Government statistics downplaying U.S. inflation

A recent survey found almost half of American parents taking on increased debt to buy their children's back-to-school supplies 

Another Reason to Ban Tik-Tok? | Ron Paul Institute | Ron Paul:

Aug 18, 2025 - "According to the July Consumer Price Index (CPI) report, prices rose by 2.7 percent over the past year, and by 3.1 percent when the 'volatile' food and housing sectors are removed from the calculation. Markets rose following the release of the CPI since the increase in price inflation was not as high as expected. This led to an increase in expectations that the Federal Reserve will cut interest rates next month.

"Of course, the CPI numbers are manipulated to understate the true rate, and effects, of inflation. One way this is done is by 'Chained CPI.' This is where the government does not consider consumers impacted by price increases that make their favorite products unaffordable if there are affordable substitutes available – as if government bureaucrats can determine what is and is not an adequate substitute for a good made unaffordable by the Federal Reserve.

"The official government figures do not take into account 'shrinkflation.' This is when a business responds to price inflation by reducing product size and otherwise reducing a good’s quality. Shrinkflation makes it appear that consumers are paying the same prices but in fact they are paying more since they are getting less of the product.

"Examples of 'shrinkflation” include increases in the size of cardboard toilet paper holders by 25 percent. This allows toilet paper companies to reduce the amount of paper per roll while maintaining the same number of rolls per package. 

"Other examples of shrinkflation include using wider bottles with concave bottoms for liquid soap, thus enabling soap manufacturers to hide the 15 percent reduction in the amount of soap per bottle, substituting cheaper vegetable oil for dairy milk in chocolates, and substituting foam pool noodles with an 'angel' hair noodle that contains 40 percent less material. Shrinkflation also exists in the airline industry. Ticket prices may have remained steady, or even declined, but travelers now must pay a fee for many 'frills‘ that used to be included with the ticket, such as baggage check-in, on-flight food and beverage service, and seat selection.

"Those looking for evidence of how inflation is affecting Americans might want to stop looking at CPI reports and instead go on Tik-Tok and other popular social media sites. There they will find videos of parents highlighting the burden placed on the family budget by the skyrocketing price of school supplies. A survey by Bankrate found that 29 percent of family budgets were strained by the growing costs of school supplies, while a survey by Intuit Credit Karma found that 44 percent of parents were going into, or increasing, their family’s debt in order to buy their children school supplies. School supplies prices have even risen at big box retailers like Wal-Mart and Target. Even Dollar Tree has raised some prices to over a dollar!

"The reason so many parents are struggling to afford school supplies is not corporate greed, but the Federal Reserve’s inflationary policies. The best thing Congress can do for America’s families is cut spending, thus reducing the pressure on the Fed to monetize the federal debt thus further weakening the dollar.

"Congress should also reform the monetary system by passing the Audit the Fed bill and repealing all laws that discourage the use of competing currencies such as precious metals and cryptocurrencies. 

"Sadly, even Tik-Tok videos of parents struggling to afford school supplies will likely not cause Congress to take these steps. Instead, the videos are more likely to cause Congress to renew efforts to ban Tok-Tok."

Copyright © 2025 The Ron Paul Institute. Permission to reprint in whole or in part is gladly granted, provided full credit and a live link are given.
https://ronpaulinstitute.org/another-reason-to-ban-tik-tok/

How gov't agencies can manipulate economic data

U.S. president Trump has accused the Bureau of Labor Statistics of manipulating economic data for political reasons. Ron Paul says that would be nothing new. 

Newsflash: Governments Lie | Ron Paul Institute | Ron Paul:

August 11, 2025 - "Bureau of Labor Statistics head Dr. Erika McEntarfer is one of the latest persons President Trump has told 'you’re fired.' President Trump said this month that he fired Dr. McEntarfer because the president believed she manipulated jobs data. Manipulations, he stated, include the updated May and June BLS numbers showing the U.S. economy created 258,000 fewer jobs than originally reported, as well as the weaker than expected July jobs report. All of this, the president suggested, was designed to make President Trump look bad.

"Following Dr. McEntarfer’s firing, many commenters worried that President Trump’s actions would create the perception that government unemployment and inflation data is manipulated to produce the numbers desired by the president. A loss of confidence in government statistics could impact demand for US Treasuries ... increasing government’s interest payments.

"President Trump is correct that BLS manipulates statistics related to the economy, but it has been doing so since long before Donald Trump moved to the White House. For example, starting in 1994, the BLS stopped including 'discouraged' workers who have stopped looking for work in the official unemployment figures. The BLS also includes those working part-time as employed even if the only reason they are working part-time is they cannot find full-time work. According to John Williams, publisher of the website Shadow Stats, including discouraged and part-time workers who want full-time work in the unemployment figures increases the unemployment rate by almost 20 percent!

"The government also understates the effects of inflation. One way it does this is by using 'chained CPI.' Chained CPI means that even if price inflation has made steak unaffordable for most Americans, the government does not consider their standard of living lowered if they can buy a 'substitute' such as hamburger. This ignores the fact that if consumers viewed hamburger and steak as equivalent then they would likely have chosen cheaper hamburger before Federal Reserve-caused price inflation made steak unaffordable.... According to John Williams’s Shadow Stats, using a more accurate definition of inflation would increase the inflation rate to as much as 12 percent.

"Manipulating the unemployment and inflation rates allows the government to gaslight the people into believing that the economy is strong and any signs of weakness — such as rising prices or an increase in unemployment in their town — are anomalies that do not reflect the economy’s real condition. Manipulating the inflation figures to understate the true amount of inflation also lowers the 'cost of living' increases the government must provide for veterans, beneficiaries of Social Security, and others. This provides a way for government to cut spending without Congress members having politically difficult votes.

"President Trump has done a service by highlighting that government statistics regarding the economy are manipulated. Many of those criticizing President Trump for endangering the 'credibility' of government’s inflation and unemployment numbers are either unaware of, or more likely have no problem with, manipulating data to fool the public into thinking the welfare-warfare system and the fiat money system are 'working.' They only object to manipulating the data to benefit President Trump. President Trump should ensure the government’s unemployment and inflation figures are as accurate as possible by appointing John Williams of Shadow Stats to head the Bureau of Labor Statistics."

Copyright © 2025 The Ron Paul Institute. Permission to reprint in whole or in part is gladly granted, provided full credit and a live link are given.

https://ronpaulinstitute.org/newsflash-governments-lie/

Shadow Stats: https://www.shadowstats.com/ 

Milei tames deficit and inflation in first year

Argentine president Javier Milei ends his first year in office with a combined budget surplus of $3 billion and an inflation rate that is down by almost 90%. But plenty of problems remain in the country.

Javier Milei’s first year: $3 billion surplus and tenfold lower inflation in 2024 | Financial World | Sededin Dedovic:

December 14, 2024 - "A year after Argentine President Javier Milei came to power, after deep reforms and a drastic reduction in public spending, Argentina had a tenfold lower inflation rate. The controversial Argentine president introduced free trade in the country, and Argentina has a budget surplus after more than a century. President Milei and the government hope that the new laws, which offer investors decades of tax and customs relief, will quickly attract capital and curb the recession.

"Although challenged by the public, Milei firmly advocated for the reduction of public administration, which won the favor of younger voters and won the election with 55 percent of the vote. He fulfilled his campaign promises quickly after coming to power, resulting in a $3 billion budget surplus a year later. 

