Inflation 101

[ferniesnow]

To the S&M “experts” who can discuss at an understandable level the concept of inflation.

I know that we hear that word a lot these days and will continue to hear it for quite awhile. So what does it really mean so that a mere blue collar worker can understand it?
I will make a list of many of goods and services that have increase over the past couple of years (this is my own information and not that of any governmental organization). Gasoline/diesel in many places has gone up a minimum of 33% and diesel leading the way, dairy has increased 20%, eggs were $12.95 for 5 dozen and now are $18.95 for the same amount and that is nearly 50% increase, vegetables are way up there (a cauliflower the other day was over $6.00 and it used to be in the $2.00 range) at more than 200% (is there anything in the average food basket that hasn’t increase by a minimum of 15%?), housing is away up along with interest, shop rates have increased, freight has increased and everything we can think of has increased a hell of a lot more than the rate of inflation!

So, if all of our everyday commodities have gone up a way more than the rate of inflation, what do the economists use to get the inflation rate to a mere 7-8%?

 

[ABMax24]

I've been looking at the Consumer Price Index (CPI) for over the last year and have tried to figure out why it is so out of touch with reality and so far have come up mostly empty handed. All the explanations and rationale for how the CPI is calculated and the 700 items included in the weighting for the most part make sense and seem logical.

One very important item to note it the cost of a house is not included in the calculation of the CPI. Mortgage costs are, but calculating mortgage costs without the price of a house is illogical, they just sum the interest. For many parts of Canada this leaves out a very large portion of household budgets.

The CPI is also heavily biased toward urban populations, where energy consumption is lower and therefore the effects of rising fuel prices and the implementation of the carbon tax has less of an effect.

I don't want to involve politics in this thread, but there is substantial justification to believe inflation and CPI rates are tweaked by political motivations, pretty hard to get re-elected with published inflation numbers over 10%. The other option is incompetency on the part of Statistics Canada and the BoC, which is also highly probable given what we've seen in the last 8 years and especially the last 2 years.

 

[catalac]

Add shrinkflation to the equation too.

interesting to me it doesn’t seem like booze has gone up much?

 

[zal]

Doug, you have been around way longer than I. You are also, in my mind more educated due to your experience and teachings.
With that said, what was done in 80-83 years to overcome inflation and recession? Is today much different then those times? Housing interest was a minimum 16%. New vehicle loans….no idea. My parents couldn’t afford a new vehicle until 1987. They had to buy used. Myself, brand new truck in 2002 (Different conversation all together).
So in your mind, how do we fix this?

 

[ferniesnow]

Well Tim, I was sort of isolated from the BS, as I was in the NWT. We didn’t feel it like southern Canada did. I was approved for sabbatical leave towards the end of the recession and we were in Edmonton for that time. We didn’t notice a big change and I can’t remember what the talk was even about. I wasn’t into government/politics at that stage in my live. I do remember the interest rate on our house going up to 18% and we had a chance to sell it and the equity that we had accumulated set us up pretty good for another build when the sabbatical leave was over. All in all, we came out of it in pretty good shape. Got into our next house without a mortgage.

The process hasn’t affected us this year. Well it has, but we aren’t feeling any of the pinch, as we have no debt. So even thought the costs are higher we are not scraping. It is the people with massive debt that are in trouble and IMHO, the worst is yet to come. The government can’t do a hell of a lot now but they could have done a lot in the last 2-3 years. The printing of money and giving it away to “who knows who” would have done a lot to lull the pain if that money had have been used in Canada to actually help Canadians.

The Liberals are way too deep into helping their friends and forgetting about the common Joe. A prime example is the piss poor attempt to rectify the drinking water system on the reserves. They have been talking about it for years and throwing some sort of money at it for just as long with piss poor results. If that was private industry coordinating that process and in charge, every reserve in Canada would have a top notch system. Get government involved and it all goes to ch!t.

As to the first post, I will add the following. If pretty much everything has risen by the high percentages, what has fallen so drastically to average out the inflation rate to 7-8%?

 

[Frosty19]

I think this thread might turn out to be interesting if it stays on track.
My one point/question to add right now does it take the average wage into account?
As a most basic example (which isn't fiscally accurate) is say the consumer expenses go up 15% but the average wage goes 7% does that work out to an 8% inflation?
I'm in the construction industry and average wages seem to go up every 6 months with the demand and then "surcharges" for this and that on top of that to cover expenses.

