Canada the start of the obvious

by Maj (ret'd) CORNELIU E. CHISU, CD, PMSC, FEC, CET, P. Eng. Former Member of Parliament Pickering-Scarborough East As the Covid-19 pandemic still plagues us, and all levels of government, particularly the Federal Government, with the hearty cooperation of the Bank of Canada in printing more money, engage in the liberal spending of taxpayers' money, we can expect to see tough economic times in the very near future. With pundits and experts looking in your pocket and spinning (il)logical explanations and surrealistic futuristic visions, the reality is that the inflation last month was 4.4 per cent - the fastest annual increase since February 2003. Statistics Canada had predicted the annual inflation rate would be 3.5 per cent, but had excluded gasoline prices from its calculation. How brilliantly accurate. Since Canada is a vast country and people and goods need to be moved across it, what could we possibly need gasoline for? In fact, much of the driving force behind the overall rise in the consumer price index were prices at the pumps. Consumers paid 32.8 per cent more last month for gasoline than they did in September 2020. We are not set up to move by solar or wind power. So the recent tendency of politicians to cancel oil and gas pipelines, can only push prices higher and higher, as supplies are eliminated. Wait and see what happens when significant portion of the population who now work from home have start to commute to work again. Food prices have also risen by 3.9 per cent year-over-year, compared to the 2.7 per cent recorded in August, mostly due to higher prices at the store. Meat prices rose at their fastest annual pace since April 2015, pushed higher by double-digit increases in the cost of chicken and beef. Bacon prices were up 20 per cent. An obvious source of price increases has been global supply-chain bottlenecks that have driven up transport costs, which are being passed on to buyers. Could this be another connection to oil and gas prices increases? Just wait until the cozy Canadian winter, a well known commodity, increases our demand for heating gas and oil. I wonder what the pundits will find to say then? Apparently September marked the sixth consecutive month that headline inflation clocked in above the Bank of Canada's target range of between one- and three-per-cent, something that hasn't happened since a six-month stretch that ended in March 2003. So will the Bank of Canada print more money? Aren't they running out of ink yet? Bank of Canada governor Tiff Macklem said from his ivory tower, that recently bottlenecks have proven more persistent than first believed, but recent inflation readings are "transitory," or a temporary issue. Wait till the inflation tsunami crashes on our shores. Will the spin they spew then still be in line with their masters, the reining Liberal Federal Government? Still thinking that they can spend more money than they have, on phantasmagoric projects under the guise of response to the Covid 19 pandemic? As we sink further and further into debt, it seems that nobody is looking to the future. Sooner or later the interest rates will have to increase significantly, and then both foreseeable and unforeseeable crashes will occur as everything spins out of control. Some people will then be playing the fiddle while the economy crashes and burns. Can you imagine who that might possibly be? As the turmoil continues the leadership vacillates, asking a false Shakespearian Hamlet kind of question; 'to keep or not to keep the generous and often abused economic subsidies?' Meanwhile, the real economic situation of ordinary people is becoming more and more uncertain. Let's take the Canada Emergency Wage Subsidy (CEWS), the $111-billion pandemic benefit that is scheduled to expire this coming week, but which may yet get a reprieve and extension by the Liberal government. The savvy Finance Minister Chrystia Freeland will soon announce what comes next, after CEWS, the Canada Emergency Rent Subsidy, the Canada Recovery Benefit, the Canada Recovery Caregiving Benefit and the Canada Recovery Sickness Benefit all wind down on October 23. She told the government mouth piece, the CBC, that significant uncertainties remain, thus implying that some benefits will be extended. More money wasted in principle. Few people begrudge temporary, targeted relief to fellow citizens in need. But, according to an attentive examination of CEWS, the wage subsidy program was a big failure and would likely not pass the most desultory cost-benefit analysis. CEWS was introduced in late April 2020, with the aim of maintaining the ties between workers and employers. According to budget 2021, it has since accounted for nearly 40 percent of the $286 billion in pandemic relief. The gurus of the program's designers, the science quoting, scientifically illiterate public service servants, ignored three fundamental economic lessons - CEWS did not address fixed costs like rents, that actually determine whether a business closes; it did not recognize that a subsidy directed towards payroll can be shifted to other purposes; and, it was not targeted at the margins where it would have been most effective. On top of this they were inflexible, sticking to an initial plan without a realty check. That does not explain, however, why CEWS criteria were not tightened when abuses emerged. As the Financial Post revealed, 68 publicly traded companies continued to pay out dividends to shareholders while receiving CEWS. With all this said, I need to conclude that if the Liberal Government continues to spend like a drunken sailor, we have very little hope of a brighter future. This will soon become clear, as the winners of the 44th Canadian election make further announcements on the post pandemic economy. Do not be surprised if your taxes increase significantly. Best of luck, we will need it.