Inflation’s coming – in time!

RYAN   By Guest Blogger Ryan Lewenza
.

The economic toll, among other things, of the global pandemic has been devastating. From what I read, the conversations I have, and what I see around me, it’s heart breaking to see so many people hurting during this scary and uncertain time.

Due to the economic damage caused by this pandemic, governments around the world have responded by providing unprecedented benefits and support to those impacted by this virus. And with all this increased government spending and deficits, central banks are ramping up the printing presses again, leading some to fear that much higher inflation (some are even calling for hyperinflation) will come and blow everything up.

For example, we’ve seen the Federal Reserve’s balance sheet increase from US$4 trillion to start the year to US$7 trillion currently. As a result of this monetary and fiscal stimulus, we’ve seen US money supply skyrocket. M2 money, which includes all notes in circulation and bank deposits and money market funds, has surged 23% year/year! My data goes back to the 1960s and the next highest annual change was back in the 1970s when it hit 13.5%. So just looking at this, many assume inflation is set to skyrocket.

US Money Supply is Rising at a Record Clip

Source: Bloomberg, Turner Investments

But money supply only captures one aspect of inflation. When looking at inflation we have to examine all the key areas including wages, commodities, and the things we buy like food, energy, electricity, etc. Focusing on the US, I reviewed all the key components of inflation and while food inflation is on the rise – the main thing people tend to focus on – many other key areas like energy and apparel are experiencing major price declines.

While I see oil prices recovering next year as demand rebounds, oil prices are likely to remain contained (i.e., $60/bl), keeping gasoline prices low. With unemployment still quite high, I see minimal wage growth pressure over the next few years. And I see pressure on residential and commercial rents until Covid passes. Basically, I see a number of shorter term deflationary trends over the next few years, which should help to offset the dramatic rise in money supply.

US CPI 12-Month Percent Change, Select Categories

Source: US BLS, Turner Investments

Looking longer term there are also a number of major deflationary trends to consider. Some include:

  • Globalization: The most significant deflationary force in recent decades has been the offshoring of jobs and manufacturing to China and other low-wage countries. Look at the tags on your clothing or the stickers on your new TV and odds are it was manufactured in China, Vietnam or Mexico, where through their low wages they can manufacture consumer products on the cheap and ship it back to us. There’s a reason why Walmart, Costco and Amazon are some of the largest companies in the world.
  • Technology: After globalization, technology has and will continue to be a major deflationary force. Technology helps to improve productivity (a good thing) but comes at a cost as technology has helped replace millions of jobs in the US and globally. Technology has led to “disintermediation”, which removes the middlemen or intermediary in areas like finance and technology. Think free trading from Robinhood and online purchases using Shopify’s online platform. And it will only get worse with automation and AI, which will have huge ramifications on the labour market and wages.
  • Demographics: The world’s population is aging and this has implications for inflation as older people tend to spend less and be less productive, generally speaking. According to the UN, by 2050, one in six people in the world will be over age 65 (16%), up from one in 11 in 2019 (9%).
  • Debt: Lastly, high debt loads can be deflationary as more and more capital goes to servicing the debt rather than being directed to more productive areas like investment.

So, while the large increase in deficits and money supply are inflationary, there are a number of deflationary trends, helping to offset the impact of the rising money supply. Basically, the simple thesis of higher money supply, leading to much higher inflation is not so cut and dry.

Given the deflationary forces that I’ve highlighted above, in the medium term (i.e., 3-5 years) I see inflation remaining fairly low and contained, but longer term I do see the potential for inflation to rise and potentially sharply, which could cause dislocations to the economy and client portfolios. One day we’re going to have to pay for this debt binge, but as a society we’re pretty good at kicking the can down the road and delay taking the hard medicine, hence why I see inflation as a longer term concern.

US Inflation Has Been Low for Years

Source: Bloomberg, Turner Investments

At Turner Investments we always try to take a longer term view and to help combat against the prospect of higher inflation longer term, we have included positions in the portfolio, which could benefit from rising inflation. These include our long held position of preferred shares (if inflation picks up central banks will have to begin hiking interest rates, which given that the Canadian preferred share market is dominated by fixed resets, they would benefit from this) and more recently we’ve started to introduce floating rate bonds and bank loans, which would also benefit from rising inflation and in turn, higher interest rates.

It never hurts to have some hedges in the portfolio!

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.

 

119 comments ↓

#1 Brenda Ovid on 09.26.20 at 10:11 am

What was Chinas Communist Party thinking when they discovered Wuhan Virus . Chinese corona virus must have been too good to pass up for the ambitious PRC. As it coincided perfectly with Golden Week China had no problem sending millions of infected travellers to every corner of the world. It must have seemed the perfect opportunity to take over.

https://torontosun.com/news/world/calamity-on-our-world-aussie-pm-says-world-needs-to-know-origins-of-covid-19

#2 Prince Polo on 09.26.20 at 10:12 am

Ryan – thanks for the early post. With robots displacing more and more people from the work force, do you foresee a “Terminator Tax” (trademark pending) to help pay some level of UBI to the masses? What will governments do when unemployment is 20+%?

#3 Doug in London on 09.26.20 at 10:19 am

My pet peeve about inflation calculations is it completely ignores housing costs. That’s fine if you live in some economically depressed town where the only business in town shut down years ago and housing is dirt cheap, but that’s not where most of us live. If housing were taken into account we would be back to the good old days of 1981 when mortgages were 20%.

#4 not 1st on 09.26.20 at 10:27 am

Money velocity is a major contributor to inflation, not just supply. I would bet for the near term people will be saving their dollars instead of recklessly buying stuff. So any inflation is likely going to be restricted to consumer staples.

Also, trump will kill globalization for good next term so theres that.

#5 not 1st on 09.26.20 at 10:30 am

Hammer (and sickle) time in canadas largest city under Tory.

Seriously, you guys voted this guy. There are handful of deaths due to covid everyday and this guy is going to bring the hammer down on the population.

I though Doug Ford was more right leaning. I have no idea what he is now. Authoritarian comes to mind.

https://www.ourwindsor.ca/news-story/10205774-mayor-john-tory-promises-to-bring-the-hammer-down-as-covid-19-infections-rise-in-toronto/

#6 Andrewski on 09.26.20 at 10:41 am

Great analysis Ryan. For those who continue to upgrade their skills and are willing to move to where the work is, or better still, can WFH, there’s less concern therefore less stress.
Read Spencer Johnson’s book Who Moved My Cheese, written in 1998, but very pertinent in 2020.

#7 Karen on 09.26.20 at 10:42 am

Why not focus on Canada, instead of using US data? We know the US is propping up Wall Street and the stock market. Will we always be the wanna-be on the other side of the US border?

#8 Drill Baby Drill on 09.26.20 at 10:54 am

High taxation is deflationary as well. Look to the devaluation of our the currency in order to make it easier to pay off the government debt.

#9 Ed on 09.26.20 at 11:01 am

It is pretty sad walking into Superstore and the only garlic for sale all originates in China.

#10 Catalyst on 09.26.20 at 11:39 am

Thanks Ryan – I think floating rate bonds make a ton of sense. I just hate prefs as an asset class but I also don’t own any baseball cards or nikes.

#11 Decel on 09.26.20 at 11:43 am

With all the articles touching the subject recently, I do have to wonder: what makes us so *sure* that inflation *is* coming eventually?

What differentiates -inflation wise- the US from turning into Japan where inflation seems like a fictitious idea. Japan has had the money-printing machine go Brrrr for a lot longer, and inflation has disappeared like the Dodo bird.

#12 the Jaguar on 09.26.20 at 11:45 am

Greetings Ryan. With respect to the Globalization issue:
I would be interested to know your thoughts on how Globalization and supply chains will be impacted as a result of the pandemic. This issue has been touched on briefly before, but with world oil demand down oil rigs are being shut in and the tight oil industry is unlikely to receive the previous level of investment. Do you think our world will become smaller, supply chains more regional, and if Mr. T is re-elected in November will more more big companies be told to come home from their tax havens, etc? And if more goods and services are sourced or produced locally won’t that have an impact on inflation? ‘Buy and eat locally’ was already gaining in popularity before Covid. One wonders if consumption patterns might be permanently altered. (?)

#13 Bezengy on 09.26.20 at 11:49 am

Corn $10 per dozen, 2 x 10 x 12 lumber $43.65, a roasted chicken on Bloor West $15.95 ( I’ve eaten bigger grouse), and many more items have already doubled in price. Many services need to increase prices due to having to deal with inefficient practices which is why a haircut costs $35 now. Free (unearned) money is been thrown around on things like a down payment on a new toy because it’s free after all, kinda like winning $100 at a casino, adding to the problem. How about a workforce that prefers not to work? Inflation is here folks, and will be getting a lot worse in weeks, not years to come.