 

[mathrulz]

This is how StatsCan explains where they collect the data for the Consumer Price Index (inflation) from:

Surveys and statistical programs - Consumer Price Index (CPI)

The Consumer Price Index (CPI) is an indicator of changes in consumer prices experienced by Canadians. It is obtained by comparing, over time, the cost of a fixed basket of goods and services purchased by consumers.

www23.statcan.gc.ca

There’s a few other links and pages on the stats can site for the CPI with different info and tools to look at as well.

I agree though, what’s being reported is a far cry from the day to day reality for most common goods. It’s a complex formula with a ton of room for interpretation and influence on everything from choosing which stores they gather price data from to the different weightings of each item and category.


Sent from my iPhone using Tapatalk

 

[mathrulz]

Here’s the detailed breakdown of exactly which items are included for each category in how the CPI is tabulated

The Representative Products of the Consumer Price Index

The list below consists of the representative products in the Consumer Price Index's (CPI) basket of goods and services as of August 2022. Representative products are added and deleted each month as goods and services appear and disappear from the market.......

www.statcan.gc.ca

Sent from my iPhone using Tapatalk

 

[sirkdev]

I think this thread might turn out to be interesting if it stays on track.
My one point/question to add right now does it take the average wage into account?
As a most basic example (which isn't fiscally accurate) is say the consumer expenses go up 15% but the average wage goes 7% does that work out to an 8% inflation?
I'm in the construction industry and average wages seem to go up every 6 months with the demand and then "surcharges" for this and that on top of that to cover expenses.

I agree with you let's keep it on track, I was able to get my first wage correction 6 months ago for the first time in 8 years, have a bit of catching up to do....

 

[JayT]

Inflation is a measurement of the money supply and credit , or debt. Money is debt. So basically the same thing.
When the bank of Canada loans the government of Canada money, It comes from nowhere. Just numbers on a computer. However, when that money is loaned it is to be paid back with interest . Which means there is literally not enough money in the system to pay back the debt that has accrued.
Thus money itself is considered debt. When governments talk about balancing the budget and paying off the debt, it's all bullsh!t.
If you've ever wondered why we have such high immigration levels, it's because they can borrow more money against the future taxes they can accrue from those immigrants.
Unfortunately we will never pay it back Because the interest we owe on it is more than the money we borrowed .
Essentially we continue to pay taxes to pay interest on the money borrowed from a bunch of grabblers, even though we will never pay the full amount back.
It's a Pyramid scheme and eventually it will fail.
The States right now are in a deflationary period Because they are actually pulling money out of the system.
That's why the American dollar is so strong right now. It's literally destroying countries and companies all over the world.
This whole Pyramid scheme is designed to extract the wealth of the middle class and hand it to a bunch of people that run the central banks. It's a genius system, because nobody understands it.
I'd love to see this taught in economics class in school.

 

[ABMax24]

I'm not an economist, so I'm not going to try and make forward looking predications. But I believe there are 2 key points that everyone needs to understand in this scenario that makes it different than anything Canada has experienced before.

1. Money Supply: Canada has taken on more debt and flooded the economy with more additional money in the last 2 years than at any other time in our nations history. There's lots of data to prove this, the government of Canada's debt has nearly doubled from the start of 2020 to today. The M2 money supply in Canada was $1.8 trillion in January of 2020, today that stands at $2.35 trillion, a 30% increase. ie if everything else in the economy stayed equal the dollar lost 30% of its value in the last 2.5 years.

2. Supply Shortages: What happened during Covid was unprecedented, it wasn't just one industry, or country or even continent that cut production and caused a shortage of goods, it was the entire developed world. Even today we face shortages, and will for years to come. In Canada the un-employment rate is low and yet almost every industry faces labor shortages and difficulties in catching up from the last 2 years. Another factor is many of the baby-boomers that haven't yet retired are likely to within the next 10 years, leaving more empty roles for the younger generations to fill, whom quite frankly don't want to work as many hours as their parents did.

So we have a conundrum, we have an economy with 30% more cash to buy less goods than were previously available. The Bank of Canada has reacted, and will continue to react by increasing interest rates. The question is, can inflation be reeled in without crashing prices on assets that require substantial borrowing to purchase like housing?

