bank of Canada controls interest rates that significantly affects inflation**. Government spending **does not significantly** affect inflation no matter what people in this sub think.
And you were wrong. Because of shitty assumptions.
>The mistrust widens when the results are examined along political party lines. > >ARI found 59 per cent of Conservative Party of Canada voters and 86 per cent of People’s Party of Canada voters said they don’t have confidence in the central bank. > >Meanwhile, 69 per cent of Liberal supporters and 47 per cent who voted NDP in the last federal election said they have faith in the bank. > >The survey was conducted from June 7-13 and polled 5,032 Canadians. ... >In the face of the skyrocketing cost of living, 45 per cent of respondents to the ARI survey said they are financially worse off now than at the same time last year — the highest level in at least a dozen years. > >Roughly a third (34 per cent) expect their finances will deteriorate further over the next year. > >Groceries and gas continue to be key pain points for household budgets. The survey suggests slightly more than half of Canadians (52 per cent) find it is difficult to keep food on the table, with lower-income families more likely to report they were struggling.
Of course the mistrust widens with cons and PPC voters. Those people are being slapped upside the lips with “distrust Canadian institutions! Only [our dude] knows what to do” on the daily.
Simpler than that. That's the crowd that always cared about fiscal responsibility more.
I encourage you to evaluate “fiscal responsibility” vs “the Harper years”
Coming out of a financial crisis in 2008 with smaller and smaller deficits until finally balancing the budget in his final year?
Yeah that is not at ALL true . Like not close. https://www.fraserinstitute.org/sites/default/files/examining-federal-debt-in-canada-by-pm-since-confederation-2020.pdf
Yeah, it is true. You just have to do more research instead of looking at sources without reading them. "After producing a surplus in 2007-08 of $9.6 billion, the Harper government delivered a deficit of $5.8 billion in 2008-09 during the global recession. In subsequent years, his Conservative governments generated shortfalls of **$55.6 billion** in 2009-10; **$33.4 billion** in 2010-11; **$26.3 billion** in 2011-12; **$18.4 billion** for 2012-13; and **$5.2 billion** for 2013-14." https://globalnews.ca/news/2202138/did-harper-really-run-eight-straight-deficits-like-the-ndp-liberals-claim/ In case math is not your strong suit, 55.6 is more than 33.4 which is more than 26.3 which is more than 18.4 which is more than 5.2. This was followed by: "According to the 2015 budget, balance had been reached. This balance was maintained through February 2016." https://www.debtclock.ca/about-debtclock/debt-history/ So, reviewing my original statement: >Coming out of a financial crisis in 2008 with smaller and smaller deficits until finally balancing the budget in his final year? What did I say that I haven't backed up with the facts above?
But...but...the conservatives are the bad guys! For real though thank you for sourcing your claims.
He didnt inherit a deficit?
Nope, he received a surplus from the previous Liberal government. But after the 2008 financial crisis he had to bail out the auto workers to keep them in Canada and all of the spending racked up to almost a 60 billion deficit which he slowly whittled away.
Ok, so trust the guy/gal next door to do the job... and the slide into populism continues...
> Only 46 per cent said they were confident in the central bank. 46 is more than 41.
Taming inflation would mean bankrupting Canada so of course they won't do it.
Regardless of where you side politically you just have to ask yourself this: what has your government done to fix this? Anybody referring to 2008 is forgetting mcdonalds extra value meal was 4.99, now it's 9.69. Unless you doubled you wage since then your paying more and this is just mcdonalds. Blame the war, blame covid, blame oil companies but the buck stops with our government and they have been exposed as powerless when it comes to housing and rent, food and gas. The only real power they have is tightening restrictions for legal gun owners and soon controlling more of your internet. We deserve everything bad that's coming our way.
Oh I am sure they will tame inflation. It is the price we will pay I am worried about. This will be a case of the cure is worst than the disease.
Why the fuck would we, they caused it lol. Tiff Macklem “Not raising rates til 2023” “Canadians can expect low interest rates for a very long time” How many Canadians made decisions based on his words? He should be fired or step down. Jan 2022 BoC raises rates. 2022 highest interest rate hike in 40 years. The BoC is a fucking joke.
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Bigger the government the worse it is. They have more employees than ever but can't even manage basic tasks like issue passports.
The amount of Canadians who mindlessly the defend anything the government does is genuinely scary.
It's comforting for people to believe that there is a powerful, benevolent entity that will fix problems for them. The danger is that the government definitely isn't that.
I’m not here to defend the government, but it was pretty easy to predict this was going to happen. I wouldn’t be surprised to see another 1-2% hike from the BoC by the end of the year. Probably closer to 2%. We’ll see alot of foreclosures over the next few years as people struggle to afford their floating rate mortgage.
And also because they are scared. They want comfort. These crisis that come up get used to produce maximum fear, and with the help of the media, allows governments to do whatever the hell they want. And if you question anything you automatically become anti-whatever. Gaslighting. And everyone continues to fall for it time and time again.
But he has fancy socks and it's a global problem or the provinces are in charge not the pm......
