What’s the Loblaw boycott in May all about? - "Sylvain Charlebois, a researcher and professor in food distribution and policy at Dalhousie University, says he’s not surprised by the anger directed at Loblaw brands. “I think it’s quite expected to see so much anger against grocers, and in particular Loblaws,” he said. He points out the bread price-fixing scandal is still fresh, people equate grocery store price increases with former Loblaw CEO Galen Weston, and a lot people don’t appreciate the impact of supply chains on grocery store prices. “Loblaw’s PR strategy over the last several months has been amazingly pathetic, to be honest. It’s like they were looking for this boycott,” he said. However, Charlebois says the anger may be wrongly placed. “When you look at the data, technically the boycott should be against all grocers because food prices have gone up everywhere, not just at Loblaws,” he said “We did a survey recently and Loblaws is seen as the best discounter in the country, followed by Walmart, third place is Costco, fourth is Metro and fifth is Giant Tiger.” Lastly, when asked if a successful boycott could lead to lower prices, Charlebois said no, but the good news is that grocery store prices are already starting to come down."
Opinion: Loblaw’s facade of benevolence has fully cracked - The Globe and Mail - "Loblaw should be seen as a great Canadian success story. It’s a family business that opened its first self-serve grocery store in Toronto in 1919, and since then has grown into a bona fide behemoth, with 220,000 people across the country on its payroll. Loblaw operates both premium and discount grocery brands, a clothing brand, a financial brand, Shoppers Drug Mart stores, and has partnerships with Esso and Mobil gas stations. It is an omnipresent feature of Canadians’ everyday lives; Loblaw is there when you get your gas, your groceries and your prescriptions. Perhaps that’s part of the reason why it has become such a target for the public’s frustrations over the rising cost of groceries. (That and the fact that Mr. Weston featured himself in its advertising for so many years. Could anyone pick David Sobey, of the Sobeys grocery empire, out of a crowd before his death in 2023?) Loblaw has grown – and has been permitted to grow – so big that Mr. Weston is now the face of food inflation in this country... But it would be too simple to say Loblaw is merely a victim of its own success. It was part of a scheme to fix the price of bread for over 14 years. It cancelled its $2-bonus “hero pay” for front-line grocery workers after the first wave of the pandemic, even though the second wave of the virus was much larger. It has resisted signing on to a grocery code of conduct. And it recently changed its discount on nearly expired food from 50 per cent to 30 per cent – only to reverse course in response to public backlash. Loblaw has a fiduciary responsibility to its shareholders to try to maximize profits, so from that perspective, many of these moves (the legal ones) are defensible and expected. But to the public, they are nevertheless irksome, particularly when Loblaw’s branding is about looking out for struggling families trying to keep up with rising food prices"
Thread by @igetredpilled on Thread Reader App – Thread Reader App - "🇨🇦BANK OF CANADA IS IN A BIND🔒
Canada’s economy is weakening quickly. Businesses are going bankrupt, unemployment is rising, and GDP per capita is abysmal. For 13 years BoC held rates at 2% (or less) so Canadians grew addicted to cheap debt and took on a lot of it. Now that we’re sitting at 5% rates it’s a shock to many people. The debt accumulated by businesses, consumers, and the government is no longer feasible which is why many are calling for imminent rate cuts. Given the weakening economy I’m sure rate cuts are on the BoC’s mind but it’s not that simple. If BoC cuts rates too soon we risk a second wave of inflation and a repeat of the 1970s...
In Canada there is one main internal force working against the BoC in their fight with inflation - the government. The federal government has welcomed a record amount of immigrants which exacerbated supply issues - the result is an increase in demand-pull inflation. The idea of mass immigration was to suppress wages and artificially prop up GDP, but we’re also seeing an expansion of the public sector to assist in the illusion of a strong economy. Government at all 3 levels are also guilty of reckless deficit spending and amassed an unsustainable amount of debt in the process. With interest rates at higher levels the government is urging the BoC to cut rates to make their debt load more manageable. The carbon tax is another inflationary pressure that not only increases the price of gas at the pumps, but also places additional operating costs on businesses. These businesses, in turn, increase the price of their products/services to offset the cost of the carbon tax. These are all contributing factors to higher inflation and preventing BoC from cutting rates.
