The Bank of Canada did QE and bought all our Covid debt, ballooning the money supply.
This caused inflation, which causes a labor shortage, as per the Phillips curve.
The Liberals and NDP did 4% annual population growth, increased TFW numbers, and allowed students to work 40 hours a week.
So currency was debased, housing is in a massive shortage, equities ballooned due to cheap labor, and our Bank of Canada is buying half of all mortgage bonds to further inflate asset values for the rich.
This manipulation lead to negative per capita GDP growth so we are all poorer in aggregate, but we avoided a technical recession, whatever that means.
When it comes to non-asset price inflation, there’s plenty of analysis already showing the largest proportion by far came from increases in corporate profit margins - a profit-led inflation.
You cite the Phillips curve model as if it’s an infallible oracle. At this point we know that not only it doesn’t always hold (e.g. stagflation contradicts it) but also its predicted effects break down in the long-run.
Your hypothesis for inflation in assets doesn’t hold up for housing prices, at least not everywhere. The GTA market has been flat after falling from the 2022 spike and it’s currently hovering 2021 levels:
Rents on the other hand have increased on the basis of the population growth, housing shortage, and interest rates hikes but even those have slowed a bit:
Some of what you’re saying is obviously true but the majority increase in non-asset inflation did not come from that. You’re going about cheap labour driving equities, presumably through higher profits since that’s what equities track, but don’t point to the recognized arbitrary price increases that increase those profits. This is what labour cost vs profits actually look like for some of this period:
I think it doesn’t look like those profits came predominantly due to cheap labour. Which leaves the other factor. So it seems like profit-led inflation is a larger contributor to equities going up. And we know as much since some execs have said that in plain language. So even some of the equity asset inflation is linked to the arbitrary price hikes.
This stuff is really important because if people are pointed to the wrong cause, they ask for the wrong solutions, and then we’re confused as to why things keep getting worse. The low-interest / QE asset inflation explanation that worked well in the 2010s is not well suited to what’s been happening post-COVID. We’re all seeing prices going up in non-asset markets left front and centre even during high interest rates. And we’re all seeing corporations posting record profits. The consolidated players in every major part of our lives are the better explanation to all this. And when you add their ability to exert power over the political system in their favour, it gets even clearer. For example they drove increased TFW immigration. Modifying monetary policy doesn’t remove their market power over the consumer market, labour market and their political power.
I realize the phillips curve eventually reverts given enough time, in the short term it still depicts an expected increase in unemployment due to monetary stimulus.
The way I see it as far as corporate profits they will always rise when there is a large bout of stimulus, the stock market is a sea of green during hyperinflation as well when measured in nominal dollar terms. When you devalue dollars everything goes up relative to dollars.
Then the BoC raises rates to cool inflation which is when corporations profits would revert to the mean; inflation which was still pushed down via immigration and mortgage bond purchase despite the large price hikes. Till we are eventually left in this state of a cooled job market, now with excess labor and a large youth unemployment, and we haven’t even officially hit a technical recession yet.
As far as house prices rising and falling I think that’s just stimulus followed by rate hikes. We still have a dire shortage due to immigration which pushes up prices, with the mortgage purchases allowing prices to remain elevated despite rate hikes due to pushing down mortgage costs.
To my understanding the Philips curve doesn’t even depict an expected increase in unemployment due to monetary stimulus. It depicts a relationship between (lower) unemployment and (higher) wages, and therefore at some level of (low) unemployment, (higher) inflation, due to people having more money to spend. In the short run. This is in relation to government stimulus (Keyensian policy) that lowers unemployment. It says that stimulus can lower unemployment at expense of higher inflation. Not that stimulus leads to unemployment. In fact rising unemployment during stimulus is an example of the model breaking down over the long run, according to what’s written here.
You expect corporate profits to revert to the mean with cooling inflation, but this year, within our current higher interest rate environment, with inflation near target, corporate profits are at an all time high.. Sorry no data at my fingertips for Canada but the processes are the same. They even say that margins to GDP are at all time high. If prices rose because workers had more money in their pockets chasing the same goods due to stimulus, we wouldn’t see profits rise significantly more than wages. We wouldn’t see margins increase. This therefore can’t be wage-driven inflation. Which also means the Phillips curve doesn’t even apply here. I don’t know what else to tell you, but looking at BoC policy and population, without factoring in the market power of large firms in every consolidated market to set prices is bound to lead to incomplete conclusions and predictions. That’s kinda like considering that (level of) competition doesn’t have real effect on prices, irrespective of other variables.
The Bank of Canada did QE and bought all our Covid debt, ballooning the money supply.