#14 Barb on 09.26.20 at 11:58 am

#9 Ed
“It is pretty sad walking into Superstore and the only garlic for sale all originates in China.”
—————————

Exactly.
And a bunch of grapes costs $10 at SaveOn Foods, who by the way also sell Washington state (Chelan) apples for $2.49!
Orchards all around us here in the Okanagan!

#15 Tarot card on 09.26.20 at 12:10 pm

Thanks for the blog Garth
Interesting Analysis Ryan.
have we taken into account all the major factors?

We are so focused on what should happen rather than what will happen.

Ask yourself what caused runaway inflation in the 80s?
Unemployment is high today in only one or two sectors.
In the 80s it affected everyone.

Right now I see all the travel money that retired people spend being redirected into home improvement, hot tubes toys like RV everything is all in short supply.

I want to renovate my kitchen, I was informed they signed 30 contracts this week, I have to wait till February. I went to buy a hot tube, out of stock?
Is that demand or lack of supply
Forget about gym equipment none anywhere
There is a shortage of RVs.
Renovation guys are booking into January.

My long winded point yes you have lots of trend analysis and you predict this should happen, but will it happen as you think?

#16 Flop... on 09.26.20 at 12:12 pm

#187 LP on 09.26.20 at 11:47 am
#120 Flop… on 09.25.20 at 7:03 pm

Still get traumatized every morning watching my poop disappear in the opposite direction…
******************************

Simple solution to your trauma…close the lid before flushing, which you should be doing anyway. Much more sanitary!

F73ON

/////////////////////////

Hey LP, good to see you’re still chugging.

Yes, I do your recommendation, my line was purely for comedic value.

Ace GoodHeart reminding me that a year has 365 days and that Australia has a dollar was also funny stuff…

M46BC

“The Canadian dollar is not a global reserve currency. For perspective, have you ever heard of the Australian Dollar? No? Me neither. They have one though.”

“Instead, the taps are wide open, the money is flying out the door, billions per day now, almost 400 billion since April (there are only 365 days in a year, we are borrowing over a billion a day right now), and our government is just purchasing time in office, by bankrupting our country.”

#17 Steerage Steins on 09.26.20 at 12:13 pm

Beer prices are shocking… $10 pints!

#18 Chris Serran on 09.26.20 at 12:21 pm

WTF #11 yesterday

Yes Pierre P is the critic and it is his job, but that doesn’t make him a hero. My point is, if we could magically snap our fingers and have him as PM, what would he actually do differently? I say almost nothing. He says he would build pipelines – sure all the First Nations and court challenges would just disappear. He would create jobs – how? He would get the deficit to zero. How? I don’t like where we are either, and would like to see a bit more fiscal restraint, but the population would not stand for it right now. So yes, he may be doing his “job” but he is exactly the same as every other politician. If he were in power, I predict we would be in almost exactly the same position, and he would be doing almost exactly the same things as our current PM is doing. Until he shows me the detailed plan of how he would create those jobs and get that deficit down to zero, he is just a guy with a great voice who complains for a living. That’s all I’m saying.

#19 Wall on 09.26.20 at 12:55 pm

Young people who are very happy with the massive government spending do not understand the damage being done to their future.

#20 mike from mtl on 09.26.20 at 12:56 pm

Respectfully, those CPI figures are fabricated fiction. I don’t see any other outcome than inflation in ‘needs’ (housing, food, healthcare, etc) over ‘wants’ (consumer goods, most services). To boot for most of the 99% ‘needs’ side is a huge percentage of their expenses. Doable to not buy the latest iPhone, not so much to avoid housing inflation.

Of course this is all the CBs and politico fault. The Fed should have started raising rates in like 2011-2012 but that would have been no good for reelection.

Fed finally started in 2018 but the stock market took that as a sell sign, sold off hard, #45 complains wants ZRIP again, Fed back-pedals. 2020, CCP releases Corona just in time for Golden week, messes everything up, rates again at zero.

Barring some divine intervention, I can’t see rates ever being normal. I’m not very optimistic for the next decade, I’ll still be investing because what else is there?

#21 technical analysis?? on 09.26.20 at 12:57 pm

as much as M2 has gone up, Velocity has COLLAPSED. you ain’t getting the desired effect until Velocity turns up.

#22 I need a drink on 09.26.20 at 1:10 pm

Where the heck does everyone in TO get all this money…. time to tax this crap!

21 Bentley Dr., Toronto

Asking price: $1,249,000

Selling price: $1,402,500

Previous selling price: $551,000 (2011)

Taxes: $4,144 (2020)

Days on the market: One

#23 not 1st on 09.26.20 at 1:26 pm

Let me educate everyone on globalization.

The t shirt and plastic toy market will be made with automation right here on NA soil. If unskilled labour in china can stich underwear, so can high tech machines. That market is done you just havent heard about it yet.

Anything with a higher degree of skilled labor and more reliability required will be repatriated to the US using US capital, mexican labour and likely Canadian resources once we turf our tyrant who is still stuck in the past paradigm.

Thats where it is going and anyone can see that. Canada could make out like a bandit and ride this wave right out of our doldrums, but we have someone who shouldnt be running a lemonade stand in charge of the country and looks like there are no adults in charge of the asylum.

Canada has zero standing in the wider world without the US at our back.

#24 Kool Aid on 09.26.20 at 1:27 pm

Add a few parts deflation with a few parts inflation and voila, stagflation.

Preferred’s, well, I get it, if you’re a fiduciary you best protect capital in the portfolio.

Too me it does not make sense for even a small part of a portfolio as we see better opportunities elsewhere.

Seriously, the bond world is morphing rapidly, the disjointed rates and economy are not fully represented, proven defecto economic doctrine may give way new tools and mechanisms to remedy what is clearly an extraordinarily uneven economic landscape.

Sovereigns & their respective CB’s are analyzing new more unorthodox strategies.

Some believe (me included) that bond holders may ensue capital losses (which can be written down) vs sovereigns further spiking already exorbitant wealth taxes.

I think people need to closer examine value, ownership and the have a greater understanding of the durability of assets, for durability certain sovereign bonds get a pass.

The capital owners which deploy capital to purchase hard assets that produce cash flow will be the big winners.

As the 40 year run to ever lower rates continues, it is not the purchase of overvalue assets that will benefit the portfolio, it is the separation of valuable assets that can be separated from corporate or business entities that at a reduced price for best use, insolvency, bankruptcy and consolidation provided the basis for these major market cycles.

There will be many opportunities in the coming quarters.

Best of luck to all, keep safe.

#25 crowdedelevatorfartz on 09.26.20 at 1:32 pm

@#10 Karen
“Why not focus on Canada, instead of using US data?”
+++
Like it or not.
The Canadian economy is irrelevant on the World scale of things.

Interesting topic Ryan. Thanks.

#26 crowdedelevatorfartz on 09.26.20 at 1:34 pm

@#9 Ed
“It is pretty sad walking into Superstore and the only garlic for sale all originates in China.”
++++
Unfortunately Uighur slave laborer’s dont even get minimum wage.

#27 NewWest on 09.26.20 at 1:36 pm

#9 Ed and #14 Barb

So don’t shop for garlic at Superstore, or buy grapes. At least where I am, there is a thriving farmer’s market where you can buy all different types of locally grown garlic, including big ropes that will last you all winter if stored in a cool dry place. Tastes way better than the imported stuff. And locally grown apples are in season now, lots of different types, and pears and plums. You might even be able to find some of the delicious little Coronation grapes that they grow around here, dark and wine-y and sweet.

I get a community supported agriculture box for six months of the year that supplies me with a bounty of local food and veg. Right now there are lots of hard storage squash in the box, apples, onions, all of which will keep in my cupboards and fridge or freezer for a couple of months.

The other 6 months I grow stuff in pots (I live in a condo) and shop at the farmers market. I buy frozen berries from one of our local producers in Langley during the winter. No, it isn’t super cheap, but I am willing to pay a premium for locally grown food.

My friend in Yellowknife just harvested huge bins of potatoes and carrots grown in their yard. They have it in storage in the basement and will be eating off it until Christmas at least. I think if you put your mind to it local food can be sourced everywhere in Canada. It just depends on your priorities.

I grew up poor, but it was a blessing in disguise as we only ate local stuff – it was all we could afford. Apples from the Okanagan stored in the root cellar at my grandparents place, potatoes from the Valley or grown in our yard, cabbage, carrots. We picked berries to freeze, canned pears and rhubarb and made jam. Yeah, not the most exciting or exotic of menus, but there was something really nice about eating seasonally. That first bowl of raspberries picked fresh and eaten with my cereal, fresh picked corn, Transparent apples, stewed rhubarb with ice cream in the spring – when eating has that kind of rhythm you don’t take food for granted and I think you appreciate it a lot more.

