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Bank of Canada taught by history about high inflation – CTV News

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OTTAWA –

Canadians are seeing the cost of borrowing rise rapidly as the Bank of Canada takes historic action to slow the soaring of prices, having learned costly lessons from history when central banks let inflation run rampant.

The Bank of Canada recently raised its key interest rate by a full percentage point — the largest single rate hike in more than two decades — as it tries to cool domestic demand and bring down inflation expectations.

An unusual move for an unusual time: inflation reached a 39-year-high of 8.1 per cent in June, after years of a low, stable and predictable consumer price index in Canada.

But throughout much of the 20th century, price stability wasn’t a given in the Canadian economy.

TD chief economist Beata Caranci said inflation today might feel especially challenging because Canadians have been shielded from inflation volatility for decades.

“We haven’t had this challenge in a while,” Caranci said.

Canada’s last experience with high inflation came in two waves during the 1970s and 80s and hit a peak of 12.9 per cent in 1981.

In 1973, adverse weather sparked a global food shortage and an embargo on OPEC oil drove energy prices up. Several years later, a second energy crisis was brought on by the Iranian Revolution in 1979.

And while the drivers of high inflation are relatively similar — global circumstances pushing up food and energy prices — inflation today isn’t expected to climb as high or be as persistent.

That’s because the approach of central banks is now markedly different, said Western University economics professor Stephen Williamson.

“A big difference now is sort of a strongly held notion that it’s mostly the job of the Bank of Canada to look after inflation control,” said Williamson. “In the 70s, that wasn’t true.”

For the bulk of the 20th century, central banks had not yet developed strong and effective mandates to maintain a stable reading of inflation, Williamson said. Instead, they tried to control inflation through the money supply.

Economists at the time believed inflation could be managed by controlling the amount of money circulating in the economy. However, central banks found this tactic to be unsuccessful.

Caranci said another reason why the Bank of Canada was slow to raise rates was that central banks were historically hesitant to hinder economic growth through higher interest rates.

TD senior economist James Orlando wrote an analysis in April that compared high inflation today to the 1970s and 80s. He said the Bank of Canada was slow to raise interest rates in the 1970s, and by the time the bank acted, it was too late.

“Inflation expectations adjusted upwards, resulting in even higher inflation over the subsequent years,” said Orlando.

Interest rates in the 1980s eventually rose to as high as 21 per cent.

In 1982, the Bank of Canada announced it would no longer target the money supply and instead would turn its focus to interest rates.

Canada’s turbulent experience with high inflation also led to the Bank of Canada’s mandate to maintain a target inflation rate. In 1991, the Bank of Canada and the minister of finance agreed on an inflation-controlled framework to guide monetary policy.

“We believe the Bank of Canada has learned from history,” Orlando wrote in his comparison of inflation in the two eras.

This time around, Canada’s central bank is still facing criticism for taking too long before starting to raise its key interest rate. By comparison, though, the Bank of Canada has acted faster and more forcefully.

“We’re hearing different dialogue coming out of the central bank today that there is a willingness to sacrifice growth, and to even have the unemployment rate rise,” said Caranci.

In its latest rate announcement on July 13, which surprised economists who were expecting a three-quarters of a percentage point hike, the central bank’s message was clear: it’s not afraid to move aggressively to clamp down on skyrocketing inflation.

At the same time, economists like David MacDonald from the Canadian Centre for Policy Alternatives have used history to warn raising rates too quickly can trigger a recession, as it did in the 80s.

However, Caranci said there are important differences between the two time periods, including a different makeup of the economy and the existence of safeguards such as mortgage stress tests.

“The challenge with doing comparisons of periods, especially when you get that far back in history is, there’s been so many differences at play,” said Caranci.

In May, Bank of Canada deputy governor Toni Gravelle delivered a speech that focused on why comparisons between stagflation in the 1970s and the current inflation environment were “unjustified,” citing strong economic growth, a tight labour market and historically low unemployment.

And of special importance, Gravelle said today’s Bank of Canada is equipped with the policy tools it needs to rein in inflation.

“Since the 1990s, we and other central banks around the world have had success with inflation targeting,” he said. “And we are committed to bringing inflation back to target.”

This report by The Canadian Press was first published July 21, 2022. 

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2 Navy aviators are declared dead after a fighter jet crashed in Washington state

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MOUNT RAINIER NATIONAL PARK, Wash. – Two crew members who were missing following the crash of a fighter jet in mountainous terrain in Washington state during a routine training flight have been declared dead, the U.S. Navy said Sunday.