 

[BILTIT]

Inflation is a measurement of the money supply and credit , or debt. Money is debt. So basically the same thing.
When the bank of Canada loans the government of Canada money, It comes from nowhere. Just numbers on a computer. However, when that money is loaned it is to be paid back with interest . Which means there is literally not enough money in the system to pay back the debt that has accrued.
Thus money itself is considered debt. When governments talk about balancing the budget and paying off the debt, it's all bullsh!t.
If you've ever wondered why we have such high immigration levels, it's because they can borrow more money against the future taxes they can accrue from those immigrants.
Unfortunately we will never pay it back Because the interest we owe on it is more than the money we borrowed .
Essentially we continue to pay taxes to pay interest on the money borrowed from a bunch of grabblers, even though we will never pay the full amount back.
It's a Pyramid scheme and eventually it will fail.
The States right now are in a deflationary period Because they are actually pulling money out of the system.
That's why the American dollar is so strong right now. It's literally destroying countries and companies all over the world.
This whole Pyramid scheme is designed to extract the wealth of the middle class and hand it to a bunch of people that run the central banks. It's a genius system, because nobody understands it.
I'd love to see this taught in economics class in school.

That is what i would call as "keeping it on track". Great job!

 

[JayT]

I'm not an economist, so I'm not going to try and make forward looking predications. But I believe there are 2 key points that everyone needs to understand in this scenario that makes it different than anything Canada has experienced before.

1. Money Supply: Canada has taken on more debt and flooded the economy with more additional money in the last 2 years than at any other time in our nations history. There's lots of data to prove this, the government of Canada's debt has nearly doubled from the start of 2020 to today. The M2 money supply in Canada was $1.8 trillion in January of 2020, today that stands at $2.35 trillion, a 30% increase. ie if everything else in the economy stayed equal the dollar lost 30% of its value in the last 2.5 years.

2. Supply Shortages: What happened during Covid was unprecedented, it wasn't just one industry, or country or even continent that cut production and caused a shortage of goods, it was the entire developed world. Even today we face shortages, and will for years to come. In Canada the un-employment rate is low and yet almost every industry faces labor shortages and difficulties in catching up from the last 2 years. Another factor is many of the baby-boomers that haven't yet retired are likely to within the next 10 years, leaving more empty roles for the younger generations to fill, whom quite frankly don't want to work as many hours as their parents did.

So we have a conundrum, we have an economy with 30% more cash to buy less goods than were previously available. The Bank of Canada has reacted, and will continue to react by increasing interest rates. The question is, can inflation be reeled in without crashing prices on assets that require substantial borrowing to purchase like housing?

The problem is there is not 30% more money in the system to buy goods. The majority of that money went to the top 1% earners. Don't kid yourself and think that the bottom 99% got the majority of that money and spent it into the system. When you look at how the money was distributed, you can see clearly that it went to large corporations and they took full advantage of it. So Mr. CEO of said company got himself a new yacht, Or if he were smart a bunch of bars of gold, and the peons got $2000.
The main reason for the Inflated prices that we are seeing Is simply the lack of goods because of the lockdowns and everybody not working.

 

[JayT]

FYI when a government raises interest rates you do not see the effects of it until 6 months to a year later. I know people would disagree with me but if you study history you will see it

 

[JayT]

I'm sure fireman will chime in any time and tell me stupid can't be fixed.

 

[JayT]

Add shrinkflation to the equation too.

interesting to me it doesn’t seem like booze has gone up much?

This is evidence to the fact that inflation in prices of particular goods is because of supply chain breakdown not so called "inflation"

 

[snopro]

There is always that one guy and that’s me. I apologize in advance. The media is saying we haven’t seen inflation this high in 40 years. A simple Google search will tell you that Pierre Elliott Trudeau was the PM 40 years ago. That’s inflation 101 in my books right there. I see Justin has a son. You know what that means? Warn your kids and grandkids. Carry on.

 

[Chump]

Amazon product ASIN B0B2F7Z4CH
Picked this up... my kids will be taught just how radical the left is

 

[LUCKY 7]

There is always that one guy and that’s me. I apologize in advance. The media is saying we haven’t seen inflation this high in 40 years. A simple Google search will tell you that Pierre Elliott Trudeau was the PM 40 years ago. That’s inflation 101 in my books right there. I see Justin has a son. You know what that means? Warn your kids and grandkids. Carry on.

so does that mean that sock boy's offspring will some day become a PM? holly CRAP that's a scary thought! if it does happen I will be long gone.

 

[Teth-Air]

Simple. You thought you had enough to retire and now you need twice as much.