Suddenly People Are Worried About Inflation

Why now? I believe it is the age old human trait of not worrying about anything until it effects you personally. Gas prices are up – a lot. Now it costs more to drive around and that effects me personally so I am outraged! Now, I notice that a can of beans is up 50% from last year. That’s outrageous. I better switch to no-name.

All this has to be somebody’s fault. It must be those damn Russians. They always cause trouble. There is no way it could have anything to do with the fact that in 2016-2017 Canada had a federal deficit of 17.8 Billion (thought outrageous at the time) and this year (2022-2023) it’s expected to be 330 Billion. Paying off debt doesn’t matter, just ask your local politician who’s buying your vote with money he doesn’t have to pay back.

This seems pretty cool. During a pandemic that put thousands of businesses under, the economy and stock market has been booming. How can that be you ask? Free government money and grants aplenty! Oh, don’t forget, almost free money to borrow with record low interest rates. Hurry! Go buy something! All this buying stimulates our Buy and Waste economy, you know.

It seems that when people have access to almost unlimited funds, they buy whatever their heart desires. When lots of people want the same things and have access to lots of cheap money, they are suddenly willing to pay more when those things are in high demand (think vehicles & homes). The sellers raise their prices and make some pretty great money and are happy until they become the buyers. Suddenly they have to pay more for the same item than what they just sold it for.

For example: I sell you a can of beans for 2 dollars that I paid 1 dollar for. Awesome, I made a dollar. I go to my supplier to get some more beans, only he tells me that the price of the can went up, and his workers wanted higher wages because beans are so expensive and the land tax where he grows the beans increased and the gas for the tractor went up and he has never sold so many beans so you will have to wait in line for your order…… so this order of beans will have to be 3 dollars a can. You realize you can’t replace the beans you just sold for the amount you got for them. As you are sure the price will be higher again next time you buy your beans, you increase the sale price to 5 dollars. Sometimes smart people call this inflation.

This is an over simplification but you get the picture. You would think all these smarty pants in government would have seen this coming after all these extra billions of free money had to go somewhere, right? Don’t worry though. The government has the answer. They will raise interest rates so people won’t borrow as much money and that will reduce demand and therefor prices. There is only one problem. People already borrowed loads of money to buy all that cool crap because they thought interest rates would stay super low forever. Could be a problem.

There is one other little problem. The government does all kinds of financial magical tricks to create money that I can’t begin to understand by issuing bonds and treasuries and who knows what else but there are interest payments due on the debt which is currently practically nothing so even a small increase in that rate would multiply the debt servicing, a lot.

Who knew the government was as dumb as the rest of us. They spent money like drunken sailors because it was free and always would be. Yahoo! Now they need more money to service all that debt. Where will they get that I wonder? If you guessed that it starts with a “T” and ends in “axes”, I’d say you are a pretty smart cookie.

What Can You Do About It?

If you have properties around the world, swiss bank accounts, gold and silver stashes, I think you will be fine. The rest of us might want to make sure we lighten our debt load and stock up on things we need that will surely be more expensive soon.

We might think that this has happened all at once because, you know, the Russians. You had just picked out the perfect miracle wax for your new boat that you only have 168 payments left on it when “suddenly” this inflation thing happens. Don’t kid yourself, this mess has been decades in the making with the only thing holding it back is governments that kept kicking the proverbial can down the road. We are at the end of the road. Brace yourself.

As always, just my opinion but maybe some things to think about.

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