Inflation | Page 2 | General financial discussion | Discussion forum

I dont believe inflation will come down to the 1% level we have seen.
Every business hike prices to try to make up the "lost revenue" from the pandemic.
Those that does well doing the pandemic hike prices too just to "keep up" and not "lose out".
Price will go up 3% every year instead of 1%, esp once people "accept the pandemic inflation"
Restaurant prices are up 10% each year as real estate skyrocket. Even if real estate prices collapse, you wont see those prices come down either.
History tells us whether its economy boom or recession, price still goes up....

Whats up stays up 🙂

Vatox said

It sure is meaningful! I’ll be sure to let the CRA know that you don’t feel it’s meaningful and to leave out of your next year indexation increase. It’s going to be in mine though!  

Monthly numbers are not all that meaningful on a calendar year basis. 5-6 months of 'high' YOY numbers will be offset with months of YOY monthly numbers trending down later this year. We all know 2020 was a suppressed year for inflation for good reason. 2021 is making up for the slack in the economy in 2020 as it should and as we should want it too. The quicker we get an economic surge back to 'normal', the better off we will be.

By 2022, you will likely be able to 'average' the combined 2020 plus 2021 into perhaps 2% per year over the 2 years. IOW, the trend line from pre-2020 will continue with 2020 a pothole in the road and 2021 a speed bump....with smooth pavement returning in 2022.

Added: By way of example: 0.7% for 2020 plus 3.3% for 2021 would be rolling average of 2% for both 2020 and 2021.

Ya, the Leaves did great once the refs started playing for them!

Measly increases in OAS and 300$ token are nothing in the scheme of what the govt has given away this year, and spent.

Real estate is now unaffordable for young Canadians.

We are entering a period with high risk of hyperinflation and our savings being devalued. Hard to know what to do besides distract ourselves with Taranna-centric hockey

Saver-Mom said

{ YouTube video }

Watch Poilievre for a concise explanation of inflation and govt overspending

The video and the explanation are garbage. Inflation and money supply don't work that way.

Countries in Europe and Japan have tried for years deliberately to inflate their economies by printing money and quantitative easing. It hasn't worked.

Printing money and giving it to people so that they can pay the rent they were paying and buy the food that they were buying simply sustains the current demand for goods. As long as the supply for those goods is not disrupted, there will be not be serious inflation.

May 2011 Forbes article Money Growth Does Not Cause Inflation! has a more detailed explanation about the common misinterpretation of the relationship between money supply and inflation.

Printing and giving away money is the solution. It was the solution too when the Conservatives were the government during the 2008 crises.

It is not the solution only when people are not the government.

Those supply disruptions have nothing to do with the money being printed.

Lumber is scarce because the lumber mills have been shutdown by the previous drop in demand. Even when they are reopened, the mills are still not allowed to have as many workers as before in them because of COVID distancing, not because the workers have been lured away to a different career.

Ditto with the meat packing plants and farms.

Those COVID distancing restrictions will eventually be gone.

Some of those housing prices increases may not stick either. Once employers start demanding some of their employees come into the office regularly, those employees will start thinking of moving back closer to work.

CERB ended 8 months ago; it only paid 2000/month and was taxable. Anyone who could would likely take a better paying job. The mill work may be seasonal. .
For a balanced view, one would have to talk to some of their employees.
The problem isn't just one mill or a group of "lazy" employees. It's industry-wide.

CERB is still around, it morphed into Canada Recovery Benefit. Lots of folks choosing to take it, ask business owners & you'll hear.

Yeah, cool, sounds like printing whatever money we need for whatever we want is the answer then. Good thing after all these thousands of years our current governments finally figured it out - just print and distribute.

Alexandre said

It is good reading, but I am afraid the author makes different oversimplification. By starting with somewhat reasonable assumption that additional money injected by the government will not create an equivalent inflation that can be calculated through MV = Py assuming "V" and "y" are constant, he jumps to conclusion that no inflation will be caused by that new money.

Which is illogical.

Not at all. Increasing money M won't cause an increase in price P when the quantity of goods y increases as well. That the quantity or supply of goods y won't increase when money supply M increases is the error the article points out.

Furthermore, that increased money supply would even go into that equation and increase M is not always true. The increased money could be banked into savings accounts. The bank would then park the money into government treasury bills. That effectively returns the extra money to the government, creating no new demand for goods y in the equation, and no upward pressure on price P. That's likely what happens in countries like Japan where there are lots of super savers in the population.

Money doesn't chase goods. It is people who chase goods. If people don't chase goods with their money, then it doesn't matter how much money is handed out to them.

Printing money and giving it to people so that they can pay the rent they were paying and buy the food that they were buying simply sustains the current demand for goods.

Norman1, you just made very convincing argument in favor of Universal Basic Income.

It isn't. There is a big difference between (a) a one-time bridging of a short term loss in income and (b) giving lifelong income to those who had no such income before.

I agree, when someone says "Printing and giving away money is the solution" that sounds like a compelling argument for guaranteed income. And I don't see the difference between giving away hundreds of billions in a short period of time vs lesser amounts over a longer period of time, if the solution is money printing who cares? And advocates of guaranteed income say it won't cost much more anyway, once we shut down all the other forms of handouts.

Anyway analysis using federal debt number is kind of funny, totally ignores huge provincial debts, and municipal too. There's only one taxpayer for all levels of debt.

Bud, I've no idea what you're talking about, i.e. CERB etc went to everyone, not just common shareholders and real estate speculators.