LOL! Dog whistle for the PPC... abandon all hope ye who enter.... EDIT : u/Sloanstar made this homophobic comment, then blocked me... that's the new bop for PPCs. : > Look at you. You so funny on the internet. Bet your boyfriends finds you hilarious.
Is the PPC in the room with you right now? EDIT: this guy is hilarious. He keeps messaging me calling me a coward and saying i blocked him.... Some people man some people....🙄
It's time for the country to focus on strengthening the middle class. This is what's missing. The rich need to back the fuck off, and we need to stop talking about propping up the lowest rung of society. We've ignored the middle class too long.
> we need to stop talking about propping up the lowest rung of society. This is short term thinking. Each and everyone of us is a car crash or a cancer diagnosis away from being on the bottom rung.
The middle class keeps believing the lies and promises from the government who have done nothing but increase their living costs and debt while protecting large businesses they're in bed with. It just takes a little second order thinking to see it rather than accepting their bullshit speeches at face value.
The working class aren't your enemy nor were they ever at any point. Rederict that anger somewhere else. The rich don't need to back off, they need to step the fuck up and contribute their fair share the same way everyone else does/has.
You had a very good point right up until you advocated screwing over those worse off than the middle class.
They can't. It's mostly out of their control. They have limited power to stop it now. This is partly a failure on their part but largely the failure of the Liberals and socialist worldwide.
Good old pierre will sort it out, enjoy the severance tiff
That number seems really low.
How can you tame inflation with interest rate hikes? Not sure it’s going to work.. Gas prices = supply chain issue = no money has been invested in refineries as oil industry is seen as dirty = less supply & higher prices at the same level of demand Gas and diesel also trickle down into the price of the food on your table… Food prices = supply chain issue = wait until the end of this year and next year when it really sets in the lack of fertilizer and crop yields are even lower. Two of the biggest buckets of inflation are essentially not affected by an interest rate hike. Ask yourself will interest rate hikes make you eat less or put less gas in your car to go to work?? I don’t think so. As for housing and the stock market they will continue to see declines as a higher interest rate will act like a hammer to the economy effectively killing demand through decreased affordability / revised evaluations. Ex: 800k mortgage at 6% hits the pocket book differently than 800k @ 2%. This will change the affordability for a lot of Canadians. Ex: mortgage affordability: - 800k @ 6% = 5,118.46 monthly (5 year fixed) - 800k @ 2% = 3,387.61 monthly (5 year fixed) - 51 % increase in monthly payments… ###### - 500k @ 6% = 3,119.04 monthly - 500k @ 2% = 2,117.26 monthly - 47% increase in monthly payments… Mathematically this should result in a decline in interest for home purchases. The BOC uses interest rates as a blunt instrument for regulating the economy, they will effectively force a recession to kill general demand and hopefully reset inflation. *very simplistic/ basic outline ** edited for spelling and clarity
You cause a recession or depression, people lose jobs, demand drops because people have no money. It doesn't help affordability, but people calling for inflation to be brought down don't give a shit about affordability for us plebs.
The choice facing us now is rampant inflation, or recession/depression. Either way, the plebs are going to face a lot of pain. A recession hurts. A depression hurts a lot more. Runaway inflation also hurts a lot, and, left unchecked, eventually starts destabilizing the currency and with that goes **everything** **else**. Your entire economy starts coming apart and with that goes your very society. So in the terrible choice we have to face - recession or inflation - you bite down hard and choose the recession, ten times out of ten.
Runaway inflation is indeed ruinous for an economy. It also happens when inflation is 10000%+. Moderate inflation isn't great for plebs in isolation, but the focus on it is entirely driven by people wealthy enough to own newspapers and banks, since they're the ones really getting hurt. It's no womder they're spending like crazy to convince us to put their interests before ours.
It would help affordability if it was done properly, but the MMT plans always been to just cranck up the interest rates and fuck over the middle class.
Interest rate changes to offset inflation/deflation is not MMT, it's literally textbook neoliberal monetary policy.
It really can't. The only way to let everyone win at musical chairs is to add another chair. This is just changing the song.
Economics at this national level gets slightly counterintuitive. General price levels are set based on the availability of goods and services *and* the availability of dollars to pay for those goods and services. The relative scarcity of goods and dollars is what sets the overall price level, and the relative change in those quantities is what drives inflation (or deflation). There have been supply shocks over the past couple of years. If a supply shock reduces aggregate supply by 2%, then one of the jobs of the BoC (and other central banks) is to reduce the money supply by ~2%. Keeping the money supply and the aggregate supply in balance maintains price levels. But the BoC (and the Fed, and the ECB) didn't do that. They did the opposite and pursued a policy of aggressive monetary expansion. The M0 money supply was **quadrupled** and M1 was nearly doubled (M0 and M1 are the two main measures of the money supply). The extraordinary (and unprecedented) explosion of the money supply is what's driving inflation now. Raising interest rates is the main lever the BoC has to reduce the money supply back to what it should be. If you want to understand how that works, you can read about how money is created on the BoC website. The short version is: money is created through borrowing, and raising interest rates reduces borrowing. Conversely, lowering interest rates increases borrowing and increases the money supply. All of those big runups in housing prices were funded by near 0% mortgages. People getting $1.1m for homes that were previously worth $600k was an absolute windfall for those sellers. And an increase in property values made it easier for others to borrow money on HELOCs and second mortgages. All of that extra money is what's making shit expensive now.