The EA-18G Growler jet from the Electronic Attack Squadron crashed east of Mount Rainier on Tuesday afternoon, according to Naval Air Station Whidbey Island. Search teams, including a U.S. Navy MH-60S helicopter, launched from the air station to try to find the crew and crash site.

Army Special Forces soldiers trained in mountaineering, high-angle rescue and technical communications were brought in to reach the wreckage, which was located Wednesday by an aerial crew resting at about 6,000 feet (1,828 meters) in a remote, steep and heavily wooded area east of Mount Rainier, officials said.

The aviators’ names won’t be released until a day after their next of kin have been notified, the Navy said in a statement Sunday, adding that search and rescue efforts have shifted into a long-term salvage and recovery operation as the cause of the crash is still being investigated.

“It is with a heavy heart that we share the loss of two beloved Zappers,” said Cmdr. Timothy Warburton, commanding officer of the aviators’ Electronic Attack Squadron. “Our priority right now is taking care of the families of our fallen aviators. … We are grateful for the ongoing teamwork to safely recover the deceased.”

Locating the missing crew members “as quickly and as safely as possible” had been top priority, Capt. David Ganci, commander, Electronic Attack Wing, U.S. Pacific Fleet, said Thursday.

The EA-18G Growler is similar to the F/A-18F Super Hornet and includes sophisticated electronic warfare devices. Most of the Growler squadrons are based at Whidbey Island. One squadron is based at Marine Corps Air Station Iwakuni, Japan.

The “Zappers” were recently deployed on the USS Dwight D. Eisenhower.

The search took place near Mount Rainier, a towering active volcano that is blanketed in snowfields and glaciers year-round.

The first production of the Growler was delivered to Whidbey Island in 2008. In the past 15 years, the Growler has operated around the globe supporting major actions, the Navy said. The plane seats a pilot in front and an electronics operator behind them.

“The EA-18G Growler aircraft we fly represents the most advanced technology in airborne Electronic Attack and stands as the Navy’s first line of defense in hostile environments,” the Navy said on its website. Each aircraft costs about $67 million.

Military aircraft training exercises can be dangerous and sometimes result in crashes, injuries and deaths.

In May, an F-35 fighter jet on its way from Texas to Edwards Air Force Base near Los Angeles crashed after the pilot stopped to refuel in New Mexico. The pilot was the only person on board in that case and was taken to a hospital with serious injuries.

Last year, eight U.S. Air Force special Operations Command service members were killed when a CV-22B Osprey aircraft they were flying in crashed off the coast of Japan.

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This story has been updated to correct the Navy says it has declared the crew members dead, not found them dead.

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Associated Press writer Jesse Bedayn contributed to this report from Denver.

The Canadian Press. All rights reserved.



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Georgia authorities investigating a dock gangway collapse that killed 7 on a historic island

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SAVANNAH, Ga. (AP) — Georgia authorities said Sunday they are investigating the “catastrophic failure” of a dock gangway that collapsed and killed seven people on an island off the state’s Atlantic seacoast, where crowds gathered for a celebration by the island’s tiny Gullah-Geechee community of Black slave descendants.

“It is a structural failure. There should be very, very little maintenance to an aluminum gangway like that, but we’ll see what the investigation unfolds,” Georgia Department of Natural Resources Commissioner Walter Rabon said at a news conference, a day after the tragedy on Sapelo Island.

He said three people remained hospitalized in critical condition from Saturday’s collapse.

Hundreds were visiting Sapelo Island for a Cultural Day event when disaster struck

The gangway, installed in 2021, gave way as an estimated 700 people visited largely unspoiled Sapelo Island, about 60 miles (nearly 100 kilometers) south of Savannah and 7 miles (11 kilometers) offshore. No bridge connects the island to the mainland. People traveled there Saturday for the annual fall Cultural Day event spotlighting Hogg Hummock, home to a few dozen Black residents. The community of dirt roads and modest homes was founded after the Civil War by former slaves from the cotton plantation of Thomas Spalding.

Rabon said “upwards of 40 people” were on the gangway when at least 20 fell into the water. Installed in 2021, the gangway connected an outer dock where people board the ferry to another dock onshore.

Rabon said his agency had extra staff working, 40 people total, on Saturday because of crowds. After the collapse, the U.S. Coast Guard and local sheriff’s and fire departments rushed to the island to help, using boats and helicopters.

