Inflation May 2022 | General financial discussion | Discussion forum

agit said

NOT temporary it is all over the world and the only way out is 2.0 version of Paul Volcker shock  

Agit is right ⬆ ... Canada and the DSofA (Divided States of America) are not alone in this. Runaway Inflation is now a 'Global' Problem ❗

One of the many examples from across the pond ⬇

https://www.ctvnews.ca/business/u-k-inflation-rate-hits-new-40-year-high-of-9-1-per-cent-1.5957842

And before it gets better ... it's gunna get Worse.

My Two Centavos,

Dean

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P.S.
A little history . . .

While Central Banks and governments screwed up by increasing money supply while ignoring inflation, these policies are being reversed. And long term factors, mitigating inflation, such as demographics, are still at play. It was clear this would happen but no reason for inflation to stay high.

if the economy cant survive on a miniscule BOC rate of say 1% then taking it all the way down to almost ZERO to squeak out yrs if 2-3 % growth was only delaying the inevitible and healthly washout. If they let it happen on the natural schedule the pain could have been smaller and normal. I still cant believe they didnt follow the stupidity of alot of the rest of world and take our interest rates to the negative. The people in charge of these central banks have encouraged too much poor bahaviour from governments, corporations, and people. Always looking for a way to spend tomorrows paycheque today!!

mordko said

Yes, but in the US and Canada money was being dished out for longer and in bigger quantities than was necessary. And the “easing”/zero rates carried on for too long as well. CBs kept telling us that the inflation was just an artifact of comparing against a low baseline in March 2020. And they did it for months on end. That fallacy lost them credibility but at least they have now admitted the error and started doing something about it.  

So much easier to judge history than the future ...

cgouimet said

So much easier to judge history than the future ...  

Especially for those who don't understand that money supply had nothing to do with it and can't even judge history correctly.

Bank of Canada has explained many times over the past few years that they were paying for those Government of Canada bonds with settlement balance credits and not currency. Settlement balance credits do not leave the banking system and cannot be used to purchase things like houses, food, or gas.

Back in the real world Central Banks themselves acknowledged they were wrong on inflation.

https://financialpost.com/news/economy/tiff-macklem-acknowledges-misjudging-inflation-pledges-to-act-forcefully-to-bring-it-down

And reasonably knowledgeable Harvard Economists like Larry Summers correctly predicted the impact of the third stimulus package in the US (with similar expert statements for Canada).

https://www.washingtonpost.com/opinions/2021/02/04/larry-summers-biden-covid-stimulus/

Russian invasion clearly impacted Eastern Europe and Germany but I am not sure what was the impact on inflation in N America. Russia makes up about 3% of the world economy and Canada didn’t trade with it all that much. Russian oil is still being sold on the world markets. Clearly there is some impact of all the sanctions but it might not be huge here.

This bout of inflation in Canada is a combination of money supply and supply crunch (eg continued Covid issues in China). The idea that doubling money supply has nothing to do with inflation is interesting. Still, I’ll go with Milton Fridman https://www.wsj.com/articles/inflation-surge-earns-monetarism-another-look-11655906400

cgouimet said

So much easier to judge history than the future ...  

yup.
No one knows at the time when to turn off the cash tap is proper. The thinking at the time is better keep the lifeline a little longer than risk killing what they try to save in the first place.
Most think inflation is the worst enemy, as thats from media highlighting the word all the time. However the bigger evil is depression / disinflation which is what global CB were ringfencing the economy from.