Inflation will take care of itself?

At ValueTrend, we utilize three distinct quantitative analysis tools to make better informed decisions. We employ traditional trend analysis (chart formations, volume, moneyflow, momentum and moving averages), macro risk analysis  (Bear-o-meter), and key fundamental metrics. You can learn to do this too. The system is taught in my Online Technical Analysis Course. Despite yet another oversold rally, our Bear-o-meter reading on September 1 warned us of the precarious risk/reward tradeoffs – the market could turn on a dime upon any bad news. As such, we didn’t take the bait, and maintained our near 40% cash weightings. Yesterday’s market move illustrated that risk potential. As I teach in my course –

“A system will save you from yourself”.

I am going to do a full market coverage over the weekend and post a blog to keep you updated on the current technicals. Meanwhile – there is a very important subject that I must address.

OK–here’s your warning. The rest of this blog is a rant. I simply have to point BS out when I see it. And the recent announcement by the Canadian government to provide “inflation relief” by raising more debt and spending yet another 4.6 billion dollars of our money is one of those “BS Baffles Brains” policies that sound good – until reality hits. A reoccurring theme from the current government.

Amongst the numerous colossal lies, nonstop ethics violations, and oppressive authoritarian politics coming from the current Canadian government, this newest piece of misinformation is right up there. The government just announced a $4.6 billion package that will supposedly give relief to low income families. Basically, their NDP overlords have pushed to spend freely on injecting/ printing more money for free dental, HST rebates, rent relief, and other programs.

Lets get something straight. The claim/ BS  of this policy lies in this statement by our PM: “They (the funds) are sufficiently targeted that we are confident that they will not contribute to increased inflation”. This, brought to you by the Liberal Arts student who, 5 years ago, claimed he would “build the economy from the heart out” and “the budget will balance itself”. You know, the guy who literally (not figuratively) admitted cannot calculate simple math. Yup-that guy. And his Finance Minister Freeland, also a Liberal Arts graduate. That’s comforting to know about our Finance Minister, isn’t it?

Artist for hire

As an aside – I cannot paint a picture to save my life. Moreover – I know nothing about art.  Do you think I should be hired at Ontario School Of Art & Design (OCAD) as an art expert? Why not?  After all, the two people in charge of our economy have the equivalent of my art skills in their knowledge in finance and economics.

Dear OCAD-  Here is my submission of art expertise for your consideration as head of your organization:

Anyhow…

Its nice to give the poor free stuff. But the fact is – injecting money and creating more debt, no matter how noble the cause, absolutely increases money supply in the system. And that’s inflationary. The bottom line in economics is and always will be: Supply/Demand. If more money is printed and circulates – no matter how it gets into the system- it adds to money supply. Labor prices go up. Prices go up. And then, that money/ debt, needs to eventually be paid back. It doesn’t just fade away – for more on that, read this for a deep dive on MMT.

When you print money, it may (arguably) temporarily help.  But the inflationary effect of increased money supply will catch up.  The poor, who supposedly benefit up front, find buying goods and services even more onerous in the future as inflation soars higher. I implore you  -please, please, please watch this YouTube by Brian Lilley explaining the utter impotence of Trudeau’s fantasy inflation program. By watching the 5 minute video – sadly, you will know more about economics than our PM.

But don’t just take my word for it….

Economists unite!

Numerous  economists and “real” finance people (liberal arts types and drama teachers excepted) “have been cautioning political leaders not to make inflation worse by injection billions in new spending into the economy (Globe & Mail).

Even the former Liberal Finance Minister Bill Morneau – the man who stood beside Trudeau with glimmering eyes as they announced their massive tax n’ spend policies, finally admitted the ill effects and impact on our countries future – entirely due to their own policies – see this link here.

Another example – CIBC chief economist Avery Shenfeld (a man I learned to respect during my days at CIBC) said “In a period of high inflation and excess demand, cutting taxes or handing out cheque can add fuel to the inflationary fire, and make the job of a central bank that’s raising rates to cool demand all that more troublesome.

OK – now that I have yet again, through a blog,  pointed out the absolute idiotic lunacy of the current Canadian “finance” team – I would now like to make the next politically incorrect (yet fiscally correct) suggestion. That is – somebody in charge has to control debt, stop printing money, and adopt a system to “pay as you go”.  PC leadership winner and actual finance expert Pierre Poilievre campaigned on such a program, where social programs are NOT eliminated –  but new expenditures are ONLY added by chopping a less effective expense. Say -gender studies, or parliament member raises, are chopped.

Ooooo…this will no doubt get me some hate mail by less informed far left & financial unaware readers. BTW- I delete the rabid emotional comments, so don’t bother.  Yes, I support Pierre Poilievre. But frankly, I’d support ANYONE who will get Canada’s fiscal house in order. I voted for Jean Chretien in the 1990’s. That’s right – I voted for a liberal! Twice! Chretien, and Paul Martin (an ACTUAL Finance Minister) knew how to do basic math! They understood economic basics, and how to balanced the budget – like Poilievre is suggesting. Wow! What a concept!

