Fewer people to make and sell the goods
Tiff Macklem, the Governor of the Bank of Canada thinks we are buying too much stuff. He has increased the interest rate several times to discourage us from doing this.
Just a few months ago, “supply chain issues” stopped us from getting our stuff. It took us four months to receive our new stove after we paid for it.
Pierre Poilievre, leader of the federal Conservative Party wants to fire Macklem. I am not sure why. Either for raising interest rates or not raising them fast enough.
Poilievre, says we should invest in crypto-currencies rather than buy more stuff. Yikes! The last time a Canadian politician interfered with the Bank of Canada was when John Diefenbaker and his Finance Minister Donald Fleming “forced” Governor James Coyne to resign. Diefenbaker then lost the next election. (American presidents routinely pressure the Feds to lower interest rates before elections.)
Everybody understands the concept of supply and demand. Post-pandemic we have saved up money and are now spending it. Suppliers have cut back because of the pandemic, so there are not enough goods to meet demand, and prices go up.
Apparently a great many of us did not come back to work after the pandemic, so there are fewer people to make and sell the goods. This results in wages going up, adding to costs.
Vladimir Putin’s illegal Russian invasion of Ukraine further threw sand in the gears by causing energy and fertilizer prices to rise worldwide. (Why does a shortage of fuel in Europe drive up the price of gas in Canada which keeps much of its output in North America? Just asking.)
Fearing a dramatic rise in our mortgage payments and car loans, you and I are afraid to spend. Demand falls, supply increases, prices stop rising and inflation stops — its magic because we will be forced do our part.
Except it will not work because of the war in Ukraine, energy costs and pay raises for workers will still be affecting increasing prices.
The gorilla in the room, nobody is talking about is our governments are not helping. Justin Trudeau is doling out money for better health and dental care and to all the people he apologizes to. He is spending billions on F-35 fighter jets when our guys cannot shoot down errant Chinese balloons with the jets we have.
Premier David Eby announced a spare billion dollars to get municipalities to build things. He will be competing with the private sector for building supplies we cannot get and when prices are crazy high, to be built by workers we do not have anymore. The government’s interest carrying costs will be enormous.
In the end you and I will be paying both to the banks and the grocery stores and when the taxman cometh.