"The peso was devalued, price controls were lifted, numerous public works were suspended, and local government budgets were cut tenfold. It was 'shock therapy' ... that initially led to many unemployed people and a huge recession. Many Argentines were skeptical about these changes, and many world media outlets wrote that Milei would further set Argentina back. However, the number of poor people is lower than a year ago, and [monthly] inflation fell from 25 percent in December last year to 2.7 percent. 

"Although this looks good statistically, ordinary citizens still can't feel any significant improvement. The country is in deep problems that have been accumulating for decades due to poor economic strategy and debt.... 

"Milei and the government hope that the new laws, which offer investors decades of tax and customs relief, will quickly attract capital and curb the recession. However, large global corporations and investors are still waiting for the new laws to stabilize in Argentina, and the number of foreign investments is only slightly higher than last year. The IMF does not expect the Argentine economy to grow this year, but rather to decline by 3.5%....

"Milei needs economic stability both for foreign investment and to reassure the public in a country that is facing such significant changes for the first time in decades. The initial adjustment has hit the working and middle classes hard because historically the largest part of government spending has been concentrated in these segments. However, some changes for the better for the Argentine population can already be felt, and [one] is the fall in [inflation] compared to December last year....

"Although there was much skepticism at the beginning of his presidency, even among his voters, today Milei has a stable approval rating of 50 percent....

"Most of the reforms implemented in Argentina under Milei — the abolition of price controls, the elimination of subsidies, and the dismantling of import tariffs and export restrictions — are policies the developed liberal world has long abandoned. Milei is trying to create a modern and functional Argentina modeled after Western models of states, after decades of accumulating problems and a complicated system of governance with an overly large state administration."

Read more: https://www.financial-world.org/news/news/financial/27591/javier-mileis-first-year-3-billion-surplus-and-tenfold-lower-inflation-in-2024/

1 Year Later: How Has Argentina Been Going? | Economics Explained | December 8, 2024: 

Video begins at 2:13.

Did modern monetary theory elect Trump?

Modern monetary theory (MMT) argues that the federal government, as the sole issuer of legal tender, can issue virtually limitless amounts of new money to fund itself. The years 2020-2024 in the USA provided an unambiguous test of this theory.

Did modern monetary theory elect Donald Trump? | Hill Times | Phillip Magness and Alexander William Salter:

November 19, 2024 - "[M]odern monetary theory is a fringe school of economic thought arguing that the federal government, as the sole issuer of legal tender, can issue virtually limitless amounts of new money to fund itself. Bucking thousands of years of evidence that such reckless policies lead to currency devaluation, advocates shirk all blame when inflation occurs, insisting instead that prices increased due to 'corporate greed' and 'price gouging.' Perhaps some of that sounds familiar....

"The Biden-Harris administration began its term assuming it could 'run the economy hot' while also avoiding inflation. They added another multi-trillion-dollar stimulus to Trump-era COVID relief spending, believing they could escape the repercussions of its price tag..... On the fiscal side, extravagant spending greatly increased government indebtedness. On the monetary side, running the printing press to keep interest rates low flooded financial markets with liquidity. The predictable result was too much money chasing too few goods — the classic recipe for dollar depreciation, better known as inflation.

"When the first signs of an inflationary spiral appeared in summer 2021, the White House responded with an official stance of denialism. Price level increases were only 'transitory,' they assured us, adopting a talking point from modern monetary theory theorist Stephanie Kelton. 

"As the problem lingered ... the White House doubled down on fringe theories, such as blaming 'corporate greed' instead of its own spending habits. As recently as July 2024, Council of Economic Advisors chair Jared Bernstein adopted the modern monetary theory-aligned inflation narrative of economist Isabella Weber, who contends that producers made an 'implicit agreement' to exploit a price shock during the pandemic and extract profits from the public.... Kamala Harris attempted to turn this conspiratorial reasoning into policy by proposing price controls at the grocery store — a scheme rejected by most economists, but championed by Weber, Kelton and other modern monetary theory advocates.... 

"Modern monetary theory fooled Washington’s elite because its message was seductive: If there’s any slack in the economy and the government prints and spends in its own currency, policymakers don’t need to worry about price hikes. The years 2020-2024 provided an unambiguous test of this theory. The answer: It’s bunk. 

"Consumer price inflation peaked at 9 percent during the summer of 2022. Central bankers were late to the game to tighten, even adopting the modern monetary theory talking point about “transitory” inflation for a brief but critical moment in early 2021. Elected Democrats scrambled to minimize the role their profligacy had played in forcibly raising the cost of living, culminating in Harris’s grocery store price control proposal as the centerpiece of her economic platform....

"Fed officials should have predicted the consequences of keeping money growth above economic growth for so long. President Biden and Vice President Kamala Harris should have recognized that continued fiscal follies would pressure the Fed to embrace money mischief, and that price controls simply made the administration look economically illiterate and out of touch. This rhetoric began as a convenient political argument for stimulus spending, then morphed into an act of self-deception on the part of the Harris campaign.

"As election day exit polling revealed, the electorate repudiated the modern monetary theory narrative. Americans are fed up with over-credentialed experts inventing new reasons to ignore basic economics. The laptop class has only itself to blame for elevating these fringe theories, thereby facilitating Trump’s electoral comeback."

Read more: https://thehill.com/opinion/finance/4996296-modern-monetary-theory-inflation/ 

Modern Monetary Theory explained | Economics Understood | April 25, 2021:

Child poverty increasing in Canada since 2020

Statistics Canada figures show that the percentage of Canadian children living in poverty has increased from 2020 to 2022 (the latest year for which statistics are available).

After years of decline, child poverty in Canada is rising swiftly: report | CBC News | Peter Zimonjic:

Prime Minister Justin Trudeau reading to children in 2019.

November 19, 2024  "Child poverty is rising swiftly in Canada ... says a new report from Campaign 2000. The anti-poverty group's annual report card on child and family poverty in Canada found that there are now 1.4 million children living in poverty across the country, with another 360,000 children falling into poverty over the last two years....

"Campaign 2000 has been issuing its annual report card on poverty since 1991. This year's report looks at the change from 2021 to 2022 and concludes that during that time, 'child poverty increased in every province and territory.'

"'The sharp increase in national child poverty rates from 2020 to 2021 was the first in 10 years and appears to signal a reversal in the downward trend that began in 2015,' the report said. 'Most alarming was the 2.5 percentage point jump from 2021 to 2022, the largest annual increase in child poverty [since 2000]. Federal strategies for poverty reduction are failing children, families and all of society....'

"Prime Minister Justin Trudeau's Liberal government introduced the Canada Child Benefit (CCB) in its first budget. The CCB, which restructured several payments and tax credits into one benefit, came with a promise that nine out of 10 families would be better off.... 

"According to the Statistics Canada data used by Campaign 2000, 20.9 per cent of children under the age of 18 were living in poverty in Canada when the Liberals came to power. Over the next five years, that percentage gradually reduced — first to 19.6 per cent in 2016, then to 18.6 per cent in 2017.... The child poverty rate then dropped significantly to 13.5 per cent in 2020, when the federal government rolled out its pandemic support program. 

"But since pandemic benefits stopped flowing and inflation started rising, poverty among children and families has been on the rise, first to 15.6 per cent in 2021 and then to 18.1 per cent in 2022.... While that rate is still almost three percentage points lower than it was when the Liberals came to power, Campaign 2000 is concerned that the rate is now trending upward again.

"The anti-poverty group's report card found that in nine of 13 provinces and territories, the number of children under the age of 18 living in poverty was higher than the national average of 18.1 per cent. The percentage was lower than that average in Quebec, B.C., P.E.I. and Yukon.... 

