It’s The Economy Stupid: Tyrannical B.C. Provincial Health Officer Dr. Bonnie Henry is leading the charge to have COVID-19 treated more like the flu (ZIRP and Bankruptcy)- January 31, 2022,
So Canada has a regulations problem, most of these government regulations, like the carbon tax, covid-19 mandates on business, and other lesser know government regulations are really starting to take their toll on the Canadian economy. Prices are rising for IMPORTS into the economy, and price controls can’t solve that problem.
In the past when Canada did a lot of its own manufacturing, price controls could be implemented, although destructive, the Canadian government could compensate domestic manufacturers if politicians made the mistake of implementing price controls. But Canada can’t force foreign nations to lower their prices to appease Canadian consumers. If the cost of doing business in Canadian dollars have gone up in a foreign nation, it is what it is.
Now, sure the politicians can do their ole trick of blaming the private sector for consumer price inflation, but the business person can respond by stopping foreign imports. As a business person, you’re not forced to restock the shelves, Nicolás Maduro President of Venezuela, learned that the hard way. Now I don’t think Canada is doing as bad as Venezuela yet, but we do have an inflation problem.
How do you fight consumer price inflation? Well, typically the central bank raises interest rates. How it’s supposed to work, is if inflation is 5%, the Bank of Canada would raise rates to 6% to get ahead of inflation and prevent inflation from accelerating. Consumer price inflation is a clear indicator that the government is too involved in the economy.
As an example, covid-19 has all levels of government poking their noses in almost everyone’s business. Because we have a fiat monetary system, this equates to consumer price inflation. If money was backed by Gold and Silver instead of price inflation the government would have price deflation as well as potential shortages.
Without fiat money, the government is forced to remain small; one of the main reasons for the great depression was the labor union movement, labor unions prior to Franklin D. Roosevelt(FDR) would be the equivalent of terrorists in the modern era. So when FDR and his new deals came around, he actually prolonged what was already a great depression. Now, because Americans and the world for that matter bought into the labour movement, they were willing to wait out the depression.
The reality is the great depression was solved because of the war, and it wasn’t solved for long, because soon after the war, America went bankrupt, leading to Richard Nixon axing the foreigner’s ability to trade or exchange the U.S dollar for Gold. In reaction to America defaulting on its debt obligations, inflation ran rampant in the United States only cooling after interest rates spiked to I believe it was 20%.
Consumer price inflation is a hard beast to tame, and shortages are the main reason why. The politicians in Canada with all of their regulations are basically shutting down the means of production, and this is leading to shortages, now truth be told prices would already be up in Canada had it not been for prior price control measures by the government. But you see, a lot of bigger businesses got smart and moved their production out of Canada, so now, that Canada is reliant on imports when the various levels of government look to implement price controls, the response is often is “we don’t make that in Canada anymore, so we can’t control what the foreigner charges us”
Sure the government can do more subsidies, but if these subsidies won’t bring those manufacturing jobs back, the cost of energy is too expensive, the cost of doing business in Canada is too expensive so even if magically, some of these jobs came back to Canada, inflation would run even hotter. Yes, Canada’s political parties have their backs against the wall, and well, we just have to see what happens. Anyway, B.C. Provincial Health Officer Dr. Bonnie Henry wants Covid-19 to be more like the flu; welcome to the club dear; we’ve only been saying this for over a year now.
Hopefully, for their own good, government people start cutting regulations because if they don’t eventually they’re going to have to default on their promises. Lastly, Zero Percent Interest rate policies(ZIRP) are still in effect, and a higher cost of living could equate to more bankruptcies; I don’t even know what that looks like? That would prove to the markets that QE, ZIRP, and all of these silly government regulations didn’t work.
This could open the floodgates for people to start demanding austerity measures. For people who don’t know, if massive defaults occur during ZIRP, it means the government has no wiggle room at all. It’s game over and don’t assume a great reset will fix it, if there are no incentives to build things, people won’t build things! What most people assume is that the money is the problem, no, government regulations are the problem, Argentina and Venezuela reset their currencies all the time, but they don’t shrink government, which is why the problem is never solved.
Now, if Canada as an example starts behaving like Latin American countries? I don’t know what that means in practice, but it doesn’t sound good to me!
Interesting times ahead!