I’m hoping that one good thing that comes out of this whole pandemic thing is that people are more aware of international supply chains and how easy it is for them to break. I hope that we look at places like California and consider how much longer they will be able to supply us with cheap produce all year round. And I hope we start getting back to some basics, like seasonal food and and knowing how to prepare and store it.

#28 CJB on 09.26.20 at 1:38 pm

Food is not expensive…we grow two gardens and pick fruit in the summer. Various veggies and fruit, frozen, last the entire winter. Meat is bought from local farmers with meal prep we can do $3.00 a meal for family of four. Good quality healthy food. Never shop at Costco or Superstore.

#29 FreeBird on 09.26.20 at 1:41 pm

#15 Tarot card on 09.26.20 at 12:10 pm

I want to renovate my kitchen, I was informed they signed 30 contracts this week, I have to wait till February. I went to buy a hot tube, out of stock?
Is that demand or lack of supply
Forget about gym equipment none anywhere
There is a shortage of RVs.
Renovation guys are booking into January.
——————-
Went trough same this summer. We got lucky with 2 trades (longtime client of one and friend of friend for painter) but for others incl counter provider were given same long wait time but were put on cancellation list after asking for one and worked btw other projects with other after offering to be flexible w dates/times incl off times and weekends. We did same with first two as thx for booking us within a month. If you’re able to be flexible it may work for you and can’t hurt to ask. Helps to admit from start ‘this may be a stupid question but…’. Im also finding a lot of goods out of stock and cos like Hudson’s Bay not responding (by phone, email, chat etc) on courier returns for online buys. We now have to drive 1hr x2 returning items to closest store. Warning before buyomg online from Hudsons bay and other stores. Check ahead. Good luck.

#30 Flop... on 09.26.20 at 1:51 pm

Got some Travel Porn in the mail yesterday, guess I can use it as a barometer to see who’s serious about having visitors over for dinner.

Brochure from Moab, Utah, arrived last week in quick time.

Last night Utah State one arrived.

Nothing yet has arrived from Colorado, that was ordered at the same time.

Earlier in the year I ordered a few that didn’t come, even though they said it was on the way, maybe because the Canadian address mean less chance of instant return on investment.

Biloxi, Mississippi, never came, have no real desire to go there, maybe just to pay tribute to Smoking Man for a week by taking up gambling and smoking.

Fort Worth, Texas, never came, been there before on a grand tour of Texas, but thought it might be good back up for a cheapie Spring Break.

In the Utah brochure that arrived last night, they had slipped in a glossy COVID sheet on what to expect on your travels, and how to keep safe.

This recommendation caught my eye.

Avoid crowded parking lots…

M46BC

#31 Diamond Dog on 09.26.20 at 1:53 pm

The top 2 drivers of inflation and hyperinflation is a drop in currency and/or supply/demand fundamental imbalances. In this context, our future is married the the currency future of the U.S. globally, and how our debt ratios compare.

A key supply/demand driver of inflation is a lack of competition from bankruptcies (supply side), the consequence of high unemployment and slowing economies (slowing demand) both domestically and globally. (currently at 10.2% in early Sept in Canada with viral winter coming) These factors in supply/demand will take time to filter through the system, but they will.

All of this being said, I don’t see hyperinflation in the near future. North American 2020 fiscal nightmares won’t be enough to do it. The chances go way up however, from 2025 and beyond. In my mind, what would cause hyperinflation is supply side shortages that I fear, would be more environmentally driven as global populations approach their peaks. Crop failures, weather on steroids… We saw environmentally driven shortages with wood and paper this year in commodities and we will see more of it going forward and we will visually see it. Continued deforestation and forests lost to fire. Entry into forests shut down routinely through summers extending into fall. Smoke in the air. Lumber yards with no lumber. Supermarkets with half empty shelves (crop failures, trade breakdown). When you see this and its widespread throughout the economy and its not demand side driven (sort of, domestic populations continue to rise), welcome to hyperinflation. Btw readers, don’t think this can’t happen within 10 years in North America on a broad scale of goods, certainly well within 20, we can count on it. Best guess is we lose our Arctic cap in 2023 and will see drama from there:

https://www.youtube.com/watch?v=kz6WxTH-p3o&t=383s

We will likely also see an influenza related pandemic in 2024 with the same contagion and fatality rate as Covid19, only killing more young people. Hyperinflation tomorrow? Not a chance. 5 years from now, its possible. 10 years from now, the fear that comes before hyperinflation will be widespread and global, so you tell me.

In a small effort to get back to topic, contrary to certain inaccurate opinions on this site, The U.S. and Canada (Canadian spending on par with the U.S., a nation we borrow all of our money from and do near 75% of our trade with, go figure, must be shear coincidence, right? It’s not. Best guess is there are pressures on Canada to spend this publicly borrowed money to support the dollar until the election is over) has spent and borrowed more money compared to pretty much all other governmental debt ratios. Don’t believe me, read it yourself:

https://www.cnbc.com/2020/09/21/european-debt-will-be-more-attractive-than-us-bonds-post-covid-economist-says.html

While European nations have their pandemic woes to be sure, they aren’t putting fiscal guns to their heads the way North America has. This shouldn’t be too hard to realize, The U.S. has had 7.2 million tested positive cases and 208,000 deaths, while all of Europe has had 4.7 million confirmed cases and 218,000 deaths. Europe boasts some 550 million people while the U.S is somewhere around 330 million. The U.S. has not only been harder hit, but has taken on higher public debt to GDP deficit ratios in response.

The U.S. federal government response has been “traitorous” for lack of a better expression. When Trump told Bob Woodward he knew the virus was airborne and a killer on parallel with the Spanish flu while running a nation that has the highest volume of flights in the world and in response Trump downplays the virus threat in every way he could, how can anyone say this man bats for the home team? How many trillions (never mind lives) did he cost the U.S. economy this year? Compare this cost with, say, China or Japan or South Korea and its not so difficult to see what could have been. Sure, there is an inexperience factor, but the federal response has been an ugly flop.

https://www.youtube.com/watch?v=LfIgjTrYYeQ

#32 Ace Goodheart on 09.26.20 at 1:55 pm

I agree completely insofar as discussion is of the US dollar.

The risk of devaluation is negligible.

However, in Canada, we have now blown right past the realm of structural deficits and we are now experiencing gross financial mismanagement at the Federal level.

We are entering into a debt spiral situation in Federal finances.

Our current Liberal NDP coalition of the willingly stupid and willfully blind are the equivalent of a six year old playing with a credit card.

If an adult doesn’t enter the room soon and stop what is happening, the financial mess being created will turn catastrophic.

There seems to be no understanding that a government has fixed expenses that it must meet in order to operate.

There is no grasp or concept of simple economic principles.

If someone doesn’t take the keys to the vault away from Junior soon, the damage will be irreversible.

#33 Handsome Ned on 09.26.20 at 1:55 pm

Your cover picture reminds of an apt joke. “Karen” spies her neighbor “Joe” leaving the pub. She chastises Joe about the time he spends there. Joe says I go everyday for 2 or 3 pints. That’s 20 bucks a day says Karen or 7000 per year. How many years have you been drinking there? about 20 says Joe. That’s 140 thousand, you could have bought a Ferrari with that.

How much do you drink says Joe. Never touch the stuff says Karen. Then where’s your freakin Ferrari asks Joe.

#34 Brass Rail on 09.26.20 at 2:10 pm

Ontario Schools 1 : 0 Ontario Strip Clubs

The way teachers moaned and strip clubs kept at it even with exposures of hundreds I would have not bet against strip clubs on this one.

Doug’s friend probably made a bet and to help him win he fixed the result, closing Strip Clubs and putting all the ladies on EI.

#35 The TRUMP Pandemic/Depression on 09.26.20 at 2:17 pm

This one’s a great one dudes… I will read again and again and see this one as timely considering both directional forces where each one counters the other and knowing governments all over the world are hungry for any types of inflation,,, perhaps they’ll continue to grow and grow the money supply until they begin to see what they want…

#36 Dave on 09.26.20 at 2:23 pm

Restaurant prices have sky rocketed….$18 appetizers a local family restaurant.

Appys, pints and atmosphere is the main reasons for going to a restaurant…main meals is a distant 4th. Sadly the first 3 are no longer worth going.

#37 Tripp on 09.26.20 at 2:27 pm

I have experienced rampant inflation in Eastern Europe in the early to mid-nineties. It wasn’t even remotely close to pre-WWII Germany, more recent Argentina, Zimbabwe or other hyper-inflation examples. Nonetheless, it is ugly, everyone gets poor and savers are punished with life-altering consequences. It generates nation-wide distrust and is a confidence killer.

Better let the housing bubble pop, rebuild the economy and produce something meaningful for our trading partners. There is no progress for Canada when we can’t even manufacture our own 3-ply masks, can’t find a shoemaker to replace a sole and even the garlic comes from you-know-where!