Demand-pull inflation occurs when demand for goods and services exceeds supply in the economy - it’s often described as “too many dollars chasing too few goods”. This is exactly what we’re seeing today largely due to mass immigration. Canada's population added 1.27 million people in 2023 alone, reaching a record high population of 40.77 million. This is the highest growth in over 65 years. These immigrants essentially create demand out of thin air and put a strain on supplies. Some of them even exploit Canada’s welfare system, receiving government money and not contributing to society in any productive manner. This amount of immigration is helping to prop up GDP, but the government is going one step further and expanding the public sector. The size of the federal public service reached 274k employees in 2023 which is a 40% increase since 2015. Compensation for federal bureaucrats also increased by nearly 37% during this time. As a result, the public sector is also propping up our overall GDP. This is bad for 2 reasons:
(1) a “strong” GDP signals the BoC to not cut rates; and
(2) this is not productive GDP so it doesn’t realistically indicate economic growth (see pics below).
So, not only is the government creating demand-pull inflation but they are also artificially propping up GDP to avoid a recession. These are two reasons the government is actually causing the BoC to keep rates higher for longer (even though they’re begging for rate cuts)
With unprecedented deficit spending our governments have contributed to high inflation and amassed record high debt doing so... This leaves the Canadian government vulnerable to sovereign default.
The carbon tax is another unnecessary inflationary pressure. On April 1 the tax is set to increase 23% from $65 to $80 per tonne (and an additional $15 every year until 2030). Not only does this increase the price of gas at the pumps but also puts an additional cost on businesses, at a time when businesses are struggling to stay afloat. In turn, these businesses will increase the price of their products to compensate for this additional cost.
The BoC is at the mercy of the Fed - if the Fed doesn’t cut, the BoC can’t cut; not without collapsing the CAD and accepting a second round of inflation anyway. In the US right now inflation is sticky and the economy seems to be chugging along just fine, they’re in no rush to cut rates. There is also the concern of oil prices, which was also a contributor to the inflation crisis in the 1970s...
Stagflation is when an economy faces both stagnant growth and high inflation at the same time - this leads to rising unemployment. This is where Canada is likely headed and the BoC can’t do anything about it anymore. If the BoC cuts too soon, inflation will come roaring back which will only force them to raise rates even higher. If the BoC doesn’t cut soon enough, businesses will continue to go bankrupt, unemployment will rise, and the housing market will take a massive hit. Even with stagnant growth (or even contraction) in most sectors, the government will continue to expand and make every attempt to avoid a technical recession. High inflation could be inevitable given the external factors on the price of oil, in addition to the carbon tax which is specific to Canada. Unemployment is rising fast and will continue to increase as businesses fail to pay off their loans and are forced to close up shop. It’s only a matter of time before Canada has to face the music."
Why Japan Stands Virtually Alone in Keeping Interest Rates Ultralow - The New York Times - "Inflation in Japan (excluding volatile fresh food prices) has reached 3 percent, the government reported on Friday, the highest since 1991, excluding a brief spike related to a 2014 tax increase. But stripped of food and energy, Japanese prices in September were just 1.8 percent higher over the last year. In the United States, that number was 6.6 percent... The Bank of Japan introduced its current monetary easing policy in 2013, when the prime minister at the time, Shinzo Abe, pledged strong measures to stimulate economic growth that had stagnated for decades. The plan included unleashing a torrent of government spending and reshaping the structure of Japan’s economy through initiatives like encouraging more women to join the work force. But the most important element was making money cheap and readily available, a goal the Bank of Japan achieved by bottoming out interest rates and vacuuming up bonds and equities. Mr. Kuroda pledged that it would maintain those policies until inflation — which had been nearly nonexistent — reached 2 percent, a level economists believed was necessary to lift wages and expand the country’s anemic economy. Nearly a decade later, Japan’s longtime commitment to using ultralow rates to stimulate growth has made its economy particularly vulnerable to the damage that rate increases can cause."