"Nunavut had the highest child poverty rate in the country at 41.8 per cent, followed closely by Manitoba at 27.1 per cent and Saskatchewan at 26.7 per cent. Yukon and Quebec had the lowest child poverty rates in the country at 12 per cent each, followed by  B.C. at 16.7 per cent and P.E.I. at 16.8 per cent."

Read more: https://www.cbc.ca/news/politics/campaign-2000-national-report-card-child-poverty-1.7387176

Argentina is at a turning point, says Milei

"We have governed these first six months of the year uphill, managing the worst inheritance in history and without the legislative power or instruments that all governments before ours have had," says Javier  Milei.... "And they put sticks in our wheel every single day that we try to govern.... But you know what? All this is proving that the ideas of freedom are stronger."

Javier Milei at Cato Conference: “I’m a Liberal Libertarian … I Don’t Believe Politicians Are Gods” | Cato at Liberty | Michael Chapman:

September 27, 2024 - "During a conference in Buenos Aries sponsored by the Cato Institute and Libertad y Progreso, Argentine President Javier Milei explained why socialism always fails, why big government (the 'State') is criminal ... and why he is a libertarian.... 'My friends, I'm a liberal libertarian' ... said Milei.... The two-day conference (June 11–12), attended by up to 1,000 people, was entitled 'The Rebirth of Liberty in Argentina and Beyond.'

Javier Milei, May 2024.

 Public domain, Wikimedia Commons.

"Milei, the most outspoken and orthodox libertarian elected to the presidency of a major country, took office in December 2023. Although his critics and much of the mainstream media have tried to characterize him as an impractical zealot — El Loco, the madman — so far Milei has implemented a good portion of his agenda.... For instance, since taking office, Milei has slashed government spending up to 30%, fired more than 25,000 federal workers, reduced federal agencies, frozen public works projects, lowered a major import tariff, maintained budget surpluses every month, reduced monthly inflation to 4.2% (August 2024) from 25% (December 2023), and is pushing for currency competition.... 

"It is not all roses, however, as he explained in his speech because his administration is fighting against 100 years of government intervention. This soft socialism has corrupted the government, the courts, the economy, the
culture, the schools, and the people.

“'We have governed these first six months of the year uphill, managing the worst inheritance in history and without the legislative power or instruments that all governments before ours have had,' said Milei. 'Politics, since before we took power, has put sticks in our wheels. They put sticks in our wheel by tearing up the balance sheet of the central bank. And they put sticks in our wheel every single day that we try to govern.... But you know what?' he said. 'All this is proving that the ideas of freedom are stronger because, despite the foul political caste, we’re doing right. We’re beating inflation.'

“There is no doubt that Argentina is facing a turning point,' he added. '[W]e can return to the path of freedom that we should never have wandered from and return to the values and ideas that once made Argentina a global power, resume the defense of life, freedom, and private property, and aspire to be a country at the level of our identity and our history once again.'

"Between 1860 and 1930, Argentina 'grew more rapidly than the United States, Canada, Australia, or Brazil' ... according to Agriculture and Economic Growth in Argentina, 1913–84. By 1913, Argentina was among 'the 10 wealthiest countries in the world,' with a per capita income similar to Switzerland, the Latin American Economic Review reported. That changed with a military takeover in 1930, which introduced statist, big government policies tainted by socialist thinking. Government intervention and economic malaise have characterized Argentina for the last 100 years. Milei is trying to reintroduce the libertarian policies that once made Argentina great.

"'[I]n Argentina we are rediscovering ideas that made the modern Western world the greatest civilizing and economic development achievement in human history,' said Milei. 'We want to be a haven for those who defend and live these ideas throughout the entire planet.' Today, 'Argentina is on the private sector side, not the state,” he said. “On the side of those who work, those who trade, those who strive; on the side of those who take risks, those who invest, who innovate.'

"'As developed countries become bogged down in unnecessary regulations and obligations, we remove the regulations that have bound our people for decades,' said Milei, 'and we invite capital from around the world to cooperate with Argentina because we understand free economic activity as the most natural act of cooperation of the human race.'

"Milei also explained how big-government bureaucrats in Argentina and other countries corrupt the economy with socialist policies. 'As Hayek said, every time the state intervenes, it generates a worse result than if it hadn’t intruded,' said Milei. 'Why? Because state intervention causes distortions in the pricing system. It prevents correct economic calculation and consequently nullifies what Hayek called the correct functioning of the market as a discovery process.' With capitalism and free pricing you have better 'information about quantities of goods or services that are wanted and at what price,' said Milei. Collectivism, however, inhibits the discovery process and 'binds the entrepreneur’s hands and impedes them from producing better goods and offering better services at a better price'....

"Where economic freedom is allowed, there is more political freedom, said Milei. '[F]reer countries have a GDP per capita 12 times larger than oppressed countries. Even the inhabitants of the lowest decile of the free system live better than 90% of the population in the repressed countries. That is, free enterprise capitalism is superior to socialism even on the main task that socialism supposedly does better, which is to help the less fortunate.'

"Social justice, charity for 'those who have the least,” said Milei, 'it is good, but if you do it with your own pocket [money]' and not with money that belongs to someone else. When the state intervenes in the name of social welfare, it confiscates 'assets from a private person, which are theirs by natural right, which means that the state is a criminal and violent organization, as it is funded with a coercive source of income called taxes.' Echoing Hayek, Milei said the more the state intervenes 'the less free the markets are and the worse they work, producing misery instead of wealth.'

"In closing, he said, 'If we manage to remove the state enough for society to flourish, we will have succeeded because free economic activity will lead to benefits for all of society. If we achieve this, it won’t be a triumph of ours but of society as a whole, which will have left behind 100 years of statism and decadence. Therefore, as we travel the road to that new Argentina, I thank you all for being here. God bless the Argentines and may the force of Heaven be with us. Long live freedom, damn it! Long live freedom, damn it! Long live freedom, damn it! Thank you.'"

Read more: https://www.cato.org/blog/javier-milei-cato-conference-im-liberal-libertarian-i-dont-believe-politicians-are-gods

This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

Argentine President Javier Milei at conference, Cato Institute, Libertad y Progreso (Abridged Video) | Max Videos | September 12, 2024:

To watch the entire video, click here. https://www.cato.org/multimedia/events/rebirth-liberty-argentina-beyond-closing-remarks-javier-milei

Kamala Harris promises price controls

Kamala Wants Price Controls | Reason | Liz Wolfe:

August 14, 2024 - "For a while, politics watchers were wondering when in her campaign for president Kamala Harris would unveil an actual policy platform. Now, she's unveiled some of it, and maybe it was actually better when we knew less. In a statement released last night, Harris' campaign said it would enact the 'the first-ever federal ban on price gouging on food and groceries — setting clear rules of the road to make clear that big corporations can't unfairly exploit consumers to run up excessive corporate profits on food and groceries,' with enforcement power given to the Federal Trade Commission. You heard that right: price controls.

"It's not clear how an 'excessive' profit would be defined, nor why policing that would be in the purview of the federal government, nor why food prices in particular ought to qualify. It's not clear what types of behavior that are currently legal would be outlawed.

"Price controls have been disastrous whenever they've been implemented. Prices are signals, ways of communicating how much of a good is needed by consumers and how much ought to be produced. Interfering with these signals will create terrible shortages. Giving the government the power to meddle in the economy in this way will not drive prices down, it will force some firms to go out of business and some consumers to experience shortages of goods they would have otherwise been able to purchase. The scale at which this devastation happens is contingent on the scale at which the government chooses to meddle....