#38 Dogman01 on 09.26.20 at 2:37 pm

At the one minute mark he describes the “caricature” that is our Prime Minister. (made me smirk)

https://www.youtube.com/watch?v=k0eg_q8fCmA
Douglas Murray | Wokeness: the new Western morality

Best line “We have landed in this strange place, where women are exactly the same as men and also magically better”

IMO the failing aspiration to middle class (and the struggle to stay there) is the root cause of this identity group division, A general increase in wealth inequity and corresponding decline in standard of living for the majority of people in Western Society over the last 50 years.
Now what I am not sure of: Is this division into groups an effort to distract from the root economic problem (look Squirrel!) or is it a symptom of the economic problem.

#39 DON on 09.26.20 at 2:49 pm

#183 not 1st on 09.26.20 at 10:01 am
Right now the BoC is buying our treasuries to goose cheap lending for Justin. But that cant last forever. They are not the US fed reserve by a long shot.

So after you have added $500B in debt and now want to unwind that balance sheet that means finding foreign lenders because nobody in canada will be buyin Canadian bonds anymore.

So you are asking someone to take on our debt in a country where we have torpedoed our main industries and chased off investment in favor of green scams, intersectional identity and virtue signaling as our main exports.

Does anyone have any idea whats sort of a premium lenders would need to do that? Yeah it isnt going to be nice 2% interest rates. You will see something back in the range of 7% with a secular stagflation recession behind it.

Seriously who are the zombies that vote trudeau and singh? Did you fail grade 2 math?

************
I am with you until the last sentence.

People voted for Trudeau to get rid of Harper. And one day people will vote to get rid of Trudeau. It’s always about the context at the time and leaders becoming arrogant. Less we forget.

Other thoughts:
COVID is exposing both our economic and societal deficiencies.

Back in April we were told that Covid would be gone by mid to late summer…just had to google the Spanish Flu to see otherwise. Don’t get me wrong I like hopism just not fake hopism in light of the facts.

Hopefully all the effort being put into the development of a vaccine will work.

#40 cuke and tomato picker on 09.26.20 at 2:54 pm

So the liberals in BC would get rid of the speculation tax and put a tax on the repeated contract sale of condos that have not even been built. Well why not do both? I sort of get my chuckles of some people who have properties on south Vancouver Island who winter here from another province and all they do is complain about our sales tax, price of gas our going green government etc. I always ask why are you here ?

#41 CrowdedFlopTurnerNationfartz on 09.26.20 at 2:54 pm

Globalization? boomers sold us out long ago.

#42 DON on 09.26.20 at 2:57 pm

Ryan

I was walking through the gocery store and noticed the price increases on canned food. Fast food and restaurant prices going up. Gas is ticking down after the summer driving season.

There still seem to be job ads…not alot. What is everyone else noticing?

#43 Blair on 09.26.20 at 2:59 pm

If inflation goes up, do bonds become a good investment?

#44 not 1st on 09.26.20 at 3:08 pm

The CERB crowd can sit there any gush over daddy Trudeau and the UN and WHO.

West is moving on from this abusive federation, aligning with our best neighbor as it should be.

What a surprise an infrastructure project of merit got some backing. Something that might pay the bill instead of sustainable bike paths.

– Trump approves Alberta-Alaska rail line project; line would move oil, other resources

https://www.msn.com/en-ca/news/canada/trump-approves-alberta-alaska-rail-line-project-line-would-move-oil-other-resources/ar-BB19s5nR?ocid=msedgntp

The A2A line would transport oil, as well as grain, ore, and other containerized goods.

#45 justwondering on 09.26.20 at 3:19 pm

…more recently we’ve started to introduce floating rate bonds and bank loans, which would also benefit from rising inflation and in turn, higher interest rates… -RL.


Hi Ryan, what are the examples to these type of ETFs? and what was your timeline foreseeing it?

#46 Do we have all the facts on 09.26.20 at 3:24 pm

To someone not employed as a spin doctor low inflation, low wage growth, low interest rates, low GDP growth equates to poor economic prospects. It doesn’t look like foreign interests are lining up to buy Canadian bonds these days so the investments Justin seems to be so proud about are ending up in the Bank of Canada not in any improvement in the Canadian economy.

Hopefully once the economy begins to pick up there will be increased employment and upward pressure on wage increases. Modest inflation is a sign of a healthy economy while borrowing $350 billion to keep the economy from collapsing is an indication of extreme weakness.

Encouraging first time home buyers to purchase overpriced homes will have a minimum impact on productivity. What we need are programs that encourage Canadians to invest in productivity not programs that discourage investment in our economy.

If our government can guarantee the purchase of mortgage backed securities they should be able to guarantee investment in expansion of the Canadian economy. Their priorities seem very mixed up these days.

Time for a change in direction!

#47 zoey on 09.26.20 at 3:24 pm

I always get a laugh when I read about inflation/deflation and how housing is so conveniently left off the list…but the loaf of bread doubling matters.

#48 JSS on 09.26.20 at 3:38 pm

Hi Ryan, REITs like Riocan are dirt cheap. Would REITs Be considered like a hedge to inflation, similar to preferred shares and floating rate bonds? Thanks

#49 Re elect NO ONE on 09.26.20 at 3:48 pm

DELETED

#50 MF on 09.26.20 at 3:49 pm

#19 Wall on 09.26.20 at 12:55 pm

You mean those the same young people who were marching in the streets in 2008 during Occupy Wall Street to protest the trillion dollar bail out in the states?

Were you advocating for fiscal contraint then too?

Occupy Wall Street was a warning of things to come worldwide. Problem is no body listened. So here we are 12 years later with zero interest rates and debt everywhere.

Is the whole thing really the fault of young people?

MF

#51 espressobob on 09.26.20 at 3:56 pm

Inflation and higher taxes are a good enough reason for this investor to stay the course.

After taking some profit off the table from time to time it just makes sense to buy rate reset prefs with some of the proceeds.

Also keep lots of cash on hand when Mr market is having a temper tantrum. That never gets old.

And yes, in a couple of hours I will change into another person.

#52 Flop... on 09.26.20 at 4:05 pm

I remember running this howmuch article last year with it’s visualization in the link.

Times are tough.

When the going gets tough, the tough get copy and pasting…

M46BC

Visualizing the Purchasing Power of the Dollar Over the Last Century.
“It’s no secret that $1 now will get you less than it would 100 years ago, but just how much has the purchasing power of the U.S. Dollar decreased over the years? To illustrate this, we created a visualization that demonstrates the rise and fall of the dollar since 1913. Using this graphic, we can see how inflation and changes in the Consumer Price Index have decreased the dollar’s purchasing power over the last century”

“Though there are outliers, the purchasing power of the dollar has steadily decreased since 1913. This is due to inflation and the continued increase of the Consumer Price Index over the years. As demonstrated by the data, dollar purchasing power has a negative correlation with the CPI. As the CPI increases, purchasing power of the dollar decreases over time.
Inflation is the constant rise in the prices of consumer goods and services over the years. As these prices continue to increase, the total amount of goods and services that can be purchased with a single dollar decreases.
Typically, sustained inflation occurs when the world’s money supply outperforms economic growth, which is why many people suggest that the world’s central banks must coordinate to maintain economic stability. This isn’t necessarily a bad thing. Controlled inflation provides stable growth environment in asset prices. This increases the value of homes and other real assets.”

The Purchasing Power of the Dollar -What is $100 worth in 1913 over time?

1913: $100
1923: $57.89
1933: $76.15
1943: $57.23
1953: $37.08
1963: $32.35
1973: $22.30
1983: $9.94
1993: $6.85
2003: $5.38
2013: $4.25
2019: $3.87

https://howmuch.net/articles/rise-and-fall-dollar

#53 Gen Z on 09.26.20 at 4:17 pm

Housing and rent in Toronto are skyrocketing. Explain that Mr. Deflation.

#54 MF on 09.26.20 at 4:24 pm

Ryan,

Thank you for addressing the big elephant in the room, namely what happens to our balanced portfolios in the long term when all this debt becomes a serious issue.

Stocks at all time highs. Interest rates at all time lows. Weird bond buying programs to the tune of billions per week everywhere. None of this sounds sustainable. Anyone like myself with multi decade time spans on their portfolios would be worried long term when you look at the sheer level of stimulus needed to maintain this whole system from collapsing, even with our balanced and diversified portfolios.

It’s hard to see what the central bank long term strategy is. To stoke inflation through money creation and inflate the debt? That would just necessitate higher interest rates that nobody can afford. Like the article mentioned, world demographics and technology are bigly deflationary and it’s only going to get worse.

Looks like they are stuck in a pickle of their own making, to be honest.

MF

#55 Ryan Lewenza on 09.26.20 at 4:25 pm

Prince Polo “Ryan – thanks for the early post. With robots displacing more and more people from the work force, do you foresee a “Terminator Tax” (trademark pending) to help pay some level of UBI to the masses? What will governments do when unemployment is 20+%?”