Clearly, excess monetary supply is what causes inflation
Opinion: We no longer believe inflation will come down any more, and that’s dangerous - The Globe and Mail - "First of all, consumers’ expectations of inflation drives behaviour. If shoppers of major durable products (for example, appliances or vehicles) expect that prices are going to rise at a faster rate than their income, they may make a decision to purchase that item today, rather than in the future. The same goes for businesses looking to make capital investments in machinery and equipment. This introduces what economists call a distortion – the choice of what and when to buy is altered by information which may not be correct. That results in suboptimal economic decisions. The second reason why it’s important to anchor inflation expectations is to prevent an inflationary spiral. If workers believe inflation to be, say, 5 per cent, they’ll expect a 5-per-cent increase to their wages. With labour shortages still plaguing many industries, employers may have no choice but to comply. In turn, higher labour costs will be passed on to the price of goods and services – et voilà, a self-perpetuating inflation spiral. Finally, if consumers believe inflation to be significantly higher than the official rate, it erodes their confidence and trust in public institutions such as Statistics Canada, the Bank of Canada and even the government itself. In a world already plagued with a lack of trust in official institutions and a rise in skepticism around “fake news,” even lower confidence in official data erodes our ability to have healthy citizen discourse on policy. How long our inflation expectations remain unanchored is yet to be determined. But the fact that the most skewed expectations are among young people is not encouraging. These are the consumers, the home buyers and the voters of the future. And if they believe inflation is going to be 9 per cent five years from now, we have a problem."
Kellogg's CEO criticized after suggesting 'cereal for dinner', but is that healthy for you? - "Kellogg’s CEO Gary Pilnick is facing backlash after suggesting that cash-strapped households save money by eating cereal for dinner... Consumers already were turning to cereal after breakfast, however. More than 25% of Kellogg’s cereal consumption is for meals other than breakfast, including dinner and snacking"
Food spending in US is highest in 30 years: Data - "Consumers in the U.S. are spending 11% of their disposable income on food — the highest it has been since 1991... relief isn’t anywhere in sight for consumers as food companies and restaurants claim they are still faced with rising labor costs and increased prices for ingredients"
Bank of Canada says more time is needed to bring down inflation - "Bank of Canada (BoC) Governor Tiff Macklem said on Tuesday more time was needed for monetary policy to ease price pressures while he warned that the biggest driver of prices - shelter costs - cannot be tamed by borrowing costs."
Interest rate hawks will be upset, since they think jacking up interest rates is the way to go to tame inflation
CHARLEBOIS: The genius of the 'greedflation' campaign - "When considered as a percentage of total sales in the last 12 months, the combined profits represent only about 3.4%, which is an incredibly modest return. Additionally, this figure includes non-food items like cosmetics and prescription drugs, which typically have higher profit margins... blaming the food industry has been, and continues to be a convenient diversion for politicians, diverting attention away from the real issues impacting inflation, such as public overspending and fiscal policies, among others. However, grocers are not without blame either. Beyond profiteering, the industry has some challenges to address. Regulatory compliance has been an issue, and the bread price-fixing scandal has certainly tarnished the industry’s reputation. While it’s true that some level of greed exists in the food industry, as in any economic system, it can also be taken to an extreme. Our grocery chains here in Canada are well-managed, but it is also to note that profit margins in other countries like the United Kingdom and the United States are about half of what they are here. While acknowledging that the evidence of profiteering in Canada is weak at best, there is a need for more competition in the market. Francois-Philippe Champagne, the Minister of Innovation, who is on a mission to increase competition, has called upon other grocers abroad to invest in Canada. However, the challenge lies in making Canada an attractive destination for investment, which cannot be achieved without a mandatory code of conduct that levels the playing field between the major grocery chains, independent grocers, and suppliers alike. Right now, players like Loblaw and Walmart have way too much influence and are dictating supply chain rules, a dimension consumers don’t necessarily see. It’s been like that for a while now. With a well-defined mandatory code of conduct, Canadians may have to wait a considerable amount of time before witnessing the entry of new grocery players into the Canadian market."