"Expect more of the same strategy: blaming big corporations for the fact that Americans' grocery bills are substantially more expensive now than before the pandemic. But this wholly ignores the main driver of this spike in costs: inflation, which was driven in large part by pandemic-era government spending, including stimulus checks. Both former President Donald Trump and President Joe Biden share blame for this profligate government spending, and both parties manage to obfuscate, trying to convince voters that some other force (greed?) is at work. But make no mistake: It was government recklessness that got us into this mess, and it won't be government price controls that get us out."

Read more: https://reason.com/2024/08/15/kamala-wants-price-controls/

Kamala Harris is wrong about price controls | ReasonTV | August 27, 2024:

Median income fell in Canada in 2022

Median income in Canada, adjusted for inflation, decreased by 4% in 2022, Statistics Canada reports more than a year later. . 

Canadians’ Adjusted Median Income Has Fallen, Young Families Most Impacted: StatCan | Epoch Times | Chandra Philip:

August 24, 2025 - "The median family income has seen a year-over-year decrease in all parts of Canada due to inflation, according to numbers from Statistics Canada. In 2022, after-tax income was $60,800, according to data released on Aug. 19. While that was a 2.5 percent increase from 2021, when including the annual inflation of 6.8 percent, after-tax income was 4 percent lower than the previous year.

"The decrease in median family income was seen in all provinces and territories, StatCan said. The largest decrease was in Nunavut at minus 8.4 percent, followed by the Northwest Territories at minus 7.2 percent. Nova Scotia saw the third lowest drop in family income at minus 5.6 percent. 

"StatCan said that the median family after-tax income for 2022 was about equal to pre-pandemic income. Broken down by province, Quebec, the Yukon, and B.C. saw increases in the median family income from 2019 by 5 percent, 1.7 percent, and 1.3 percent respectively. All other provinces saw a drop.... 

"Almost all types of family groups saw a drop in median income in 2022, when adjusted for inflation, StatCan said. Younger families saw the biggest decrease, with single-parent families where the parent was under 25 years old seeing a 15.1 percent decrease in income. Median income for this family group was $24,690, according to the data.

"Single Canadians 25 years and younger saw a 12.9 percent drop in median income to $17,650. That was the lowest median income of all family groups. Couples 25 years and younger saw a 9 percent decline in median income to $45,070 in 2022. Older Canadians also saw a decrease, but not as much as younger families....

"Some cities saw increases in median family income between 2019 and 2022, with the biggest increase in Sherbrooke at 6.2 percent. Montreal saw the second highest income increase 5.2 percent, followed by Trois-Rivières at 5.2 percent and Saguenay at 5.1 percent. Cities that saw the largest decrease in family income were Edmonton at minus 5.1 percent, Windsor at minus 4.3 percent, and Kitchener–Cambridge–Waterloo at 4.1 percent."

Read more: https://www.theepochtimes.com/world/canadians-adjusted-median-income-has-fallen-young-families-most-impacted-statcan-5712388

Median household income dropped in 2022: StatCan report | CBC News | April 26, 2024:

400K Canadians fell into poverty since 2020

Canada's Department of Social Development estimates that 4 million Canadians are living in poverty, an increase of 400,000 since 2020.

Feds admit cost of living flattened poverty progress | Western Standard | Jen Hodgson:

15 June 15, 2024 - "A report from the Department of Social Development shows the cost of living has overtaken years of progress in lowering poverty rates, per Blacklock’s Reporter. 

Courtesy Dimensions of Poverty Hub

"The department counted a half million Canadians who fell into poverty due to inflation in a December 11 briefing report. 'Future increases in the rate of poverty could stall progress towards reaching the 2030 poverty reduction target of a 50% reduction in poverty versus 2015 levels,' said the federal report. 

"The department estimates 9.9% of Canadians, approximately four million people, live in poverty compared to 6.4% in 2020. That works out to  'approximately 400,000 more Canadians,' the report said. 'High inflation coupled with lagging household incomes has led to affordability pressures among many households.'

"The National Advisory Council on Poverty prior to the December report said inflation remained a worry for millions of Canadians. 'We noted a growing sense of hopelessness and desperation,' wrote the council. 

Persons with lived expertise of poverty and service providers alike told us things seem worse now than they were before and during the first years of the pandemic.'

We heard that people are worried about the rising cost of living and inflation. More people are in crisis and these crises are more visible in our communities.

Recent increases in the cost of living represent one of the most important socioeconomic challenges faced by people living in Canada following the onset of the COVID-19 pandemic. It is expected this will put upward pressure on poverty rates.

In speaking to people it seems as though the feelings of hopefulness and optimism for change that we saw early in the pandemic have faded. Hopelessness and desperation have replaced these as the cost of living continues to increase....

"The social development department last November 28 acknowledged inflation was driving more Canadians into poverty. 'The rising cost of food will be reflected in Canada’s poverty rate,' it wrote."

Read more: https://www.westernstandard.news/news/feds-admit-cost-of-living-flattened-poverty-progress/55295

Canada is Becoming Poor, Here's Why... | Griffin Milks | March 9, 2024:

Milei's Argentina sees light at end of tunnel

Javier Milei's government in Argentina is still stuck in the proverbial tunnel, but there are some signs of light at its end.

Milei is already proving the Left-wing economic establishment wrong | The Telegraph | Matthew Lynn: 

4 May 4, 2024 - "Argentina has historically been a country of failed governments, economic collapses, and debt defaults. Yet incredibly there are signs that – against all the odds – the bold, free market reforms of its libertarian President Javier Milei are beginning to work. With inflation falling, interest rates coming down, and the peso on fire in one market, Milei is already proving the global Left-wing economic establishment – addicted to bigger government and endless deficits – wrong. Indeed, it may provide a template for other countries to escape from zero growth....

• inflation has fallen to 11pc and Milei predicts it will fall further. While a monthly figure (this is Argentina after all), price rises may be coming back under control after soaring above 300pc annually. 
• Last week, Milei announced that the country had recorded its first quarterly budget surplus since 2008, a modest 0.2pc of GDP, but still an astonishing achievement in such a short space of time, especially for a country that has run deficits for 113 of the last 123 years. 
• Then, earlier this week, the central bank, which Milei has not yet gotten around to abolishing as he pledged, cut interest rates for the third time in three weeks. While they are still at an eye-watering 50pc, that will start to feed through into the economy very soon.

"Investors have started to notice. According to Bloomberg data, in the blue-chip swap market the peso was the best-performing currency in the world in the first quarter of this year, and the bond markets are rallying as well. It may also get better over the months ahead. With stabilising prices, and a rising currency, investment should start flowing again into a country rich in natural resources and hyper-competitive on wages costs. If Milei can make good on his promise to unlock the country’s vast reserves of shale oil and gas – using technologies that have proved safe and successful in the US – then the economy could even start to boom..... 

"On Milei’s election, he was dismissed as a madman who would be removed from office within a matter of months, if not weeks. In proving that narrative wrong, he would show that even after the short-lived catastrophe of the Liz Truss government, free market reforms are far from impossible. So how is he en route to deliver such a massive shock to the stale economic orthodoxy? Fundamentally, he got three big calls right. 

