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.

Put More CO2 into the Atmosphere

This evening I was reading about a personal carbon allowance being suggested in some circles as a way to control our ability to put carbon dioxide into the atmosphere. The idea is that your activities would be monitored, and you would have to decide whether you are traveling or having a campfire. Once you have used up your allowance, you would be excluded from CO2 production until your allowance was renewed. I doubt I would be able to find any credible scientists that would endorse such stupidity. Life on earth is carbon based, and CO2 is how carbon is delivered. Plants need CO2. We have historically low levels on CO2 in the atmosphere --- roughly 400 parts per million. This is up from about 280 one hundred fifty years ago. When I consider that 150 ppm is as low as we can go before plant life is exterminated from the earth, I find the current demonization of CO2 sinister and asinine. There is a reason why plants anciently were larger than today’s fauna: today’s plants are starving for CO2.  This is why greenhouse operators buy CO2 to inject into greenhouse air, to increase CO2 to about 1000 ppm. 

WE NEED MORE CARBON DIOXIDE IN THE ATMOSPHERE. It isn’t toxic to breathe, at least not at any levels we could possibly widely distribute. You exhale air that is 40,000 ppm, and when you breathe in your exhalation because of the mask you are wearing…..well, you get the idea.

Instead of being led around by a little girl in pigtails, spouting what she has been told to say by those who are manipulating her, we need to use our brains. WE NEED PLANTS, AND PLANTS NEED CO2.  Let’s allow them to have it and keep this planet alive.  Our political leaders are unwittingly (I am trying to be charitable) coercing us to destroy life. I wonder why…..

 

The Upcoming Election and the Housing Issue

It cheers me up to see the Conservatives pulling ahead in the federal pre-election polls. The Liberal government has been mediocre at best, and their ineptitude is displayed in their election campaign as much as it is in their governing style. They knew they were calling an election, but they didn’t even have a platform to announce for the first few days after the Writ. But what should we expect when an immature prime minister selects a cabinet on the basis of demographics instead of ability and commitment. And the breaches of integrity by this PM are now legendary. He has overstayed his welcome. It’s time for him to leave.  

Attention seems to be increasingly paid to the housing issue. The various political parties are blaming it on lack of housing supply. In some regions, housing prices have doubled in the last year or two, but population hasn’t. This is not a problem of supply of housing; it’s a problem of supply of money. There is too much of it. The Bank of Canada, allied with the Liberal government, has created way too much money, and I am not convinced it has been done legally either. There are rules about how much of a government’s deficit the Bank of Canada is allowed to fund. And the government has distributed new money unequally. People do not benefit from the new money in proportion to their existing financial status.  The result is that many people who need housing did not receive much of the increase in money, but they are faced with prices that have increased because people with surplus funds are able to buy more.

I am all for funding basic government functions (the protection of life, liberty and property) with newly created money provided that all tax laws were repealed. But our government uses new money to fund activities that are detrimental to the citizenry while taxes increase in some cases and stay the same in others. They are out of control and they should go.

Adapting to Climate Change is a Better Strategy than Preventing it

I notice that one of the biggest issues for people leading up to the September 20 federal election is still the environment --- same as with the 2019 election. Yes, covid and the economy are among the top issues also, but a very recent Angus Reid poll shows that climate change is the number one issue on people’s minds. Parties are scrambling to develop strategies to slow down or reverse climate change. So far as I can tell, we will not succeed in doing so because nothing man is doing is causing the problem. My comments at https://gordonfeil.blogspot.com/2019/09/ are still my belief in the matter.

Climate change is inevitable. It is solar related, not man related. What we need to do is develop policies to help us adapt to the inevitable. The targets we have set for ourselves to eliminate the petroleum powered cars and to build massive solar and wind farms are impossible to meet with current mining technologies. Think for a moment. An electric car battery requires minerals obtained from processing 250 tons of ores. To replace the world’s billion cars with electric versions would require 250 billion tons of materials to be mined and refined.

Assuming that the average car only traveled 10,000 km per year, and that a recharge can power a vehicle 500 km, which is very generous, we are talking about 20 billion recharges a year. We don’t come close to producing enough electricity. Solar and wind will not do the job. Firstly, they are not serious solutions in the latitudes and regions where energy is most needed, and secondly, to produce a single wind turbine takes 45 tons of non-recyclable blades made from plastic ---- petro-chemicals --- and solar panels of the quantities that would be needed require prohibitive amounts of rare earths and other minerals. Uranium might do the job, but not wind and solar.

What we need to do is plan how to cope with climate change, not how to prevent it.