The Liberals are only pretending to care about affordability if these are their solutions - "the Trudeau government wants to amend the Competition Act, the federal law regulating competition in the marketplace, to establish a “Grocery Task Force” to supervise “big grocers,” stabilize prices, and monitor and investigate practices such as “shrinkflation”—that is, when producers reduce the size of products due to rising production costs. While the government’s proposals are light on details about enforcement, it’s easy to imagine the difficulty the Competition Bureau, the federal law enforcement agency tasked with enforcing such things, would face in determining, for example, what constitutes shrinkflation. If a grocer changes the packaging size and price of a specific product, is that always shrinkflation? Or is that grocer, in an effort to cover their full costs, simply expanding the range of options for consumers who may opt for lower prices over higher volume? In reality, if the Trudeau government wants to help lower food prices for Canadians, it would reduce tariffs on imported dairy and other food products and eliminate provincial marketing boards. These costs are passed on to consumers at the checkout line. Also according to the economic update, the government plans to crack down on so-called “junk fees” such as roaming charges, excessive banking fees, and airline fees. But how would competition authorities determine when certain fees are “junky” while other fees are legitimately meant to recover costs for services customers desire? Clearly, such judgments would be totally arbitrary. And if the government prohibits specific fees, without helping increase competition in the affected sector, the new fee prohibitions will likely result in increased prices for other transactions involving affected businesses. In an effort to reduce prices for Canadians, the Trudeau government will simply push costs from one consumer—or one transaction—to another. It’s also noteworthy that the worst-offending industries, in the government’s eyes, are among the most sheltered from foreign competition. Specifically, in Canada, foreign ownership restrictions in sectors such as media/telecommunications and air transportation are among the most restrictive in the developed world. If the government wants to meaningfully protect consumers, it would scrap direct and indirect restrictions on foreign competition in these industries—for example, eliminate “cabotage” regulations that prevent foreign airlines from operating domestic routes within Canada. More competition in the air means lower prices for Canadian air travellers. Finally, the Trudeau government wants to address so-called “planned obsolescence” where manufacturers create demand for more expensive new versions of existing products by deliberately designing products (e.g. smartphones) to wear out or function less effectively over a relatively short period of time. But the concept of planned obsolescence is open to debate since informed consumers in a competitive marketplace will purchase products at the lowest available price with “lifespan” (and other factors) in mind. Furthermore, planned obsolescence is often—if not always—in the consumer’s best interest. “Value engineering” is a design process meant to use as little material as possible in a product while still delivering an acceptable lifespan. For example, the useful life of a smartphone is limited to a few years due to rapid technological improvements in both software and hardware. It would be wasteful to build a smartphone with a physical lifespan much longer than its useful lifespan. Competition policy bureaucrats in Ottawa are likely ill-equipped to distinguish between efficient and inefficient product obsolescence."
Meme - Roo Barker: "Ahhh Austrians, predicting 29 of the last 1 cases of mass inflation. Congrats! you were right this time!"
Hannah Cox @HannahDCox: "Literally everyone with an Austrian Econ 101 understanding saw it coming..."
Dave Marinara @DaveMarinara: "Insane! Change the name of your publication."
The Economist @TheEconomist: "The sharp increase in inflation over the past year has blindsided many economists. Almost no one saw it coming"
Meme - "Regular: $3.699
E85 - $3.299
Diesel - $5.599
Coffee - $1.299"
Meme - "Blaming rising prices on profit-seeking is like blaming a plane crash on gravity."