"First, even without a majority in parliament, he has been ruthless. Whole government departments have been closed down overnight, regardless of the immediate consequences. The Ministry of Culture was axed, so was the anti-discrimination agency, and the state-owned news service. Only last month, he unveiled plans to fire another 70,000 state employees. Milei hasn’t attempted to cut gradually, to control budgets, or to ease people out with early retirement, or hiring freezes. Instead, he has, as promised, taken a ‘chainsaw’ to the machinery of the state, yielding huge savings in the process. 

"Next, he has been bold. The president massively devalued the peso on day one, taking the financial hit upfront, and then tore up rent controls, price restrictions and state subsidies. He pared back workers’ rights, reducing maternity leave and severance compensation, and allowed companies to fire workers who went on strike. He ripped away fuel subsidies, even though it meant a temporary spike in inflation. Sure, there has been some short-term pain, but the results are now becoming evident. Rents, for example, are falling by 20pc a year as landlords, freed from controls, put more supply on the market, instead of withdrawing it as they do in countries where the price is set by the government. 

"Finally, Milei has never stopped making the argument. He promotes freedom, liberalisation and a smaller state with a messianic zeal. Many of the measures he has taken might be rough, but the president has never attempted to dismiss that, instead explaining patiently and persistently why the reforms are justified, and how they will create greater prosperity for everyone in the long run. 

"Much of the developed world, and the UK in particular, are gradually slipping into Argentinian-style stagnation.... Governments are hooked on subsidies and price controls, trying to buy their way out of every challenge with higher spending. Deficits are allowed to rise relentlessly, with no meaningful plan for ever bringing them down again. A corrupt, crony capitalism is allowed to flourish, killing competition. But the Argentine leader is providing a blueprint for how to break free. The global economic elite keeps lecturing us on why we need more government and a more powerful state despite the painful lack of results. Argentina is challenging it in dramatic fashion. It is just possible that it is starting to work."

Read more: https://www.telegraph.co.uk/business/2024/05/04/argentina-javier-milei-proving-left-wing-economy-wrong/

How Javier Milei is turning Argentina's economy around | Ian Bremmer | Quick Take | GZERO Media:

Business bankruptcies in Canada highest in 37 yrs

Business bankruptcies in Canada, which were up last year by the largest increase in 36 years, soared to a new record in the first quarter of 2024.  

Bankruptcies are soaring, but especially in Canada | Financial Post | Pamela Heaven:

February 5, 2024 - "Business insolvencies in Canada jumped the most in 36 years of records in 2023, as debt costs rose and the economy weakened. The number of businesses that filed for insolvency was the highest in 13 years, according to figures out last week from the federal Office of the Superintendent of Bankruptcy.... The rise was mainly due to bankruptcies, rather than a renegotiation of terms, said Charles St-Arnaud, chief economist for Alberta Central.  Bankruptcies were up 75.6 per cent year over year, mostly in  accommodation and food services, retail and construction.

“'Businesses have been struggling to cope with a myriad of financial challenges over the past year, including higher input costs, wage costs, and debt servicing costs, exacerbating the rocky footing many have been on ever since the pandemic,' said André Bolduc, chair of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).... Business owners who were unable to pay back government pandemic loans known as CEBA by the Jan. 19 deadline now have to pay five per cent interest and make monthly payments on what was previously an interest-free loan with no monthly payments, CAIRP says."

Read more: https://financialpost.com/news/bankruptcies-soaring-especially-canada

Bankruptcies and insolvencies shot up in 2023 | CBC News: The National | February 2, 2024: 

Business insolvencies in Canada surge at fastest level in 37 years, consumer debt soars | True North | Isaac Lamoureux:

May 6, 2024 - "Data released by the Office of the Superintendent of Bankruptcy on Friday shows that business insolvencies in Canada increased 87.2% between the first quarter of 2023 and 2024. The number of insolvencies between the two years increased from 1,070 to 2,003. Between the fourth quarter of 2023 and the first quarter of 2024, insolvencies increased from 1,521 to 2,003, a 31.7% increase.

"Consumers weren’t immune ... with consumer insolvencies increasing for the eighth consecutive quarter when measuring year-over-year increases, reaching the highest level since the fourth quarter of 2019. Insolvencies among consumers in Canada increased by 14% between the first quarter of 2023 and 2024. Consumer insolvencies increased from 29,725 to 33,885 between the two years. Between the fourth quarter of 2023 and the first quarter of 2024, insolvencies increased from 31,813 to 33,885, a 6.5% increase. On average, 372 Canadians filed for consumer insolvency daily in the first quarter of 2024.

“'A perfect storm of economic challenges is brewing, with high mortgage renewal rates, soaring rental prices, and elevated costs of everyday necessities. The high cost of servicing debts is also compounding the financial strain for many Canadians and leaving them grappling with insurmountable debt burdens,' said André Bolduc, Chair of the Canadian Association of Insolvency and Restructuring Professionals.... 

"Business insolvencies surging 87.2% was the largest annual increase in 37 years of records from the Office of the Superintendent of Bankruptcy, according to the CAIRP. 'We are seeing signs of a significant rise in distress among Canadian businesses. Many are still shouldering the burden of the pandemic, on top of high input and labour costs, declining consumer spending, and higher debt-carrying costs,' said Bolduc. 

"The actual number of business closures is even higher, considering many business owners decide to cease operations without pursuing formal insolvency proceedings. Based on members surveyed by the Canadian Federation of Independent Business, only 10% of their members who considered closing their business would officially file for bankruptcy....

"The government’s decision not to extend the CEBA deadline was 'the straw that broke the camel’s back,' said Simon Gaudreault, chief economist and vice president of research at the CFIB. Gaudreault said that other factors contributing to businesses filing for bankruptcy included lost revenue from public health closures, supply chain challenges, inflation, increased costs, rising interest rates, and labour shortages.

"Statistics Canada’s most recent data shows that 43,121 businesses closed in January 2024."

Read more: https://tnc.news/2024/05/06/business-insolvencies-canada-surge-consumer-debt/

Economists deny carbon tax impacts inflation

Canada's carbon tax "has a negligible impact on inflation" claim 200 Canadian economists in an open letter defending the tax. However, their only citation for this claim is a flawed Bank of Canada analysis.

Bruce Arthur, Toronto Star, March 28, 2024.

Economists' support for federal carbon tax seems like a lot of hot air | Toronto Sun | Brian Lilley:

March 27, 2024 - "The headline made it sound pretty clear, 'Economists defend Liberals’ carbon price as political rhetoric heats up.' A story under a headline like that might make you think there was a hefty defence laid out for the carbon tax being imposed and soon to be increased by the Trudeau Liberals. You’d be wrong if you read the story, but you’d also be wrong to think there was a robust defence of the carbon tax in the open letter from economists that it was based upon....

“The letter ... address[es] what they said were five myths about the carbon tax. Given that this letter is from economists, it’s the portion that discusses the impact of the carbon tax that caught my eye. The letter claims that the carbon tax is not affecting inflation and then cites ... a thoroughly debunked claim from the Bank of Canada as proof. 'According to the Bank of Canada, carbon pricing has caused less than 1/20th of Canada’s inflation in the past two years,' the letter says. 

"This claim was made by bank governor Tiff Macklem last fall and was widely reported, but never fact-checked by the media. Instead, asking the bank how it got to that figure fell to academic Sylvain Charlebois. Charlebois, the senior director of the Agri-foods Analytics Lab at Dalhousie University who is also known as the 'Food Professor,' asked the bank to explain how it arrived at that claim. Given Charlebois’ interest in food prices and food inflation, the answer was shocking. 

