Skip to main content

Inflation up (whoops!)

This morning reading the StatsCan web based news I was directed by error to the July inflation data, when in fact this morning StatsCan published its August data (I have removed the post since).

The August news was bad, real bad!  First fuel costs as a component of the CPI is actually down -- fuel prices in August were lower than in July, and yet inflation came in at 3.1% Year on year... Futures market is still pricing a reduction in rates (although with less conviction than it did last week), that's up nearly 0.4% (when the market was expecting at worse a +0.1% increase in inflation).  Question is what can be done? Joke is that inflation is always a monetary phenomenon (of course-- since the goods themselves have not changed!), Canada has been expanding credit (so maybe the BoC will talk to the banks to tighten credit rules -- one would have thought that the new mortgage rules would start to bit, but it seems that's not the case).  The principal tool available to the BoC after that are asking banks to increase reserves (but since banks are already keeping reserves in excess of the BoC's requirements).  BoC cannot touch short term interest rate.  Next the government can raise taxes (or at the very least compress expenses) -- but government don't like that too much (even the conservatives).

So lets see, the economic news for Canada:

  1. Canadian's per capital borrowing is nearly equal to the Americans', but whereas Americans are deliveraging Canadians are pilling debt at a rapid pace -- this is bad news (not terrible, but bad)
  2. The IMF (following the BoC last week) downgraded Canada's growth for 2011 from 2.8% to 2.1% ( still think this is optimistic -- 1% growth in Q1, zero in Q2...), so more bad news (although I cannot believe that this was not already priced in).
  3. Manufacturing is up (so that's good news, but then exports are in trouble so ordinary news)
  4. Inflation is going the wrong way (again) and is slightly about the 1% to 3% band that the BoC targets.
  5. Cash continues to flood Canada (another $11 billion in July) but its mostly being invested in S/T instrument -- so really hot money that's got to get up the BoC's nose!  (rumors are around that the amount of cash around is starting to really worry the BoC).  Can negative interest be far away here too for foreign cash depositors.  Second year when cash inflow in excess of 8% of GDP
No wonder the CAD is playing around parity.  

Comments

Post a Comment

Popular posts from this blog

Ok so I lied...a little (revised)

When we began looking at farming in 2013/14 as something we both wanted to do as a "second career" we invested time and money to understand what sector of farming was profitable.  A few things emerged, First, high-quality, source-proven, organic farm products consistently have much higher profit margins.  Secondly, transformation accounted for nearly 80% of total profits, and production and distribution accounted for 20% of profits: Farmers and retailers have low profit margins and the middle bits make all the money. A profitable farm operation needs to be involved in the transformation of its produce.  The low-hanging fruits: cheese and butter.  Milk, generates a profit margin of 5% to 8%, depending on milk quality.  Transformed into cheese and butter, and the profit margin rises to 40% (Taking into account all costs).  Second:  20% of a steer carcass is ground beef quality.  The price is low, because (a) a high percentage of the carcass, and (b)...
Post a Comment
Read more

Spray painting Taylor Swift G650 aircraft (updated)

 First, a bit of paint will not harm anyone.  These climate activities are going to learn two things in the next few days:  (1) Trespassing at an airport is a felony almost anywhere in the world.  That means criminal prosecution.   (2) removing paint from an aircraft is expensive.   So these climate activists are about to find out the reach of the British criminal system and it will not be pleasant, the UK has very strict laws about that, I would be surprised if cleaning the aircraft of all the paint will cost less than $100,000.     I am sure that when they planned (premeditation) this little show they had a very valid logic to doing this.  Tonight, they are probably realizing the depth of their troubles.   I understand that in the UK it's a minimum one-year jail sentence.    Also, good luck travelling with a criminal trespass charge against you.  I am relatively certain that the airline industry will ...
Post a Comment
Read more

Janet Yellen from China supporter to Hawk...

There is rarely serious news in the world these days, it seems that most newspapers are filled with headlines and little else, and then Ms Yellen went to China.  Secretary Yellen has long been known in the Biden administration as the voice of moderation when dealing with China, yet as her trip which concluded yesterday a hawk was born:  She warned the Chinese against dumping goods in the United States.    fighting words! The American administration is very concerned about the lack of Chinese domestic consumption.   Even before the COVID-19 epidemic, there were already the beginning signs of a slowdown, automobile sales were off.   China is facing domestic deflation (a clear sign of collapsing demand) China imports few consumer goods, they import raw materials and intermediary goods.   It seems that the American administration is concerned that the Chinese administration will dump consumer goods abroad to keep its manufacturing machinery ...
Post a Comment
Read more