"Eggs US (USD/Dozen)
Egg Companies Discover Greed
Greed Forgotten
Egg Companies Rediscover Greed
Greed Forgotten
Egg Companies Rediscover Greed
Greed Forgotten
Egg Companies Rediscover Greed
Greed Forgotten"
Canada's worker shortage problem isn't going away anytime soon - "a lot of people who lost their jobs during the pandemic may not return to them once the economy reopens. A survey in January by U.S. think tank Pew Research Center found that two-thirds of American workers have seriously considered changing their occupation or field of work since losing their job. A survey of 217 American businesses done by the Economic Outlook Group LLC found that 22 per cent were having trouble finding employees because their former workers had chosen new careers or returned to school, while 46 per cent said attractive unemployment benefits were to blame... the shortages that existed before the pandemic, the old-fashioned ones, will stick around. It’s not even a question of money. “Plumbers, believe me, make a lot of money,” Tal said. “We simply cannot attract people.”... “You go to Germany and say you’re a plumber, it’s like saying you’re a doctor, ” he said. “Try to get a plumber in Canada. Good luck with that.”"
From 2021. Labour market shocks have consequences
Of course, the left keeps claiming they just need to raise wages even more. And the right keeps claiming it's due to printing money
The federal food price plan makes no sense. Politically, that may not matter - The Hub - "Families across Canada are struggling with high food prices. On average, food costs 18 percent more in July this year compared to two years earlier. This is much faster than the usual 2 percent annual price growth. Indeed, it’s the most rapid acceleration in food price growth since the late 1970s. And for an average family, this adds roughly $150 per month in additional costs... First, it will browbeat corporations by calling leaders of large grocery chains to “an immediate meeting in Ottawa.” Second, they will consider taxing grocery stores. At first glance, this makes no sense. With a little more thought, it makes even less. Taxing grocers will not ”restore the grocery price stability that Canadians expect,” as they claim. Neither will stern words. But conveniently for the government, that may not matter. There are strong indications that food prices may stabilize soon regardless, allowing the government to claim victory. Let us first examine the government’s main, if only implicit, claim: corporate greed and a lack of competition cause high food prices. Many agree. Corporations are an easy political target, after all. And the government’s NDP partners, for example, focus almost exclusively on this as the primary cause of inflation. I wrote at length on this for The Hub last year. The data is crystal clear: rising profit margins are not a particularly important cause of rising prices. Those conclusions remain as true today as they were then, and they are as true for food as they are for inflation overall. Food and beverage retailers in Canada earned roughly 4.2 cents in profit per dollar sold in the second quarter of this year. Although up from 3.7 cents a year earlier, this is not a major factor in rising food prices. For perspective, this contributed 0.5 percentage points to the 9.1 percent food price increase between the second quarters of 2022 and 2023. That’s not zero. But it’s close. Even over a longer period, changing markups account for little. Since early 2020, grocery prices have risen by 21 percent. Had markups not increased, they’d be up by 20 percent. A key driver of grocery price changes is not corporate greed but farm product prices and input costs, including for producers elsewhere in the world. There’s good news for consumers here: the cost of many important farm inputs has fallen recently... The government will naturally claim credit. It was their harsh words and threat of a tax, they’ll almost surely say, that caused prices to stabilize. It’s hard to see this as anything but a cynical move to mislead Canadians, cast blame on a politically unpopular group, and claim credit for improvements that were beyond their control. That is bad enough. What was worse about the government’s plan was what it did not contain. If politicians wanted to lower food prices, they would repeal policies that deliberately raise them. Canada has several artificial and restrictive agricultural policies. We force farmers to hold costly licenses to produce milk, for example, and impose prohibitive tariffs of almost 300 percent on imports. Want a dairy cow in Alberta? The permit alone will run you roughly $50,000. The effect on prices of this policy—known as “supply management”—should be obvious. Actual estimates are stark. Eliminating supply management for milk would cut prices nearly in half, according to the OECD. This adds up. One in every seven dollars spent on groceries by the typical Canadian family is spent on dairy products.. Support for policies that raise food prices is, to be clear, an all-party problem. Conservatives, Liberals, and the NDP dare not touch it. Dairy farmers have a powerful lobby."