"The Bank of Canada admitted that it only looked at the impact of gasoline, heating oil and natural gas when applied directly to the consumer to arrive at its claim that the carbon tax is responsible for less than 1/20th of Canada’s inflation. That ... fails to take into account the pass-through impact of the tax on consumers.

"A cucumber grow[er] in one of southwestern Ontario’s many greenhouses would have to pay the carbon tax on the CO2 used to grow the cucumber[s]. The trucking company that picked up the cucumber would have to pay the carbon tax on the fuel used to transport the cucumber. The warehouse that stores the cucumber and the store that sells it will both pay the carbon tax on keeping that cuke cool. You will only pay the carbon tax on the gas it takes for you to drive to the store and that is all that the Bank of Canada uses to assess the impact on inflation, not all of the other steps that increase the price. 

"It’s a lazy method for the Bank of Canada and it’s lazier still for these economists to use that as their measurement when claiming to refute myths about the carbon tax.

"Yves Giroux, the parliamentary budget officer, looked at the full impact of the carbon tax — from what we all pay, the lower economic growth, the increase in prices, the increased amount of GST we pay — and arrived at a basic conclusion: Most of us are paying more. 'Once you factor in the rebate, but also the economic impacts, the majority of households will see a negative impact as a result of the carbon tax,' Giroux told a House of Commons committee last week.

"That’s not something these economists mention. Instead, they spend more time repeating government talking points and sounding like Liberal MPs than they do in providing evidence for their claims."

Read more: https://torontosun.com/opinion/columnists/economists-announce-support-for-carbon-tax-but-not-the-truth

Trudeau's Carbon Tax Drives Inflation | Kyle Seeback | February 27, 2024:

Milei gov't balances budget in first month

Javier Milei's administration achieved a balanced budget in January, its first month of office, the first time the government of Argentina has had a positive balance in over a decade..

Argentina sees first monthly budget surplus in 12 years | Straits Times | AFP:

February 18, 2024 - "The Argentine government in January saw its first monthly budget surplus in nearly 12 years, as new President Javier Milei continues to push for strong spending cuts, the Economy Ministry announced. January was the first full month in office for Mr Milei, a far-right [sic] libertarian who took office in December, and it ended with a positive balance for public-sector finances of US$589 million (S$800 million) at the official exchange rate, the government said late on Feb 16. The figure includes payment of interest on the public debt....

"Milei has been negotiating with the International Monetary Fund over its US$44 billion loan and has vowed to achieve balance in public finances in 2024 [see video]. 'The zero deficit is not negotiable,' Economy Minister Luis Caputo said on Feb 16 on X, formerly Twitter....

"Following a 50 per cent devaluation of the peso, a lifting of price controls and strong rate increases, Argentina saw an inflation rate for January of 20.6 per cent, with a 12-month rate of 254.2 per cent. The year 2023, the final year of the centre-left government of Mr Alberto Fernandez, ended with a 211 per cent inflation rate. With poverty affecting 45 per cent of the population, Mr Milei has predicted an economic rebound within three months."

Read more: https://www.straitstimes.com/world/argentina-sees-first-monthly-budget-surplus-in-12-years

How Javier Milei Would Cut Argentina Spending by 14% of GDP | Nothing Personal | September 22, 2023:

Javier Milei’s Argentine success is paving the way for freedom and prosperity across Latin America | New York Post | Axel Kaiser:

February 14, 2024 - "Shortly after coming to power, Milei dramatically narrowed the gap between the official and the market exchange rates by devaluing the peso 54%. He went on to shut down ministries and public offices and lay off swarms of useless bureaucrats. He also passed an emergency decree with 300 measures to deregulate the economy. Among them are the privatization of all public companies, the elimination of rent controls, an open-sky policy, cutting subsidies to different sectors of the economy, ending import restrictions, deregulating satellite services and many others....

"During the first month of Milei’s administration, public spending decreased by 30% in real terms compared with the previous year and the previous month. In other words, the government is already spending almost a third less than in the same period last year when adjusted for inflation. Needless to say, this is only the beginning of the 6.1 points of gross domestic product worth of deficit spending Milei has to adjust to restore a balanced budget. Most of this adjustment (3.2% of GDP) will affect the public sector by cutting spending, while a temporary taxation increase (2.9% of GDP) will do the rest.

"Despite the harsh measures adopted so far and the challenges some of them face in the courts and congress, Milei’s popularity has stayed at around 60%.... [T]he demonstrations the infamous Argentinian unions orchestrated have not been able to harm the government. If anything, they have contributed to increased public support for Milei’s efforts to fight what he calls the 'caste' of 'parasites' that have exploited Argentinians for so long.

"If he is successful in getting rid of the 'caste\” so he can turn Argentina around, the ideological and political impact throughout the region will be enormous — even more so because he and other free-market advocates have already achieved a lasting change in the mentality and values of millions of young people by replacing collectivist and statist ideas with notions of individual responsibility and freedom."

Read more: https://nypost.com/2024/02/14/opinion/javier-mileis-argentine-success-is-paving-the-way-for-freedom-and-prosperity-across-latin-america/

More labor unrest in store for Canada

As PSAC strike drags on, experts say Canadians should prep for more labour unrest | CBC News - Pete Evans:

April 26, 2023 - "As a strike by Canada's largest public sector union drags on, experts say Canadians should expect more and more labour unrest this year as workers use the sudden leverage to claw back the inflationary hit they took in the pandemic. 

"Last week, more than 150,000 civil servants represented by the Public Service Alliance of Canada (PSAC) walked off the job, slowing government services ranging from immigration, citizenship, passport, licensing and tax services to a glacial pace.... [T]he two sides remain far apart on the major issue that tends to bog down most labour disputes: compensation. The federal government has offered a nine per cent raise spread out over three years, a move that negotiators say would add $6,250 to the pocket of the average worker.

"The union, meanwhile, says the majority of its members make less than $70,000 a year, and is requesting a 13.5 per cent raise over the same time period. PSAC workers have been working without a contract since 2021, and the union says the cost of living in that time frame has risen by more than the pay bumps they're asking for....

"After plummeting in the early days of the pandemic due to reduced demand for goods and services, inflation came roaring back starting in 2021, peaking at more than eight per cent last summer. Policy makers at the Bank of Canada quickly hiked interest rates to slay the inflationary dragon, and with the rate having fallen by almost half from its peak, that strategy appears to be working.

"As recently as last week, however, central bank governor Tiff Macklem was warning that the battle isn't over, and urging restraint on demands for wage gains that threaten to bake-in inflation to come. But that request isn't resonating with workers.... Across the country and in various industries, more and more labour disputes are looming with compensation disputes at their heart. From Vancouver Symphony Orchestra stagehands to nurses in Ontario, and from WestJet pilots to flight attendants at that airline and others, it's a sentiment echoed by workers across the country right now.

"Flight attendants represented by the Canadian Union of Public Employees staged demonstrations across Canada on Tuesday, with union members across the country telling CBC News they want an end to what they call rampant abuse of unpaid work in the airline industry.

"Larry Savage, a professor of labour studies at Brock University in St. Catharines, Ont., says the current era of high inflation has emboldened workers to seek solutions for problems that predated the sea change to working life that COVID-19 brought about.... Union confidence in pushing for job actions typically come at a time when the job market is tight, Savage notes, and that's certainly an apt description of the situation right now, as Canada's official jobless rate currently sits at five per cent, barely above the all-time low of 4.9 per cent set last summer.

