The government continues to pump fresh spending into an already overheated economy, which could make things much worse, for much longer
We were assured that consumer price inflation, which Canadians deal with day-to-day on food, power, shelter, furniture and transportation, was “transitory,” but it’s now clearly here to stay awhile and will continue to devalue salaries and savings. With consumer inflation now exceeding five per cent, a worker who receives a five per cent pay raise this year will in effect be getting a pay cut.
The great irony is that much of this new spending is funded by inflation itself. The federal government had a revenue windfall thanks to rising oil prices, along with increased tax income from rising consumer prices and corporate profits. The government also has an easier time paying back its debt when inflation soars and interest rates remain low, because they pay their debts back in dollars worth less than the dollars they originally borrowed.
This is why inflation can be just as detrimental to a worker’s wallet as a significant income or sales tax hike. It also puts Canadians at serious economic risk. Historically, runaway inflation has always been followed by a recession, if not a depression. The bubble always bursts.
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