Quote:
Originally Posted by Azure
I think in large part because of decades worth of policy to offshore every single possible thing where it was cheaper to do production in China or other cheap labour countries, and huge advancements in agriculture & fossil fuel technology that allowed food & energy to be remain cheap.
But as soon as the supply chain ran into problems, where practically everything we lived on because an issue to transport, inflation went crazy.
Low interest rates are an issue, and they should have possibly been raised quicker, but I think its pretty clear that there are other issues going on as well.
One example where government policy has been very slow to adapt to reality is with housing prices. Its pretty clear that money laundering, criminal activity, excessive foreign investment, multiple property ownership, etc has led to our real estate market very likely being a massive bubble. Why has the government not stepped in HARD to deal with this?
I don't even know if housing is tied into inflation numbers, but the fact that so much of our money is GOING into real estate means that there is less money for other good & services, which also drives up prices.
You can find many examples like this.
That is why continuous rate raises is just a short sighted policy.
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I think that is an interesting theory that offshoring savings offset the money printing activity however if that were the case and didn’t occur with a corresponding replacement of GDP you would have had currency devaluation especially in the US. Would be interesting to see how it affected the overall system as you are correct that the basket of goods would get cheaper in that scenario.
I think you are looking at the supply chain issue incorrectly. I see it as supply chain reduced the supply of goods therefore to prevent inflation you need to reduce the dollars chasing those goods. By forcing more money into interest payments you reduce demand and therefore the supply chain problems is reduced. Once the supply chain issues work their way through we should see lowering rates which Opendoor outlined very nicely in his post of what currently is happening.
Money laundering in BC is something like 5% of the housing increase per the BC government so a part of but again not a significant affect.
I go back to this one being pretty simple. People with jobs didn’t spend people without jobs didn’t produce and were given money. Then everyone started spending again while productivity was crushed due to a variety of factors. Then inflation occurred. In hindsight it seems pretty obvious and the solutions seems to be working.
Yes it sucks for people and yes the ongoing problems in Canada of competitiveness and corruption still exist.