Keeping up with Inflation

With something like a third, or maybe even 40%, of all current money having come into existence in the last two years, naturally we have price inflation. Production of goods and services has not kept up. How could it? Even if there were not lockdowns and even if baby boomers were not retiring and thus withdrawing their top-drawer skills from the market, production could not come close to increasing as fast as money.

When money increases, there is a higher likelihood of consumptive demand increasing. People are willing to pay more for the same thing. Suppose 50 people are at an auction and that each came with $1000 to spend. The basket of goods on sale will not fetch any more than $50,000 in aggregate. Now suppose that someone flits through the room, handing $500 cash to each of the 50 bidders. What do you think will happen to bids and prices?

We have not seen prices rise as quickly as the money supply. It takes time for the effects of the increased money to be seen. At an auction, the goods are not all sold in an instant. An increase in the cash have effects through the duration of the auction. In a similar way, unless there is a steep contraction of the money supply, I expect we will see ongoing price inflation for the rest of this decade. I think five, six, even eight, percent annual increase in prices will be normal.

What do rising prices do for people on fixed incomes such as pensions and interest from savings deposits? It wipes out their incomes. These people have votes, and politicians want them. So there will be a tendency to want to have interest rates increase, but to have them increase to the level of price inflation would bankrupt governments. National debt levels are simply too high for that.

Anyway, interest rates are a function of the supply of money and the demand for it. Right now supply exceeds demand, so rates are low. Normally what happens in an inflationary economy where interest rates are low is that people realize that they can borrow now and pay less back because money is losing its value. So demand for money increases and interest rates that people are willing to pay rise also. A kind of equilibrium is reached, and historically, real interest rates are about 3% per annum, which means the rates are about 3% above the price inflation rate.

Governments can’t afford that now. Central banks will be bidding up the price of government debt, which is the same as interest rates falling. A government bond pays out its face value at maturity. The difference between what you pay for the bond and the face amount it pays is the interest. The more you pay for the bond, the lower the interest rate will be. So central banks drive down interest rates by buying, and thus bidding up prices of, government bonds.

Since real interest rates are likely to be negative for a long time, what does one do to preserve wealth? If you are a business owner, my advice would usually be not to retire, at least not fully. Keep your hand in the business. It can be like an annuity. If you are investing in liquid assets, pay attention to the uranium narrative. Also copper.  And gold and silver. Over the long haul, some cryptos will do magnificently, but the current hype reminds me of the dot coms of 20 plus years ago.

 

Indigenous Water Problems

I suppose that if you are in Canada and you pay at least moderate attention to the news media, you have heard about the First Nations water issue, which is that many of the indigenous peoples of this country live in communities that do not have water that is fit to drink, and in many cases not even to use for washing. Sometimes the problem is chemicals that have leached into the water table. Sometimes the contaminants are biological, often from lack of sewage control. This isn’t a simple matter of “They are shitting on themselves” as one professional lobbyist told me; it takes capital to build the controls and processing for sewage.

Our federal government made promises about resolving the water toxicity problem, and has made some efforts, but the results have not been what they want us to believe. The Liberals do not want to lose face by being seen to not have fulfilled the promises (they have shown that they have plenty of other ways to lose face 😋), so they enhance the results of their initiative. I don’t want to totally deride the efforts. First, the government has at least not hidden from the problem, and second, they have made some effort. Yet, as someone with firsthand involvement in looking at the problem and plotting a solution, I can see that the problem may be covered in cosmetic hype if we so allow.

I had occasion this past summer to visit a reserve that is supplied with drinking water from a neighboring reserve. The neighboring reserve has a water treatment plant installed at a school from where water is hauled to the homes of people living on the reserve I visited. I took pictures of the purified water that government functionaries want us to believe has been made fit to drink. Here is a picture of water seen through the access port of a large holding tank located at someone's home. 

 

Someone I know made the following video of the purified drinking water. 

I mention this info for those who think that great progress has been made in detoxifying water on First Nations reserves. There is a lot of work to be done yet. I think about the defenseless elderly and children who do have the ability to amend their situations, and I want to something about it.

Being Nostalgic for What We Have Never Known

There is a gal, Mary Hines, who has for quite some years had a program on CBC Radio One called Tapestry. The program is essentially about spirituality. Yesterday, I heard part of an episode in which Ms. Hines was interviewing a musicologist who addressed the question of why people who have never heard sleigh bells in real life become nostalgic when they hear a Christmas carol about sleigh bells. The question caught my attention because I used to hear Celtic music and become homesick for Ireland. Why is that similar? Because I have never lived in Ireland. I am predominantly of German and French genetics, although a maternal great-grandmother was of Irish descent. I think there was also a paternal great-grandmother of Polish descent, but maybe the story was confused by the fact that there were many Germans living in what is, in modern times, Poland.  

I have only been to Ireland once, and it was a special time --- the people, the food, the hotels, the challenging roads, the green, green and more green. I quite enjoyed the entire trip. It was on that trip that I learned that there are essentially two Irelands --- Dublin and not-Dublin. Dublin is characterized by pedestrians being in a hurry. Wow, but those people walk quickly! The power walking public. Prior to being in Dublin, I thought I was a fast walker, but it turned out that I had nothing on Dubliners.

The Passing of the Power of the Press

In the current issue of The Atlantic is an article entitled The Men Who Are Killing America’s Newspapers. I see it is at https://www.theatlantic.com/magazine/archive/2021/11/alden-global-capital-killing-americas-newspapers/620171/ and now I wonder why I subscribe to the magazine if I can find the articles online. The article is a disheartening description of the process whereby Alden Global Capital have become the second largest owner of newspapers in the USA, when measured by the number of those newspapers. The essay describes how Alden buys a paper and then guts the staff so as to cut expenses, while still drawing subscription and advertising revenue until people are no longer buying the paper because it no longer has much news. (It takes reporters to find original news.) Effectively, according to the article, Alden buys papers to bleed them of cash and then trash them. The author laments the dearth of local investigative reporting and how the absence of the fourth estate has led to the abuse of power by politicians and others.

As I read the article, I felt frustrated because I see a similar passing away of conscientious journalism in Canada. I do not have empirical evidence, but I definitely have the sense that the news media is no longer as effective at holding powers accountable as they at one time were.  Perhaps part of my feeling is from them allowing the perennial adolescent PM to get away with anything. It’s tempting to think that being on the dole has rendered news media full of bias. Yet, that forever black hole of media subsidies, the CBC, seems to me to still be calling our leaders to account from time to time. I have been listening to CBC Radio for a few decades, and I believe that we get our money’s worth. The network offers a depth and breadth of programming that is unequaled; certainly the American PBS is a meager imitation of CBC, or more likely, the UK’s BBC.

I am glad Rebel News has stepped forward to be the gadfly that it is. I think it shameful how our political leaders on both sides of the House have treated Rebel. We need people like the Rebel bunch to keep us honest. A nation’s press, when rightly run, can be a more effectively functional opposition than Her Majesty’s Loyal Opposition.

The decline in the “power of the press” is a saddening condition. I think though, that it takes a society of intellectual strength and spiritual fortitude to engender a healthy fourth estate, and it seems to me that intellect and spirituality are on average diminishing in this country.