What more can you ask from the people in charge of your economy?

Meanwhile – I look forward to OCAD’s response to my above noted art submission and application to head their school. I am sure I could add real value to their fine institution by building their art and design program from the heart out.

Back next week with a full market analysis.

 

12 Comments

  • Traditionally a Liberal supporter, but NO rabid emotional comments here – I ABSOLUTELY AGREE with your RANT – completely – well done !!!

    Bruce

    Reply
  • At a technical analysis meeting the guest presenter, a super qualified finance guy, presented data showing that inflation will be around for a while… some years. Central banks seem helpless to deal with it. Probably due to the actions of unqualified politicians over the years… like the ones you mention. As someone said, “government couldn’t run a bubble gum machine.” At least for the moment we still have elections.

    Reply
  • Hi Keith,

    The Canadian dollar dropped to 0.76 following the announcement.

    What fascinates me is what is the “summed result” if other countries are worst off, or, just like Trudeau, spend by lowering taxes, pay for benefits, help with rental. Would that cancel out and our loonie remains strong relative to most currencies? Emerging markets are is a terrible financial state, and France/Italy’s balance sheets are terrible (debt to GDP), as for England, it’s inflation is above 12%.

    Curious times.
    Matt

    Reply
    • The loonie relies on the relative relationship to what the USD is doing worldwide AND our GDP (commodity biased economy), our rates, and our credit ratings.

      Reply
  • I thought Poilierve was encouraging Trudeau to do something to help Canadians who were suffering from high inflation. I personally feel it better to target the poor who are the most in need. I think tax breaks to everyone would do little to help the most vulnerable in society since the amount taxes the poor pay is probably neglible.

    Reply
    • Its the long termed effects of that money in circulation. Inflationary. Full stop–economists everywhere agree with that statement. Watch the video I implored readers to watch.

      Reply
  • Completely agree with your assessment and I myself supported Liberals Chretian/Martin due to their centrism and fiscal responsibility over the PC.

    My question Keith is what has happened to the electorate ever since the late 90s/early 2000s? Canada used to be a centrist country but now it seems like we are pretty far left almost like the Europeans. Seems like the urban centres like downtown core Toronto have really shifted further left like the NDP? I speak to my friends who don’t like Trudeau because of his overt focus on being “woke” all the time, but they also already refuse to vote for Pierre Polievre and the Conservatives. There seems to be a branding problem where the PC party is considered “evil” and arrogant jerks.

    Seems like all western countries have gone left due to taking for granted our past economic successes and too focused on social issues now (first world problems). Would you agree that we’ve essentially bred an entire generation of millenials who refuse austerity at all costs and overly sensitive on social issues? It seems like it’s going to take another generation of young folks who will finally wake up to reality and realize how destructive inflation is to the middle working class…

    Reply
    • Absolutely and completely true assessment – you are so correct about the swing to the left. IMO it is a combination of the WEF “Reset” agenda -it is not a conspiracy theory–their website talks about the left-ist conversion tactics for “new capitalism’ i its right on their site! – many world leaders have bought into the agenda including and especially our boy and girl here. Also, there has been a propaganda policy in todays schools–it started when my kids were young about 15 years ago–teachers would boldly influence the kids to hate conservatives and business / wealth etc. My kids would come home and describe these class conversations–it was very disturbing to hear, and now it is even more predominant. WOKE-ism is ironically not very awake when it comes to the issues you describe. Finally–there is a strong left-wing agenda by the mainstream media in NA. They deny it. Ha! Just open your MSN page and read the headlines, then try to deny the left bias.
      Anyhow–here is hoping for a change!

      Reply
  • Hi Keith,

    Thanks for the ask anything video. It was most informative!

    In response to my question about where to place your cash, You and Craig suggested High Interest Savings Accounts. I checked out rates at ratehub.ca. They had 1 trust company paying 3.30%. Not a bad return for little risk. I also checked the savings account mutual fund RBC Direct investing offers (RBF2010). It now pays 2.85% and once my sell order is received, I can place a buy order for another security. Being in cash now is certainly more lucrative than last year.

    Reply
  • It’s shocking how much money Trudeau is spending. At least one basic economics/finance course should be mandatory in high school. it’s great you mentioned Creatian/Martin. Both although liberal were actually trying to balance budgets.

    As for free dental care I’m sure it will turn into a massively expensive boondoggle similar to healthcare where finding a dentist will be difficult. The people I know that are calling for free dental are smokers with poor diet habits and poor self care habits. If you do simple at home dental self care the chances that you will need crazy expensive dental procedures are greatly reduced. But of course now all of us will have to pay for everyone (expect those covered by employer plans). It will not end well.

    Reply
    • Dave I have always liked you because you are as uncomfortably factual, which today means being politically incorrect, as I am.
      As Leslie Nelson in the movie Naked Gun, said: “The truth hurts. Not as much as sitting on a bike with no seat. But still. It hurts”

      Reply

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