"Instead of trying to shed excess workers, in the aggregate there's a war for talent right now, with many employers reporting they can't find enough staff to meet their demand. That's an ideal scenario for workers to fight for concessions, and unions are doing exactly that, Savage says — and not only for their own benefit. 'If these workers are able to win their bargaining demands, I think we'll see similar demands from public servants at the provincial and the municipal level and in the private sector as well,' he said. 'Whenever a union has a win at the bargaining table, that's contagious.'

"Doug Porter, an economist with Bank of Montreal, says all eyes are on the PSAC dispute right now, because the outcome is likely to impact a slew of other negotiations down the line. 'The very public wage negotiations come at an incredibly delicate time for the inflation backdrop, potentially setting the tone for a vast array of settlements elsewhere,' he said in a note to clients last week. 'A wave of wage settlements in the zone of four per cent or higher across the economy ... could put a hard floor under inflation and make the Bank of Canada's job of getting back to target that much more difficult.' 

Read more: https://www.cbc.ca/news/business/psac-strike-labour-1.6821590

"Canada Federal Workers on Strike," Immigration and Migration, April 21, 2023: 

NDP Leader fails to blame food inflation on profits

When the CEOs of Canada's major grocery chains testified at the parliamentary committee on Agriculture and Agri-Food last week, NDP Leader Jagmeet Singh sat in o try, but fail, to flame high grocery profits for inflation. 

In blame game over high food costs, Superstore mogul scores win over NDP's Singh | Edmonton Journal - David Staples

March 10, 2023 - "Galen Weston Jr. ... is one of Canada’s wealthiest people ... he’s charging us far more than we’d like with food inflation at 10 per cent, and his gargantuan company, Loblaw, parent company of outlets such as No Frills, Real Canadian Superstore and Shoppers Drug Mart, makes enormous profits, with $556 million profit in the third quarter alone, up 29 per cent from last year. 

"The NDP pushed to get Weston before a parliamentary committee to answer questions. But I reckon that when the two faced off in Ottawa on Wednesday, Singh got far more than he bargained for in the one-two punch of Weston and fellow grocery store executive Michael Medline of Empire/Sobeys.

"Medline pointed out food inflation is happening around the world and is driven by factors such as soaring energy costs. In the last three years, all input costs in food production and distribution have gone up, Medline said, including butter (up 59 per cent), corn oil (140 per cent), wheat (109 per cent) and four (63 per cent for baked goods, and tin (53 per cent) and pulp (45 per cent).... 

"When a customer buys $25 in groceries, his company’s profit is just $1, Weston said of Loblaw. 'That means even if the industry had zero profits, a $25 dollar grocery basket would still cost $24. So the claim that Canadian grocers can correct food price inflation is simply wrong.' Other products such as financial services, clothing and, most importantly, pharmaceutical sales make up more than half of Loblaw’s business, Weston said, and they drove its higher profits.... 

"Singh asked Weston the same pointed question repeatedly. 'We have families that are struggling to buy food for their kids in a G7 country and they look at you and they see you making record profits. How can you justify that?' Singh accused Loblaw of making 'excess profit' of $1 million per day. Loblaw is a big company so the numbers are large, Weston said. 'Reasonable profitability is an important part of operating a successful business. I think a dollar (profit) out of $25 of sales is reasonable.'

"To test the credibility of Singh and Weston’s claims, I went to Prof. Sylvain Charlebois of Dalhousie University, who testified previously on food inflation.... It now costs more to ship food, Charlebois said, with unstable energy costs, unstable geo-politics and drought all playing a role. 'It’s a bit bizarre to see people pointing fingers at either a company or a man. Is Galen Weston responsible for Germany’s 20 per cent food inflation rate? I don’t think so.… When I see a guy like Jagmeet Singh attacking the grocers, I just don’t know where he’s coming from.' Canadian grocers have margins of 4.5 to 6.0 per cent on food sales, Charlebois said....

"John Barlow, a Conservative MP from rural Alberta, referenced the expert testimony that inflationary government spending and an uncompetitive tax regime, including the carbon tax, are drivers of food inflation.... Barlow might also have mentioned Singh’s steadfast support of policies that have made energy scarce and expensive, such as the NDP’s dogged opposition to nuclear power and oil and gas production.... This is a root cause of food inflation on a global scale, given how critical our previous low fuel prices were in pushing down input costs. If Singh is in need of a scapegoat for families not being able to feed their kids, he would do well to first look in the mirror."

Read more: https://edmontonjournal.com/news/politics/david-staples-in-blame-game-over-high-food-costs-superstore-mogul-scores-win-over-ndps-singh

Why the Bank of Canada is losing money

Counter-intuitive as it seems, the Bank of Canada is losing money due to rising interest rates, and may need a government bailout to cover its 2022 losses. 

The feds are about to bail out the Bank of Canada | The Hub - Jules Boudreau:

October 19, 2022 - "Between April 2020 and December 2021, the Bank of Canada added $360 billion of bonds to its balance sheet as part of its quantitative easing (QE) program. It mostly bought Canadian government bonds, but also provincial bonds and mortgage-backed securities. Outside of the first few months of the crisis, when it helped prevent Canadian financial markets from seizing up, QE probably had a negligible effect on the Canadian economy. Swapping one type of government debt (government bonds) for another (bank reserves) did not cause the current surge in inflation. But it did have a major impact on the state of government finances going forward. 

"We will have a preview of this 'QE bomb' on public finances when the Bank reveals it generated a negative net income in 2022 and Ottawa is forced to bail it out. The Bank should be transparent about the upcoming shortfall and add safeguards around the use of quantitative easing policies going forward.

"Prior to 2020, every year the Bank of Canada sent around $1 billion to the government of Canada in remittances. Those steady remittances were 'seigniorage' profits: because the Bank has a monopoly on currency issuance, it can produce bank notes at close-to-zero cost, sell the notes to banks, and use the proceeds to buy bonds. The business of trading bank notes, on which the Bank pays no interest, for interest-bearing bonds allowed the Bank to self-finance its operations..... It would then send the surplus to the government. Seigniorage is the federal government’s golden goose: the feds receive a steady billion annually in exchange for granting the Bank the privilege of issuing currency.

"But in 2020, the Bank ditched its ingenious zero-reserves 'corridor' monetary system, in which commercial banks send funds to each other to manage their liquidity needs, for a 'floor' system, in which commercial banks hold reserves at the central bank. Think of reserves as central bank money, on which the Bank pays interest. The implementation of this new system, combined with pandemic QE, means that bank notes — the golden goose — today only make up 28 percent of the Bank’s liabilities, down from 78 percent in 2019 (chart 1). Bank notes are now eclipsed on the Bank of Canada’s balance sheet by interest-bearing reserves and reverse repos. When the Bank hikes its policy rate, it increases the interest payments it makes to banks and other financial institutions. 

Chart 1. Graphic credit: Janice Nelson

"With one hand, the Bank receives interest from its bond holdings. With the other, it sends interest payments to banks. The problem is that government bonds offer a fixed interest rate, while the interest paid by the Bank on reserves scales with the Bank’s policy rate. And with Canadian rates surging, the Bank’s interest expense is about to exceed its interest revenue (chart 2)....

Chart 2. Graphic credit: Janice Nelson

"Because the Bank does not have sufficient capital to cover the losses, the government will have to bail it out with a loan or transfer. Based on market expectations for Bank of Canada rates, I estimate the shortfall to be $1 billion in 2022, $4 billion in 2023, and $2 billion in 2024. Instead of receiving $3 billion over three years from its golden goose, the federal government will have to cover a shortfall of $7 billion, the equivalent of two percent of annual government revenues.... The Bank of Canada is clearly aware of the issue. It just stopped paying interest on government deposits at the Bank, an accounting trick to reduce the end-of-year shortfall....