No I don’t see a “terminator tax” or a tax on tech companies as they displace workers. This is a longer term trend and it’s difficult to directly show how technology is specifically resulting in job losses. But I do see more taxes, potentially to pay for a UBI if Justin has his way. – Ryan L

#56 MF on 09.26.20 at 4:27 pm

#46 Do we have all the facts on 09.26.20 at 3:24 pm

“Encouraging first time home buyers to purchase overpriced homes will have a minimum impact on productivity. What we need are programs that encourage Canadians to invest in productivity not programs that discourage investment in our economy.”

-Finally something that we agree on.

MF

#57 Ryan Lewenza on 09.26.20 at 4:31 pm

Karen “Why not focus on Canada, instead of using US data? We know the US is propping up Wall Street and the stock market. Will we always be the wanna-be on the other side of the US border?”

First, Canada is relatively insignificant in the global economy (we’re 1/10th the size of the US and our stock market represents less than 3% of world’s capitalization). Second, these are global trends so when looking at these big macro trends/themes it’s always best to focus on the US. – Ryan L

#58 MF on 09.26.20 at 4:32 pm

#44 not 1st on 09.26.20 at 3:08 pm

That’s awesome.. Thanks for posting.

Reposted for all who missed it:

https://www.msn.com/en-ca/news/canada/trump-approves-alberta-alaska-rail-line-project-line-would-move-oil-other-resources/ar-BB19s5nR?ocid=msedgntp

Also, I recently read some literature about an agreement between Canada, the UK, Australia and New Zealand callled CANZUK.

All 4 countries are commonwealth and share similar cultures. This is a great idea for our economy too.

https://en.wikipedia.org/wiki/CANZUK

MF

#59 willworkforpickles on 09.26.20 at 5:04 pm

All the talk and guarantees interest rates won’t rise for 3-5 years or longer is simply moot.
A bit more wishful thinking injected or blatantly deceptive than precisely accurate on any dependable projectable scale.
There exists a vast multitude of variables to consider pushing inflation, stagflation even deflationary conditions.
Too many in fact, variables for all to be considered in how and when each factor will combine or de-couple from one quarter to the next to ever come up with a infallibly reliable projection.
Many believe 3-5 years of low interest rates – no increases to be solid and immovable.
They are wrong to think so with the multitude of variables that affect conditions that can drive rates.
Not all the variables are ever in play at once and do change up constantly from quarter to quarter.
Factor in as well potential come along variables and conditions not always or even yet widely considered that figuratively speaking, appear from out of nowhere like a bundle of bouncing betty’s this way cometh.

#60 Bill on 09.26.20 at 5:15 pm

YOU GOT IT PONTIAC! (Ryan..a GOOD piece but an awesome pic..been there lol) Major carnage from draconian clueless gov lock downs and their pushing for more.
We have a absolute out of control clueless leader that thinks he won the lotto..and he did. The bugs the tool he needed for his crazy ass agenda.
Its a sad time for all Cunuckle heads…we haven’t even seen the real poop hit the fan.
As for me I was fortunate to own the right business that have been affected, ZERO…
If we see currency debasement or inflation its only to my benefit. I do prefer moderate inflation for the good of all. Its going to be bumpy IMHO.
Here’s a great piece from Mike Campbell..the first 14 min in commentary.
I will REPEAT, we have no leadership…what so ever. 400 bill $ was just the start cause debt don’t matter to a soiled B-I-T.
Best to all good Canuckle heads.

https://omny.fm/shows/money-talks-with-michael-campbell/money-talks-september-26-complete-show

#61 Don Guillermo on 09.26.20 at 5:23 pm

#58 MF on 09.26.20 at 4:32 pm

Also, I recently read some literature about an agreement between Canada, the UK, Australia and New Zealand callled CANZUK.

All 4 countries are commonwealth and share similar cultures. This is a great idea for our economy too.

https://en.wikipedia.org/wiki/CANZUK

MF

***************************************
This group could lead the way on the world progressive stage. They could start by aligning our PC agendas, setting proper pronoun usage and maybe even come up with some long overdue rainbow sidewalk standards.

#62 Don Guillermo on 09.26.20 at 5:34 pm

#166 Ace Goodheart on 09.25.20 at 11:39 pm
The other interesting thing about currency crisis, is that it often happens to countries that the USA, for some reason or another, “flips off”.

The USA has been “flipping off” Canada for years now, as Trump apparently hates us.
*****************************************

When Trudeau started snickering behind Trumps back like a little Jr high school kid during one of the early global meetings the writing was on the wall. Like or hate Trump why would anyone do that. Of course Trump isn’t going to do anything to help Canada after that. How childish and unprofessional for a so called global leader. Probably cost us $Billions and maybe even a couple of Michaels. Unforgivable!

#63 Bill on 09.26.20 at 5:47 pm

I’m going to print this because I love this country and despise our government.
I written many letters to T2 literally calling him and idiot sell out.
If they continue I can live 5 lifetimes in ASIA on 10 Mil$
The last sentence tells it all. I’m a bit above middle class but most days prolly running my chain saw looking like a redneck. Never give away what you have. In a small town you can look like a big fish but the old lady drives a Leaf well we could have fleet Teslsa’s.
I’m going to start making shot guns with my lathe.
So wake the hell up and lets lose T2 and Garth’s going to take over…I’m too chicken shit.
Mostly US #s but same globally and we are rocking it!
So sit the hell down grab a 4 finger (Booze insert flavor here) and get gob smacked…WE AR F###kin toast.

—-The Elephant in the room—-
Every so often we review the latest debt numbers as tracked on the US Debt clock site. These numbers are US based, but the story is similar all over: governments have been racking up massive debts for decades and now with COVID-19, they are accelerating this practice to unprecedented levels

The US national debt is $26.8 trillion
In the US there are 330.2 million people
Therefore, the debt per man, woman & child equals $81,145
Of those 330.2 million citizens only 124.4 million pay income tax, so the debt per taxpayer equals $214,845

The US also has $154 trillion of Unfunded Liabilities (Social Security, Pensions Plans etc)
That adds another $468,217 per citizen & $1.24 million per taxpayer

Add the National Debt + Unfunded Liabilities together = $181.44 trillion
Which equals $549,485 per citizen & $1,458,520 per taxpayer
These numbers are as of today and are growing rapidly. In the US there are negotiations to add a Phase IV COVID emergency funding of at least $2 trillion. We could easily see the US debt hit $30 trillion in a year and $50 trillion by 2025.

Your family may have sacrificed for years, made smart investments, built up your savings, and now believe you are debt-free, but the reality is you are also citizens and most likely taxpayers. These massive government debts are going to end up on the backs of those who have a job, pay taxes, who own a home and have accumulated some wealth. We are seeing government across the globe use COVID-19 as an excuse to create new programs and fueling what we see as frightening Big Government initiatives that have nothing todo with fighting the virus.

Here in Canada, the federal government throne speech was an incredible 17 pages long, and only six of those pages were actually devoted to dealing with the COVID-19 pandemic. The rest included over 30 new initiatives, with absolutely no mention of what they will cost or how they will be paid for. The only reference to funding was a promise to ‘tax the rich.’ This has become a very popular mantra, as there is a widening wealth inequality, but to suggest that simply taxing the rich will cover all these costs is absurd, there simply are not enough rich people to cover all these costs. And realistically, if you threaten to tax the rich at 75% or more of their income, as France did, they will simply leave the country.

The reality is, it is the middle class, the group every politician claims to be protecting, who ends up paying the price.
THE SAD END

#64 WTF on 09.26.20 at 5:53 pm

18# Chris

Respectfully,

MP Poilievre ISNT running for the PM position. I doubt being “your hero” is one of his considerations. Your “opinion” of what he would “do” if in power carries no weight. You are speculating.

As far as behaving like every other politician. Perhaps, grandstanding is part of politics. Guilty.

My Opinion? MP Poilievre’s financial compass seems better attuned to reality than the current prattling economic neophyte who seems to think he was given a mandate to shovel inordinate amounts of our $ in every direction with no apparent checks or balances to the detriment of every man/ woman/ child in this country for the foreseeable future.

Many countries have spent far less to address this virus.

Almost every former finance minister on both sides of the house has condemned the PM’s profligate ways which are being used to further his single minded obsession with his progressive ideals. Which incidentally he didn’t run on last election. If you want to point fingers at politicians who are less than truthful you might start with our PM.

To call a person elected by his constituents, placed in a position of trust by his Leader on behalf of the majority who voted conservative a “complainer” is condescending. He is a critic . He is doing his job, in an exemplary fashion. Isn’t that how democracy is supposed to function?

#65 Expelled Franquist on 09.26.20 at 5:59 pm

Oh Kanada I see looming Trud taxes on non-renewables like oil & gas.

