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Hyperinflation

June 2, 2021

We have been hearing about the threat of hyperinflation in the media lately, but just what is it? According to Wikipedia, hyperinflation is defined as “…very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase”.  Hyperinflation has happened before in various jurisdictions around the world, the most noteable recent case is probably Venezuala. The federal government, in Canada, has been downplaying rapidly growing inflation, using controvertial metrics that seem to have little if anything to do with everyday life.

Reality Check:

1. According to an April 2021 Global News report, “In April 2019, the price of a common lumber western spruce and fir two-by-four was around US$400 for every 1,000 cubic board feet. That price is nearly three times that amount today at just over US$1,100 for every 1,000 cubic board feet. The average since 1999 has remained around the US$400 mark.” This increased cost, however, has little direct impact on the overall prices of housing, only new-builds. Tripling prices in a single year is a sign of hyperinflation.

2. According to a London Ontario Real Estate Market Statistical Report in December 2016 the average sale price for a home in London was $297,480.00 by 2021 (4.5 years later) that value has more than doubled to $650,000.00.  That is a sign of hyperinflation

3. Meanwhile. The average (2021) wage income for London, Ontario, is $35,685.00 which has a net value of $2,432.18 per month according to the CRA payroll calculator.  By contrast the average wage in 2016 was $32,143.50 which adjusted for inflation equals $35,149.91 in 2021 dollars meaning that between 2016 – 2021 wages increased by a total of $535.09 (1%). When incomes don’t keep pace with rising costs that a sign of hyperinflation.

4. If the federal government goes ahead with its plan to implement a Universal Basic Income (“UBI”) based on the same value as the CERB, average working people will be working for $432.18 per month.  Imagine the disincentive of working 40 hours per week to get an extra $99.81 on your paycheck (that is $2.49 per hour).   Begging the question “who in their right mind is going to work for such low wages, when they can stay home and get paid substantially the same amount of money?” Stagnating incomes are a sign of hyperinflation.

5. During the lockdowns millions of Canadians lost their jobs, many permanently.  Some 8,900,000 Canadians signed up for CERB benefits as a result of lockdowns.  Other laid off employees were helped by their employers who allowed them to take vacation pay and so forth.  Many others received Employment Insurance Benefits.

6. The cost of groceries has steadily risen by an average of 5% per annum since 2016, when the current government came into office. We have been unable to find a value for the increase in 2020/21, during the lockdown, but annecdotal reports suggest a range of 20% – 30% increase over the preceeding year. Such explosive living costs are a sign of hyperinflation.

Summary:

In the last five years wages have increased by a mere 1% while the cost of living has roughly doubled. The lockdowns of 2020/21 have had a tremendous impact on business and financial stability. We are currently in a phase of hyperinflation with no clear plan forward.  Even if the federal government seized our property and forgave our debts and paid us all UBI, with printed money using MMT, as has been suggested by the World Economic Forum, we will not avoid the ravages of, all levels of government’s poor economic decisions. It truly is a roll of the dice.