Singh challenges Bank of Canada inflation report, found no profiteering - "“Our estimates suggest markup growth accounted for less than one-tenth of inflation in 2021,” said a BoC report. “Furthermore, by 2022, when inflation reached its highest levels in recent years, growth in markups was near zero or negative.” “Counter to what we would expect if firms were using their market power to raise prices, increases in the markups of Canadian firms do not coincide with the high inflation in 2021 and 2022,” said the report The Contribution of Firm Profits to the Recent Rise in Inflation. “Rather, the data suggest the contribution of changes in markups to inflation was limited.” “Markups did grow after the onset of the COVID-19 pandemic,” wrote the BoC. “However, our results do not indicate this markup growth was inflationary. Most of the growth in markups occurred in 2020, a year characterized by low inflation.”... Singh pointed out that a review conducted by the Competition Bureau (CB) of grocery chains did reveal higher profit margins for these companies."
When you cherry pick data to reach your conclusion. Clearly grocery chains are representative of the whole economy
Trudeau’s record immigration targets contributing to inflation: Scotiabank economist - "Economist Derek Holt joined a growing number of professionals in the industry warning that the record targets are negatively impacting the Canadian economy in several ways. “Alas, no one will win a Nobel Prize in Economics for observing that when you add a massive surge of immigration into a market with no supply, rents and house prices will push higher,” wrote Holt... “Immigration may be adding to domestic strains and pricing power in these sectors. Health care was up 0.3% and auto insurance increased by 0.5%. More drivers, more folks in the health care system,” observed Holt... Instead of heeding calls from economists to bring back immigration to manageable levels, Liberal Immigration Minister Marc Miller has said that he is even considering boosting immigration even further to deal with the housing crisis."
Economics is racist, so
Trudeau Liberals claim victory on inflation as food and housing spike | Toronto Sun - "It’s almost all driven by a drop in the price of gas compared to a year ago while food prices, rent and mortgage payments continue to spiral out of control."
Posthaste: Canadians are desperate for other ways to tame inflation besides rate hikes - "High inflation has two drivers: elevated demand and constrained supply. Governments, the economist suggested, have the tools to tackle both. To slow demand, governments could raise sales taxes, although doing so could lead to higher prices. However, Vachon said inflation is typically tracked excluding taxes. He suggested governments could tackle overconsumption with right-to-repair legislation and address “planned obsolescence” in consumer products. Also on the policy side, governments could look to increase competition and reduce costs for business. “The Fed and other central banks would probably have an easier time if governments opted for policies that would curb demand,” Vachon wrote. Cutting government spending also made Vachon’s list of helpful tactics to slow demand in inflationary times, something he noted governments failed to implement. Many economists argued earlier this year that generous government spending helped to foil the Bank of Canada’s efforts on inflation. TD Economics said in a note prior to the April 2023 federal budget that provincial inflation relief programs, such as one in Quebec, and government subsidies including those for daycare, worked at cross purposes to the Bank of Canada’s efforts to douse demand. “Financial tightening by the Bank of Canada is being mitigated by government programs,” wrote Beata Caranci, TD’s chief economist. During the pandemic, central banks were quick to realign interest rate policies to help economies survive, Vachon at Desjardins noted. However, governments haven’t been as quick to return the favour. Post-pandemic government spending remains high in many countries. Indeed, Ottawa, in its 2023 federal budget, added $43 billion of net new spending. Tinkering with supply, however, appears a longer-term proposal, the Desjardins economist said, with any changes taking quarters or years to come into effect, including measures “to increase the number and size of businesses, introduce new technologies or production methods, increase housing, upgrade infrastructure, improve worker training.” Governments could also take steps to avoid supply shocks, a phenomenon the pandemic brought sharply into focus."
Pace of government spending ‘not helpful’ in efforts to tame inflation: Macklem - "The Bank of Canada’s efforts to tame inflation by raising interest rates are at odds with the projected pace of government spending, says governor Tiff Macklem."
Weird. Doesn't he know what Trudeau supporters do - that inflation is a global phenomenon and government spending has nothing to do with it?