#66 MF on 09.26.20 at 6:45 pm

61 Don Guillermo on 09.26.20 at 5:23 pm

Politics ain’t the same thing as economics.

I couldn’t care less what pro noun people want to identify with, but I sure care about the economy.

MF

#67 Ponzius Pilatus on 09.26.20 at 7:03 pm

#7 Karen on 09.26.20 at 10:42 am
Why not focus on Canada, instead of using US data? We know the US is propping up Wall Street and the stock market. Will we always be the wanna-be on the other side of the US border?
—————–
Agreed.
Time to stand on our own feet.
Make Canada Great Again.
Take a lesson from Austria, which during the last 90 years always has been in the shadow of Germany, but now, under young Chancellor Kurz is pursuing a more independent path.
We have some strong Ladies in leadership roles, that can make it happen.

#68 Ponzius Pilatus on 09.26.20 at 7:15 pm

#25 crowdedelevatorfartz on 09.26.20 at 1:32 pm
@#10 Karen
“Why not focus on Canada, instead of using US data?”
+++
Like it or not.
The Canadian economy is irrelevant on the World scale of things.
—————-
What a defeatist attitude.
We are still part of the G7.

#69 Sail Away on 09.26.20 at 7:16 pm

Food is already way too expensive.

As an example, I have 30 blue grouse in the freezer from a recent hunting trip. Adding up travel expenses, truck maintenance, lodging, dog trainers, dog food, dog treats, dog accessories, vet bills, ammo and necessary alcohol, these birds are running around $300 apiece.

This is crazy!

#70 Do we have all the facts on 09.26.20 at 7:18 pm

Let’s face facts. Debt has increased the extrinsic value of a wide range of assets in recent years and in spite of what our current Prime Minister thinks there are limits on the total amount of debt that can be assumed.

Economic cycles occur when the assumption of debt no longer results in an escalation of asset value. Without economic gain the amount of debt and value of assets declines until the next cycle begins.

Debt includes personal debt, business debt, and sovereign debt and at some point in time the total debt incurred by an economy becomes too large to support the continued escalation of asset values. The statement that the Government of Canada assumed debt so that Canadian citizens and businesses would not have too confirms that our Prime Minister really doesn’t understand how a healthy economy should function.

Expanding GDP through the assumption of debt has a limited lifespan and shifting debt from citizens and businesses to the government might prolong this lifespan for a few years but a day of reckoning will come.

It is time to focus on real productivity based on the investment of actual capital not endogenic capital created by financial institutions or our governments.

includes personal debt, business debt and sovereign debt

before a correction

#71 Millennial 1%er on 09.26.20 at 7:25 pm

Hedge against inflation. It’s always wise to have an (unknown amount) of cryptocurrency. You can even use it to do things like buy web servers.

#72 Don Guillermo on 09.26.20 at 7:26 pm

#66 MF on 09.26.20 at 6:45 pm
61 Don Guillermo on 09.26.20 at 5:23 pm

Politics ain’t the same thing as economics.

I couldn’t care less what pro noun people want to identify with, but I sure care about the economy.

MF
********************************
I guess it was my poor attempt at sarcasm. I just don’t have much faith in these 4 countries economically. They’re all racing down the same road.

#73 Nonplused on 09.26.20 at 7:34 pm

Well, not much controversial there today Ryan, so I’ll make my own:

Today Trump nominated Amy Coney Barrett for the supreme court. An absolutely brilliant move. I watched the announcement and President Trump looked, well, actually presidential. But that’s not what’s brilliant about it.

First, ACB was on Trump’s list of potential jurors that he released during his 2016 campaign. Campaign promise met. Biden says he won’t release a list for 2020 but Trump already has.

Second, she is well liked even on the left. This will be no Kavanaugh circus. She’s already been through a confirmation recently by most of the same senators. She’s as close to a slam dunk as Trump could have imagined. By every account a very accomplished and well respected intelectual.

Third, she’s teflon. Already the left is trying to attack her by saying she “stole” her adopted children through “shady adoption agencies”. But that is only going to highlight that she has 2 black children. No racism card to play. They are also going after her being Catholic. Also a bad move because Catholics are still the largest single religious group in the US, followed by Anglicans which aren’t that much different. The third largest group would be the various branches of reformed churches (Lutheran or Calvinist). And of course there are all the other Christian faiths that may think the Pope is the Antichrist but they would still fall on her side over various issues. Attacking her faith is going to be political suicide. Even the Jews are going to think attacking her faith is bad business because of course they are people of faith too. Even the Muslims are likely to prefer someone who holds to the same ten commandments and aren’t going to like watching someone be berated for their faith. And of course the US constitution states that there can be no test of faith for public office.

Other than that they don’t seem to have anything on her. There won’t be any number of men coming forward to accuse her of abusing them in high school. It is a done deal. Prediction: Confirmed before Nov. 3rd.

Oh and I forgot number 4. She’s the epitome of the US upper middle class soccer mom, exactly the sort of person that feels that they and their lifestyle is under threat by the radical left.

Well played Mr. Trump, well played. Even mail in voter fraud won’t stop you now. The senate will confirm her because the republicans still have the majority and all of them know voting against this woman would be political suicide. Even Mitt Romney knows it. He’s from Utah after all.

Side note, RIP RBG. Amazing woman, amazing life. Also a woman of faith.

Other side note: If you are a betting man take Trump no matter the odds, and if you think there will be some sort of market reaction to Trump winning position your portfolio that way. It is now a done deal.

#74 jal on 09.26.20 at 7:55 pm

“As an example, I have 30 blue grouse in the freezer from a recent hunting trip. Adding up travel expenses, truck maintenance, lodging, dog trainers, dog food, dog treats, dog accessories, vet bills, ammo and necessary alcohol, these birds are running around $300 apiece.”

Hahahah!
That’s why its called a “sport”
Did you count all the other trips where you came home with nothing.

#75 Nonplused on 09.26.20 at 7:58 pm

#8 Drill Baby Drill on 09.26.20 at 10:54 am
High taxation is deflationary as well. Look to the devaluation of our the currency in order to make it easier to pay off the government debt.

———————————–

The deflation of the Canadian dollar has been highly inflationary for Canadian wage earners, because so many of the products we buy are not made here.

#76 binky barnes on 09.26.20 at 8:01 pm

Please fellow blog dogs, just relax. King Justin (the Teflon Man) has his two manly arms on the wheel. The future of this country–both in the short and long term–is his priority. There is absolutely nothing to worry about.

BB

#77 Nonplused on 09.26.20 at 8:10 pm

#69 Sail Away on 09.26.20 at 7:16 pm
Food is already way too expensive.

As an example, I have 30 blue grouse in the freezer from a recent hunting trip. Adding up travel expenses, truck maintenance, lodging, dog trainers, dog food, dog treats, dog accessories, vet bills, ammo and necessary alcohol, these birds are running around $300 apiece.

This is crazy!

——————————

One does not hunt or gather to get cheap food. That’s why farming and ranching came to be so pervasive.

#78 The real reason on 09.26.20 at 8:18 pm

The real reason that so many rich people are in favor of a wealth tax is to prevent smaller competitors from gaining enough capital to become a market threat. It is just more oligopoly in action. Sorry millennials. It is Facebook vs. Parler and Facebook is willing to pay more to make sure Parler doesn’t get anywhere.

Oh and as Mises proved beyond a reasonable doubt, taxing capital leads to goods and services become unaffordable except for the rich. You sort of have to have a hammer before you can pound nails.

#79 Ryan Lewenza on 09.26.20 at 8:26 pm

JSS “Hi Ryan, REITs like Riocan are dirt cheap. Would REITs Be considered like a hedge to inflation, similar to preferred shares and floating rate bonds? Thanks”

I believe REITs are undervalued as an asset class and like them. REITs would benefit from rising inflation generally as many of them would be able to raise their prices, whether it be rent, hotel costs etc. This could in turn lead to higher distributions being paid out. But I think prefs have a higher sensitivity to interest rates, and therefore provide a hedge to rising inflation. – Ryan L

#80 1-800-DOCTORB on 09.26.20 at 8:27 pm

“ Due to the economic damage caused by this GOVERNMENT…”

Fixed it for you Ryan.

#81 Ponzius Pilatus on 09.26.20 at 8:44 pm

#69 Sail Away on 09.26.20 at 7:16 pm
Food is already way too expensive.

As an example, I have 30 blue grouse in the freezer from a recent hunting trip. Adding up travel expenses, truck maintenance, lodging, dog trainers, dog food, dog treats, dog accessories, vet bills, ammo and necessary alcohol, these birds are running around $300 apiece.

This is crazy!
—————–
Thank you Sailo, for pointing out that inflation is a relative term.
BTW, is it you who coined the phrase “let them eat blue grouse”?

#82 Karlhungus on 09.26.20 at 8:58 pm

Surprised you didn’t talk about capacity utilization which IMO is a much better predictor of inflation and is actually tracked by stat can.