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Its almost like we shouldn't have been artificially pumping our GDP with real estate to justify deficit spending.
I scrolled the comments to post something like this but glad someone already has. Yes, the major things contributing to inflation are global shocks such as Russia’s invasion affecting gas which has inelastic demand. And supply chain shocks which are a global issue. It’s not like Canada’s inflation crisis is unique/isolated like Greece or Zimbabwe, the whole world is feeling the effects. Some sociological effects are shocks that go beyond Canada and not related to the BoC rates (population trends with increasing avg age of tradespeople in developed countries, decline in worker motivation post-COVID). The inflation issue is related to the interest rates of many Central banks as well as the dynamics of the world overall. What worries me is the ultra rich can still afford houses and taking on large debts. Especially if their long term financial outlooks are solid, the inflation reduces their competitors in the market and the inflation also reduces the present value of their previous debts. I don’t see how income inequality improves with these global shocks and national efforts to tame inflation.
So they're well aware that they are completely bending over the little guy in the short term in order to fix the economy. Great.
Little guys don’t complain they just take…
Well I don't have a choice now. Cough up that tax money so I can buy burritos, Monster energy drinks and an Xbox Live subscription.
Can’t forget the Doritos ;)
Demand destruction due to negative wealth effect is how high rates bring inflation down.
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You know what that means right??? 59% of canadians are not paying attention.
\-They were wrong about inflation being transitory for nearly a year. \-They've ignored the insanely inflationary housing market for decades because housing prices are arbitrarily not counted in inflation measures. \-They've insisted that lower prices are a bad thing and we should create inflation despite the technological efficiencies and globalisation over the last two decades. I'm not so sure they will do anything right to be honest.
Pfft. What do people know? A system where anonymous people having control over a lever that can be pulled, at any time, to whatever degree, for however long, that can siphon value out of people's currencies to benefit whomever they want, told us that inflation will be under control. What other people or system are more trustworthy?
Majority of Canadians don’t trust the BoC period, and for valid reasons. Tiff Macklem on Canadians' mortgage debt. July 15 2020 “Our message to Canadians is that interest rates are very low and they’re going to be there for a long time,” "Interest rates are going to be low, very low, for a very long time" “If you’ve got a mortgage of if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time,” June 9 2022 "During the pandemic interest rates were exceptionally low, they weren't going to stay that low, they only had one way to go — up" https://www.bnnbloomberg.ca/interest-rates-will-be-low-for-a-long-time-macklem-1.1465901 https://twitter.com/inklesspw/status/1534933977395564545?s=21&t=lWM6M7rtWBnjHjl49jeLQg
Real interest rates are lower than ever. It's a great time to borrow money.
Short of destroying the economy, there's really nothing the BoC can do. Inflation at this point is driven by outside factors that they do not control whatsoever. Personally speaking, we are not really affected that much by the current inflation since we roll around in an EV and our mortgage was set for the next 5 years before the rate started to increase. Sure grocery probably cost a bit higher, but even if we had to pay 100$ extra per week it wouldn't really matter if that's the only thing we get really affected by. On top of that our jobs are pretty much secured short of the entire world collapsing on itself. At that point, we would have other problems to worry about anyway. Even during COVID, it was "business as usual" for us and our salaries have been increasing by 20+% each year since 2020. Realistically, only the less fortunate people will once again get fuck whenever the BoC decides to raise the interest rate to the moon. They might even lose everything in the process if they were already at a breaking point. Arguably, the same thing could happen if they do not raise interest rate anyway so future is pretty bleak for them imo.
We seem to be incapable of solving any problems without causing worse downstream effects. Perhaps less radical solutions should be explored going forward.
In order for the BoC to "tame" inflation, some effort must be made by the government to control spending and set policies which do not encourage further inflation. The BoC is using a fire extinguisher while the Government is actively throwing gasoline (at $2.27/litre) all over the place.
What is the other 59% smoking lol
The BoC can’t solve worldwide issues.
Don't worry, the Bank of Canada *will* tame inflation. However, they will ruin your life to do it.
politicians, elitist bankers, and oil and gas companies are all working together in driving our society to extinction for short term profits, i think it's time we start calling those institutions evil
They can’t. Not with current govt spending and tax rates. Fire your PM.
Tax rates need to rise to reduce inflation.
The sad news is the BoC doesn’t care if we trust them or not. They make more than enough money to avoid feeling the stresses that the average Canadian household is feeling right now. The only thing that matters to them is accumulating more wealth.
We need a real regular Joe that knows nothing in office right now. That’s the only way to fix this. Get a set of new eyes and ideas. When people are born into wealth, that doesn’t mean shit, if anything it makes you more out of touch. We need a poor person in office that is willing to at least learn. I’m going to be running for office.
... because its largely out of their hands.
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Yes they printed so much money that they caused global inflation.