This caused inflation, which causes a labor shortage, as per the Phillips curve.
The Liberals and NDP did 4% annual population growth, increased TFW numbers, and allowed students to work 40 hours a week.
So currency was debased, housing is in a massive shortage, equities ballooned due to cheap labor, and our Bank of Canada is buying half of all mortgage bonds to further inflate asset values for the rich.
This manipulation lead to negative per capita GDP growth so we are all poorer in aggregate, but we avoided a technical recession, whatever that means.
When it comes to non-asset price inflation, there’s plenty of analysis already showing the largest proportion by far came from increases in corporate profit margins - a profit-led inflation.
You cite the Phillips curve model as if it’s an infallible oracle. At this point we know that not only it doesn’t always hold (e.g. stagflation contradicts it) but also its predicted effects break down in the long-run.
Your hypothesis for inflation in assets doesn’t hold up for housing prices, at least not everywhere. The GTA market has been flat after falling from the 2022 spike and it’s currently hovering 2021 levels:
Rents on the other hand have increased on the basis of the population growth, housing shortage, and interest rates hikes but even those have slowed a bit:
Some of what you’re saying is obviously true but the majority increase in non-asset inflation did not come from that. You’re going about cheap labour driving equities, presumably through higher profits since that’s what equities track, but don’t point to the recognized arbitrary price increases that increase those profits. This is what labour cost vs profits actually look like for some of this period:
I think it doesn’t look like those profits came predominantly due to cheap labour. Which leaves the other factor. So it seems like profit-led inflation is a larger contributor to equities going up. And we know as much since some execs have said that in plain language. So even some of the equity asset inflation is linked to the arbitrary price hikes.
This stuff is really important because if people are pointed to the wrong cause, they ask for the wrong solutions, and then we’re confused as to why things keep getting worse. The low-interest / QE asset inflation explanation that worked well in the 2010s is not well suited to what’s been happening post-COVID. We’re all seeing prices going up in non-asset markets left front and centre even during high interest rates. And we’re all seeing corporations posting record profits. The consolidated players in every major part of our lives are the better explanation to all this. And when you add their ability to exert power over the political system in their favour, it gets even clearer. For example they drove increased TFW immigration. Modifying monetary policy doesn’t remove their market power over the consumer market, labour market and their political power.
I realize the phillips curve eventually reverts given enough time, in the short term it still depicts an expected increase in unemployment due to monetary stimulus.
The way I see it as far as corporate profits they will always rise when there is a large bout of stimulus, the stock market is a sea of green during hyperinflation as well when measured in nominal dollar terms. When you devalue dollars everything goes up relative to dollars.
Then the BoC raises rates to cool inflation which is when corporations profits would revert to the mean; inflation which was still pushed down via immigration and mortgage bond purchase despite the large price hikes. Till we are eventually left in this state of a cooled job market, now with excess labor and a large youth unemployment, and we haven’t even officially hit a technical recession yet.
As far as house prices rising and falling I think that’s just stimulus followed by rate hikes. We still have a dire shortage due to immigration which pushes up prices, with the mortgage purchases allowing prices to remain elevated despite rate hikes due to pushing down mortgage costs.
To my understanding the Philips curve doesn’t even depict an expected increase in unemployment due to monetary stimulus. It depicts a relationship between (lower) unemployment and (higher) wages, and therefore at some level of (low) unemployment, (higher) inflation, due to people having more money to spend. In the short run. This is in relation to government stimulus (Keyensian policy) that lowers unemployment. It says that stimulus can lower unemployment at expense of higher inflation. Not that stimulus leads to unemployment. In fact rising unemployment during stimulus is an example of the model breaking down over the long run, according to what’s written here.
You expect corporate profits to revert to the mean with cooling inflation, but this year, within our current higher interest rate environment, with inflation near target, corporate profits are at an all time high.. Sorry no data at my fingertips for Canada but the processes are the same. They even say that margins to GDP are at all time high. If prices rose because workers had more money in their pockets chasing the same goods due to stimulus, we wouldn’t see profits rise significantly more than wages. We wouldn’t see margins increase. This therefore can’t be wage-driven inflation. Which also means the Phillips curve doesn’t even apply here. I don’t know what else to tell you, but looking at BoC policy and population, without factoring in the market power of large firms in every consolidated market to set prices is bound to lead to incomplete conclusions and predictions. That’s kinda like considering that (level of) competition doesn’t have real effect on prices, irrespective of other variables.
Sorry I meant stimulus increases inflation, which increases the demand for labor to absorb the new money supply.
Wages arent going up due to immigration, thats my whole point. We also see capital shallowing.