#83 crowdedelevatorfartz on 09.26.20 at 9:22 pm

@#68 Ponzie Perturbed
“The Canadian economy is irrelevant on the World scale of things.

What a defeatist attitude.”

+++++

Nah. Just reality.
The Canadian population and economy is about the size of California……
On the world scale….. we rank behind California…no matter how much we bleat our “importance”.

#84 crowdedelevatorfartz on 09.26.20 at 9:25 pm

@#69 Sail Away
“these birds are running around $300 apiece.’
+++++

Ahhh but the anecdotes ( sorry MF) you can tell about each and every one……

#85 Ponzius Pilatus on 09.26.20 at 9:34 pm

Tough Times?
People camp outside of BC Liquor stores for highly anticipated release of 2017 Bordeaux.

#86 Sail Away on 09.26.20 at 9:42 pm

#81 Ponzius Pilatus on 09.26.20 at 8:44 pm
#69 Sail Away on 09.26.20 at 7:16 pm
Food is already way too expensive.

As an example, I have 30 blue grouse in the freezer from a recent hunting trip. Adding up travel expenses, truck maintenance, lodging, dog trainers, dog food, dog treats, dog accessories, vet bills, ammo and necessary alcohol, these birds are running around $300 apiece.

This is crazy!

———–

Thank you Sailo, for pointing out that inflation is a relative term.

BTW, is it you who coined the phrase “let them eat blue grouse”?

———–

You’re welcome.

By the way, all the grouse were taken with an Austrian Ferlach 16 gauge side by side shotgun, beautifully crafted by master gunsmith Josef Hambrusch in 1947.

I’ve named her ‘Ponzie’ and lovingly rub her down with warm oil after each day’s hunt.

#87 SoggyShorts on 09.26.20 at 10:08 pm

#73 Nonplused on 09.26.20 at 7:34 pm
Well, not much controversial there today Ryan, so I’ll make my own:

Today Trump nominated Amy Coney Barrett for the supreme court. An absolutely brilliant move.

*****************
More guns, fewer reproductive rights, and loss of voting rights.

Even if it was a”brilliant” nomination, it’s not something I would cheer.

#88 Drinking on 09.26.20 at 10:29 pm

#27 NewWest

Great post!

—————————–

Ryan, I get where you are coming from but I almost had to sell my car today just to by vegetables at a local grocer; farmers markets are not much better but at least it is local and we are supporting them. Inflation is nuts right now with regarding food!

#89 Wall on 09.26.20 at 10:30 pm

#50 MF on 09.26.20 at 3:49 pm
I never meant young people are to blame. I just want them to curb their enthusiasm regarding the freebie programs. I was also very frustrated that the Wall Street executives (only one US banker went to jail) responsible for the 2008 financial crisis were not punished/jailed.

#90 Don Guillermo on 09.26.20 at 11:00 pm

#69 Sail Away on 09.26.20 at 7:16 pm
Food is already way too expensive.

As an example, I have 30 blue grouse in the freezer from a recent hunting trip. Adding up travel expenses, truck maintenance, lodging, dog trainers, dog food, dog treats, dog accessories, vet bills, ammo and necessary alcohol, these birds are running around $300 apiece

*************************************

Born and raised in the West Kootenays my father loved hunting, fishing and alcohol (probably in reverse order). We always had a 21 cu ft freezer full of game in the basement. I never inherited his passion for hunting and fishing but my absolute favorite was the way my mother cooked grouse. Can’t remember the last time I had it. Pheasant in Alberta isn’t the same. Still love Alberta. Driving out east of the city tomorrow as all the crops are off. Going to have a look at the fields and then stop at Origins brewery in Strathmore for a pint. Life is good.

#91 Ponzius Pilatus on 09.26.20 at 11:49 pm

#82 Karlhungus on 09.26.20 at 8:58 pm
Surprised you didn’t talk about capacity utilization which IMO is a much better predictor of inflation and is actually tracked by stat can.
————
Interesting.
I guess once capacity utilization is maxed, you’d expect higher prices.
Usually works on a micro level.
Not sure how it works on the aggregate.
Losers may cancel out the winners.
But, good discussion.

#92 TurnerNation on 09.27.20 at 12:02 am

Firstly I’d like to congratulate the [email protected] on their stunning victory. Right now the authorities in Toronto are out in force ensuring all businesses shut at midnight. No fun or drinking allowed.

You need your sleep Comrade. We must work to pay off our new country debts.
To my late grandparents I am so sorry you had to sacrifice for WW2. You tried your best. But it was temporary. The camps are open air now did you hear?

Can we please cancel Nov 11? It’s just embarrassing now. No point.

#93 Brenda Ovid on 09.27.20 at 1:21 am

Globalization is great at lowering your standard of living, which is why most Canadians are borrowing like crazy to maintain a standard of living which is no longer affordable with current wages.

‘Those guys making to much’? Send their jobs to China, great. T-Shirts union made at $20? Send the factory to Mexico. Great. Still too many jobs in Canada, import workers to compete for labor at a fraction of the cost, that’s globalism.

It’s stupid and fallacious to say we owe our standard of living to everyone in the world. Our civilization worked for thousands of years to create a set of laws that work for us.

To say we have to apply and grant those same laws to every country regardless of contribution is stupid. Those laws are designed for us, not everyone. We don’t owe anyone outside our borders anything. Let them work and war for two thousand years the way we did.

Stop globalization, stop it now.

#94 Stan Brooks on 09.27.20 at 3:10 am

If by ‘inflation’ you mean CPI you could be right.
Stan Druckenmiller thinks that CPI will shoot north of 5 %, even 10 % in a few years.

The problem of course is that the cost of living increases much more than CPI and this is what we experience and perceive as inflation, not some carefully managed artificial construct.

Here is some pro-inflation arguments:

1. The money created to subsidize the deficit came from BoC and has no economic activity behind it.
So much more money will chase less goods and services.

2. The trend is for deficits to stay permanently very high when compared to GDP, i.e. more money chasing reduced number of goods and services.

3. The broken supply chains due to the virus will make goods more expensive.

4. The money created will not be returned as it can not be returned, i.e. it is not credit money.

5. The interest rates will stay low for a very long time, inflating asset prices further. This is not organic growth with the economy actually shrinking. This is inflation as well.

The chapwood index that measures the prices of 500 goods and services without ‘creative adjustments’ measures 10-12 % yearly increase in the cost of living in the big US cities in the last decade or so. The numbers in our big cities are probably higher if we include our housing bubble in the equation.

That number will likely further increase with rates stuck at zero, even negative.

Cheers,

#95 Guelph Guru on 09.27.20 at 6:41 am

“While I see oil prices recovering next year as demand rebounds, oil prices are likely to remain contained (i.e., $60/bl),”

Time to buy ZEO or XEG. Should double from the current dismal level in the next 3 years hopefully.

#96 crowdedelevatorfartz on 09.27.20 at 6:49 am

@#85 Ponzie preauthorized payment
“People camp outside of BC Liquor stores for highly anticipated release of 2017 Bordeaux.”

++++
Yep.
One guy was bragging he had been standing in line since 9pm the previous evening.
$3200 a bottle for the top o the line French grape juice…. Greaterfool bragging rights I suppose.

#97 Phylis on 09.27.20 at 7:31 am

#85 Ponzius Pilatus on 09.26.20 at 9:34 pm
Tough Times?
People camp outside of BC Liquor stores for highly anticipated release of 2017 Bordeaux.

There was quite the lineup at the ebgames store too. Hmm, i guess they offer something so important it can draw the youngsters from the basements. Tough times indeed.

#98 maxx on 09.27.20 at 8:24 am

@ #9

Sad?? Sad??? It’s infuriating as well as disgusting. We grow garlic here, ffs. I absolutely refuse to buy any food from China.

You can get local, organic garlic, ginger, etc at any decent health food store.

Vote with your wallets Canada!

#99 BillyBob on 09.27.20 at 9:24 am

Greetings from Madrid, the Covid epicentre of Spain! Here on business. It’s been interesting, been many times before, so wanted to see how different it is during the pandemic.

Staying in hotel suites we went to a local mall to get some groceries on Friday night. Place was absolutely packed, 100% mask compliance but zero distancing. Good luck getting a Latin culture to do that.

Now the federales want Madrid to go into lockdown, but since health is administered locally, Madrid is saying no. Interesting times.