"When the government sells a bond to finance its spending, it chooses the optimal maturity of the bond to issue. If it wants to 'lock in' an interest rate to protect itself from future changes in borrowing costs, it will issue a long-term bond, for example, a 30-year bond. But what happens to the government’s balance sheet if the Bank of Canada purchases the 30-year bond? That long-term bond is replaced by an ultra short-term bond: bank reserves, on which the Bank — and by extension the government — pays the overnight rate....The data shows that the impact on consolidated government debt profile is immense. When we factor in the Bank of Canada’s holdings of Government of Canada bonds, the average weighted maturity of the government’s debt drops from 6.7 years to 4.7 years, rendering government borrowing costs about 30 percent more vulnerable to a rise in interest rates.... 

"Should the unelected Bank of Canada have such an impact on the government’s debt profile? Especially since, outside of periods of acute liquidity shocks like April 2020, QE’s effects on the economy are debatable. Hindsight is 20/20, and we can’t blame the Bank for emptying the cupboard in unprecedented times. But going forward, the Bank should install safeguards around the use of its balance sheet to gobble up government debt. The Bank of Canada should also commit to eventually returning to its previous corridor system to reduce its footprint in the government bond market."

Jules Boudreau is an economist in the Multi-Asset Strategies Team at Mackenzie Investments, a Canadian asset manager.

Read more: https://thehub.ca/2022-10-19/jules-boudreau-the-federal-government-is-about-to-bail-out-the-bank-of-canada/

Uprising in Venezuela

Venezuelan Crisis Boils Over as Opposition Leader Declares Himself President - Hit & Run : Reason.com - Eric Boehm:

January 23, 2019 - "Nicolás Maduro was sworn in for his second term as Venezuela's president earlier this month ... at the country's Supreme Court — rather than, as is typical, in front of the National Assembly.... Five days earlier, when the Assembly opened its new session, opposition leader Juan Guaidó stood in front of his colleagues and accused Maduro of being a 'dictator' and 'usurper' who had used a fraudulent election to claim another six-year term....

"In the days since Maduro's January 10 inauguration, things have moved quickly. The United States, Canada, and 17 Latin American countries signed a declaration refusing to recognize the legitimacy of Maduro's government. Some have cut off diplomatic ties with Venezuela. Those official actions have bolstered unofficial efforts to oppose Maduro in the streets of Caracas and other cities, where people impoverished by the Venezuelan regime's socialist policies have clashed with the military, which (along with the courts) remains loyal to Maduro.

"In the midst of huge protests Wednesday that marked the anniversary of the 1958 uprising that toppled a military dictatorship, Guaidó declared himself to be the interim president of Venezuela — a bold move that was quickly endorsed by President Donald Trump and other world leaders. 'The people of Venezuela have courageously spoken out against Maduro and his regime and demanded freedom and the rule of law,' the White House said Wednesday in a brief statement. An op-ed from Vice President Mike Pence ... Tuesday in the Wall Street Journal ... called Maduro a 'dictator with no legitimate claim to power' and encouraged Venezuelans to support Guaidó....

"Whether Maduro can cling to power likely depends on whether he can use the country's military to crush the current uprising — similar to what happened in 2017 when an anti-Maduro uprising was violently suppressed. Hopefully, the military will abandon Maduro....

"Maduro is a monster, and Venezuelans are right to want to remove him from power. He sought to continue the socialist policies of his predecessor, Hugo Chavez, and has now brought those ideas to their inevitable conclusion. Chavez nationalized the Venezuelan oil companies and used the profits to fund a massive welfare state, but production declined  ... in the absence of competition and foreign investment. When oil revenues fell, ... Chavez (who died in 2013) and Maduro printed money.... When inflation resulted, they closed off Venezuela to imported goods. Before long, what had once been the richest country in Latin America was reduced to a place where toilet paper is considered a luxury. An estimated 3 million Venezuelans have fled the country, turning the nation's collapse into a regional humanitarian crisis....

"[T]he Trump administration's response ... has been admirable in its restraint. After all, it was Trump who suggested, in August 2017, that American military intervention could be used to 'topple' the Maduro regime. In September 2018, White House officials met with Venezuelan ex-patriots to discuss the possibility of a U.S.-backed coup to overthrow Maduro. Ironically, both incidents served to only tighten Maduro's grip on power, as he was able to point to U.S. machinations as the source of Venezuelans' problems....

"An American-backed military coup in the style of the ones that toppled governments elsewhere in Latin America during the 1970s and 1980s would likely trigger endless internal conflict in Venezuela — and foment distrust towards whomever eventually replaces Maduro....

"The United States ... has an opportunity to show that it has learned a lesson from the decade-plus quagmire in the Middle East. Namely, that regime change is never as neat and tidy as it might appear at the outset, and that nation-building is best done by the people who will have to live there when the job is finished."

Read more: https://reason.com/blog/2019/01/23/what-is-happening-in-venezuela-socialism
'via Blog this'

Venezuelans turn to bitcoin as currency collapses

Why Venezuelans Are Turning to Bitcoin Mining - The Atlantic - Rene Chun:

September 2017 issue - "In Venezuela, home to some of the worst hyperinflation since the Weimar Republic, a Big Mac costs about half a month’s wages. Or rather, it did, until a bread shortage forced the burger off the menu. The annual inflation rate is expected to hit 1,600 percent. Life resembles an old newsreel: long lines, empty shelves, cashiers weighing stacks of bills.

"To survive, thousands of Venezuelans have taken to minería bitcoin — mining bitcoin, the cryptocurrency. Lend computer processing power to the blockchain (the bitcoin network’s immense, decentralized ledger) and you will be rewarded with bitcoin. To contribute more data-crunching power, and earn more bitcoin, people operate racks of specialized computers known as 'miners.' Whether a mining operation is profitable hinges on two main factors: bitcoin’s market value — which has hit record highs this year — and the price of electricity, needed to run the powerful hardware.

"Electricity, it so happens, is one thing most Venezuelans can afford: Under the socialist regime of President Nicolás Maduro, power is so heavily subsidized that it is practically free. A person running several bitcoin miners can clear $500 a month. That’s a small fortune in Venezuela today, enough to feed a family of four and purchase vital goods — baby diapers, say, or insulin — online....

"But recently, Maduro has begun cracking down on mining operations, apparently finding in them a convenient political scapegoat — much as he calls those who seek to profit off inflation “capitalist parasites.” Yet trading bitcoin is still condoned. It’s as if Maduro realizes that cryptocurrency is one of the few things holding the country together.

"Because Venezuela has no cryptocurrency laws, police have arrested mine operators on spurious charges. Their first target, Joel Padrón, who owns a courier service and started mining to supplement his income, was charged with energy theft and possession of contraband and detained for 14 weeks. Since then, other bitcoin rigs have been seized — and, in many cases, rebooted by corrupt police for personal profit....

"Venezuela’s most resourceful miners ... are moving on to a new inflation-buster: the cryptocurrency ether (ETH). The profit margins are higher and, more important, the risk factor is much lower. 'Mining ETH or bitcoin is pretty much the same principle: using free electricity to generate cash,' one Venezuelan miner told me. 'But ETH mining is more affordable — all you need is free software and a PC with a video card. Any police officer is easily fooled into thinking your ETH miner is just a regular computer.'"

Read more: https://www.theatlantic.com/magazine/archive/2017/09/big-in-venezuela/534177/
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