Inflation’s true impact underestimated
Re The rising cost of staying afloat, April 10 The economic reality faced by Rassel Mohammad and his family is shared by many struggling to make ends meet in an expensive city, as it lays bare the voodoo economics of policy-makers biased toward deflationary fear-mongering since the financial crisis.
The StatsCan Consumer Price Index’s basket of goods and services has always been less than entirely representative of the real impact of inflation on the typical Canadian family. Food and energy cost inputs are excluded to smooth out volatility, so they say.
CPI also does not give sufficient weighting to the cost of university education, health services not covered by OHIP, child care, elder care, utilities, insurance, taxes and all kinds of user fees. All of these items have seriously outpaced official inflation for years.
Yes, it’s costing less to buy a big-screen TV and a pair of sneakers, but these are not frequently recurring expenses like take-out meals or rent or mortgage payments, and those are taking an increasingly big bite out of family budgets.
Cheap money in the form of low interest rates is fuelling the current property boom, driving up asset inflation. It’s great if you’re a homeowner, but along with higher house prices all shelter-related costs have also gone up. Take a look at what people are paying for rent and condo fees and hydro bills.
On the flip side of this cheap money coin, everyone is now forced to invest in the stock market, even those close to retirement, because no one can live off the paltry return from a Canada Savings Bond anymore.
The inflation-wracked decade of the 1970s may be recalled as a scourge by present day central bankers, but at least inflation was acknowledged and an attempt was made to keep wages up with rising prices.
Today the government publishes halfcredible data that paint a picture of disinflation, and employers use that to justify keeping wages stagnant, unless you work for the government and make it on the sunshine list. Bob Wong, Richmond Hill