But the food is still great, the wine is still cheap, and weather is still warm. Will be sorry to leave next weekend.

https://www.bbc.com/news/world-europe-54309649

#100 Analytical Austrian on 09.27.20 at 9:26 am

While I agree with the author for the points made on keeping “consumer inflation” depressed, I am amazed at the blindness (willfull or learned in school) from mainstream economists that consumer inflation is the only kind of inflation.
The vast creation of money, through government deficits and central bank printing (digital), has bypassed labour and gone straight to capital. As such we are seeing high inflation it just isn’t what Keynesian or Neoclassical economists understand as inflation, this inflation is all going into “asset inflation” rather than consumer.
A quick look around will demonstrate that almost every single “asset” has gone way up in price: stocks, bonds, real estate, antique cars, etc.
There are a number of reasons for this that is deserving of a discussion, the main ones are: financialization of everything in the 70’s, crushing of labour unions in the 80’s, rampant creation of government money (debt and central bank printing) since the Tech Wreck to try and keep the asset bubble inflated.

#101 Dharma Bum on 09.27.20 at 9:29 am

Notwithstanding the Greater Fool Theory, I still believe that residential real estate is a great hedge against inflation.

The cost of housing is conveniently left out of the inflation calculation, however, it is the one staple that everybody requires.

Those that purchased houses 10, 20, 30, 40 years ago have no regrets. Those dollars spent on housing have kept up.

Like Garth says, the biggest problem with buying houses is the debt that has to be assumed by those that can least afford it. It’s the short term risk (job loss combined with house price decline = financial wipeout). If one has to go way out on a limb to buy a house (i.e., borrow so much that any crisis or disruption means that they can’t pay their mortgage), then, yah, it’s probably not the best idea.
If one buys a house and it leaves them in a position that they cannot save and invest any left over money in financial assets, then, yah, it’s a bad idea.
However, if one knows that even though they may face a job loss, they can still service their mortgage for at least a year, it’s probably a smart move to buy a house within the range of their affordability. It will eventually be one of the assets that protects you from inflation. In the long run.

So, it’s a farcical concept that house prices are ignored when discussing inflation, while the cost of celery is dramatized.

The ridiculously stupid cost of houses in major urban centres today is a lot bigger problem than the rising cost of canned soup.

#102 Steven Rowlandson on 09.27.20 at 9:33 am

The real sad thing about history is that people never learn from it or they continue to believe propaganda that is untrue. There is nothing new under the sun and excess debt and printing of the currency will end in disaster.

#103 maxx on 09.27.20 at 9:36 am

#18 Chris Serran on 09.26.20 at 12:21 pm

WTF #11 yesterday

“Yes Pierre P is the critic and it is his job, but that doesn’t make him a hero. My point is, if we could magically snap our fingers and have him as PM, what would he actually do differently? ”

Walk and talk?

https://torontosun.com/news/national/election-2019/gaffe-prone-trudeau-a-look-back-at-his-most-embarrassing-moments

Be more statesman-like and not such an international embarrassment?

https://www.youtube.com/watch?v=BbmHVnA0JLg

A PM without multiple interactions with the ethics commissioner?
(WE is not going away: three strikes?)

Mr. Trudeau has turned an outstandingly beautiful country into a global laughing stock.

That’s what Mr. Poilievre or just about any other Canadian would do differently.

#104 Phylis on 09.27.20 at 9:45 am

FP has an article out on inflation.

“With CPI inflation close to zero, and downward pressure coming from energy prices, travel services and economic slack more generally, we expect inflation to stay well below the two-per-cent target in the near term,” Macklem said in a speech on Sept. 10. “Our core measures of inflation have drifted slightly lower, consistent with the unused capacity in the economy.”

+++

…Goes on to mention how the metric has been revised and then explains how you won’t understand it… nice

My issue with it is if travel prices have dropped (well duh) shouldn’t that component be weighted less since know one it using it anyways? Maybe it is and as the article suggests, it is beyond my comprehension.

#105 crowdedelevatorcoughz on 09.27.20 at 9:46 am

Cough! Cough! Cough!

Am I – Cough! – becoming too annoying here with my dozens of – Cough! – self-absorbed and dumb comments?

Let me – Cough! – squeeze by you to press my button!

Have a – Cough! Cough! – great day!

#106 Md on 09.27.20 at 10:01 am

Hey Garth, how’s it going? Finally got a chance to stop in to your former general store in belfountain. Really good ice cream. Only allowing 5 people in at a time so didn’t get a chance to go in. But great job on the restoration

#107 crowdedelevatorfartz on 09.27.20 at 10:27 am

@#105 Coughz

Have you been tested for Covid yet? Thats a bad cough.

#108 the Jaguar on 09.27.20 at 10:31 am

@#99 BillyBob on 09.27.20 at 9:24 am
-Place was absolutely packed, 100% mask compliance but zero distancing. Good luck getting a Latin culture to do that.’ ——

Nothing like a crisis of this magnitude to put on full the display the ‘cultural chickens coming home to roost’.

The graph in the article you provided in the link tells the tale. The Germans have flattened the curve, and countries like Spain not so much. I guess those Germans really do know how to ‘follow orders’. All the old stereotypes have risen like Lazarus from the dead.
Similar to the obedient Canadians versus their wily freedom loving American cousins.

#109 not 1st on 09.27.20 at 10:35 am

Well isnt that something. A project that could significantly add to canadas gdp gets traction and gets crickets from our Liberal govt including our astute Minister of Missing Infrastructure Funds. Just amazing.

https://canada.constructconnect.com/joc/news/infrastructure/2020/07/alaska-alberta-rail-begins-surveying-for-proposed-edmonton-to-anchorage-route

“The new rail line will create new economic development opportunities for a wide range of businesses, communities and Indigenous communities in Canada and Alaska. We estimate that A2A Rail could unlock $60 billion CAD in additional cumulative GDP through 2040 and lift household incomes by an average of 40 per cent.”

#110 Sara on 09.27.20 at 11:08 am

#105 crowdedelevatorcoughz on 09.27.20 at 9:46 am
Cough! Cough! Cough!

Am I – Cough! – becoming too annoying here with my dozens of – Cough! – self-absorbed and dumb comments?

Let me – Cough! – squeeze by you to press my button!

Have a – Cough! Cough! – great day!
==================================

Strange comment. Are you sure you are a 50-something year old man? You act more like a 12 year old boy.

#111 Sara on 09.27.20 at 11:11 am

@#105 I’m obviously not awake yet this morning. Good impression of the man-child. Fooled me.

#112 Ryan Lewenza on 09.27.20 at 11:26 am

Karlhungus “Surprised you didn’t talk about capacity utilization which IMO is a much better predictor of inflation and is actually tracked by stat can.”

Agree capital utilization is an important factor when looking at inflation, but I often prattle on too long so I’m trying to keep it to 800-900 words per blog. There’s only so much room and attention. – Ryan L

#113 Mf on 09.27.20 at 11:48 am

My wallet says to buy garlic grown in China. It’s cheaper and the quality is good.

#114 KLNR on 09.27.20 at 11:57 am

@#98 maxx on 09.27.20 at 8:24 am
@ #9

Sad?? Sad??? It’s infuriating as well as disgusting. We grow garlic here, ffs. I absolutely refuse to buy any food from China.

You can get local, organic garlic, ginger, etc at any decent health food store.

Vote with your wallets Canada!

ask the mexicans how they feel about free trade, in regards to corn sales/production. We’ve got it easy.

#115 crowdedelevatorfartz on 09.27.20 at 12:20 pm

I heard of debit or credit card theft scam in the Lowerbrainland
Seems thieves will break into cars or homes and grab debit or Credit cards at night and then go to 24 hr retail stores/gas stations whatever and use the “tap” function to buy multiple “gift cards” for $50, $75 dollars.
90% of the time the cards are still ok to use because people dont know their cards have been stolen yet .

The gift cards are then considered as good as money and the stolen cards can be tossed without any risk of being caught.

Seems a store owner I have spoken to has reported this to the police to no avail……he has the same people coming into his store night after night buying “gift cards” using the “tap” function…… if the card is denied….no biggie, they just pull out another one to “tap”.
The theft is “under $100” so the cops cant be bothered.

Dont leave debit or credit cards in your vehicle.

#116 akashic record on 09.27.20 at 12:46 pm

Wage cuts, jobs losses due to shutting down the economy is highly inflationary economic event for the affected individuals.

#117 maxx on 09.27.20 at 1:46 pm

@ #114

That’s not the point. Health is – no matter what part of the world food comes from.

When will some, if not most people get that through their wrongheaded, badly prioritized buying habits?

The best investment, bar none, is good health.

A bag of pesticide-soaked avocados for $2? No thank you. How many Mexican workers deal with those poisons day in, day out? What are the impacts on their health? Curious how those stats aren’t printed right on those cute little 4000-series stickers.

Read anything by Vandana Shiva.

#118 Numbers on 09.27.20 at 3:50 pm

Inflation may not come if the economy does poorly enough. I think the title of your article is wrong. The added M2 is just replacing transactions that the old economy was making as part of the GDP numbers. GDP is way down.

#119 Jeff on 09.28.20 at 1:17 pm

I think we’ll see inflation before 2025, by 2022-2023 imo.

And it’s going to be a Stagflation that will last for decades.