Inevitable

U.S. President Harry Truman said, mockingly of economists, that he wanted one-arm economists as he was tired of those who claimed that on one hand such and such would happen, but on the other hand, something else may occur.

People like to ridicule economists because many of their forecasts prove to be incorrect. If one does not ask too much of them, economists generally can be helpful. Most economists nowadays dismiss fears about inflation; they cite recent statistics. Also low interest rates imply that lenders do not seek inflation protection with higher bond yields. All this ignores some basic facts.

More money supply in North America has been expanding at a rapid rate. An increased supply, of a commodity, entails lower prices sooner or later. Governments worldwide have been incurring massive budget deficits financed by printing money.

Also, how else will governments ever begin to repay debts incurred except by inflating away the debt? People seem to be willing to ignore this basic fact, claiming that it is not an immediate problem. This view is very short-sighted and ignores all kinds of warning signals and also the inflation that, even now, is underway.

Inflation in Canada has appeared first of all in the enormous rise of house prices. Population growth has not been sufficient to fuel demand strong enough to account for that. As well, day-to-day price increases have been so gradual that few pay much attention.

In Ontario, for example, the cost of registering a car has climbed from $80 to $120 this year alone. Many food prices have jumped just over 15 per cent.

Oil prices have fallen 4.1%, primarily reflecting the astronomical increase in oil fracking. However, the number of oil wells fracking has risen from 23,000 in the year 2000 to 300,000 currently. Recently, in Canada, the minimum wage has risen from $11.25 an hour to $11.40.

In the United States, the minimum wage has increased from $6.40 per hour to $7.25 – but in some states to $15 an hour. It is being recommended here in Canada to do likewise. Gold, the best barometer of inflation, has climbed 10.1% during this year with minor sporadic fluctuations.

It should be obvious, therefore, that the many components of inflation have been rising significantly. Thus, despite the contrary view in the financial community, inflationary increases are inevitable and will be become more widely evident in the near future.

Be aware and prepare. 

Bruce Whitestone

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