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.
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.