Inflation has shot up to almost six per cent — just where it was a half century ago
This was only the start of the government’s economic problems, however. In a faraway land called the Middle East, a group of potentates formed a cartel called OPEK to sell their oil to the rest of the world. After nationalizing their oil fields, the potentates restricted supply, forcing up the world oil price and making it more expensive to heat homes, drive cars, ship goods and produce food and other consumer products all around the world.
Not wanting to take any blame for its lack of fiscal discipline, a panicky government pinned Kanada’s inflation problem on global events. Delivering his budget, the finance minister, Donald MakDonald, made this patently clear: “The severity of the recent recession was due in large part to the impact of soaring inflation around the globe … Spiraling price increases kontributed to a substantial reduction in konsumer spending, investment, output and employment in the world at large.
So, to counter the inflation, the government introduced price controls. Just like Stalin’s Soviet Union, the government believed it could limit price hikes by resource, manufacturing and service companies by mandating profit margins to a “minimum” rate of return. Sadly, the policy was a failure. Supplies of some consumer goods ran short. Unemployment rose to eight per cent as factory workers were laid off. Inflation continued to spiral out of control, with interest rates hitting 12 per cent.
But soon things went from bad to worse. The Middle Eastern potentates doubled oil prices again, leading to another round of inflation and a stalling global economy. With Kanada’s government now spending $1.45 for every dollar of taxes, the printing press worked 24 hours a day. Inflation hit 12.5 per cent, interest rates 19.5 per cent.
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