A ferry worker says he tried to help but two people were already dead

Ed Grovner was working as senior mate on one of the ferries taking people between the island and the mainland. He told The Associated Press the ferry pulled up to the dock a short time after the collapse and crew members saw orange lifejackets bobbing in the water that had been tossed in to help people who had fallen. Grovner said he and other crew members tried to help a man and a woman, with someone administering CPR, but they were already dead.

“I couldn’t sleep last night,” Grovner said. “My wife said I was sleeping, I was hollering in my sleep, saying, ‘I’m going to save you. I’m going to save you. I’m going to get you.’”

He sighed deeply and said: “I wish I could’ve did more.”

Small coastal communities descended from enslaved island populations in the South — known as Gullah, or Geechee in Georgia — are scattered from North Carolina to Florida, including on Sapelo Island. Scholars say their separation from the mainland caused residents to retain much of their African heritage, from their unique dialect to skills such as basket weaving.

Hogg Hummock resident Jazz Watts was at the festival site, where visitors gathered for demonstrations on crafting quilts and fishing nets while sampling island foods like smoked mullet and gumbo, when word spread of the collapse.

Watts said when he arrived, he saw emergency responders and civilians pulling people from the water and trying to administer CPR and other aid. Some of the dead were covered with blankets.

“It’s devastating,” Watts said. “When you see people being carried that are wrapped in blankets and they have died; it’s traumatizing to everyone.”

A human chain was formed to pass victims from the water to the shore

Resident Reginald Hall was among those who charged into the water, where an outgoing tide created a strong current that was pulling victims toward the ocean.

Hall said he was handed a 2-year-old child and passed her along a chain of bystanders to shore, roughly 60 yards (55 meters) away. He then helped carry blanket-wrapped bodies.

“It was chaotic,” Hall said. “It was horrible.”

JR Grovner loaded an injured woman into the back of a pickup truck and drove her to a field where a helicopter was evacuating victims. The ground was thick with tall grasses that camouflaged holes dug by wild boars, he said.

Sapelo Island residents in 2015 sued McIntosh County and the state of Georgia in federal court, arguing they lacked basic services including facilities and resources for medical emergencies. In a 2022 settlement, county officials agreed to build a helicopter pad on the island.

JR Grovner, Hall and Watts all said that still hasn’t happened. Patrick Zoucks, the McIntosh County manager, did not immediately respond to an email message seeking comment.

The ferry dock was rebuilt in 2021 after Georgia officials reached a settlement in the same lawsuit, in which island residents complained that state-operated ferry boats and docks failed to meet federal accessibility standards for people with disabilities.

Grovner said he complained to one of the ferry captains about four months ago that the gangway to the ferry didn’t seem sturdy enough, but nothing happened. Rabon said he wasn’t aware of any complaints being made.

Watts said a private healthcare provider had planned to open a clinic in a county-owned building long used as Sapelo Island’s community center. But the deal fell apart when county commissioners decided to lease the space for use as a restaurant.

None of the seven dead were island residents, Rabon said. And Watts, Hall and JR Grovner said they weren’t aware of any family members of island residents among the dead.

Rabon identified one of the dead as Charles Houston Jr., a chaplain for the Natural Resources agency.

Investigators are now trying to understand why the walkway failed

A team of investigators with expertise in engineering and accident reconstruction — with assistance from the Georgia Bureau of Investigation — was on the site Sunday to begin probing why the walkway failed.

In 1996, Hogg Hummock, also known as Hog Hammock, was placed on the National Register of Historic Places, the official list of treasured U.S. historic sites.

But the community’s population has been shrinking for decades, and some families have sold their land to outsiders who built vacation homes. Tax hikes and local zoning changes have been met with protests and lawsuits by Hogg Hummock residents and landowners. The zoning changes approved in 2023 doubled the size of homes allowed in Hogg Hummock, prompting residents’ fears that larger homes would lead to tax increases that could force them to sell land their families have held for generations.

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Associated Press writer Emily Wagster Pettus reported from Jackson, Mississippi.



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In one portrait, an AP Photographer tells the story of how difficult the job of a miner is

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STONAVA, Czech Republic (AP) — AP photographer Petr David Josek started working with The Associated Press in 2002 and became a full-time staffer in 2011, when he got the Prague bureau job. Since then, he has covered the Iraq War, eight Olympics and four World Cups among numerous sports and news assignments. Here’s what he had to say about this extraordinary photo.

Why this photo?

When walking through the dark shafts of the mine you come across quite a few miners, but this guy’s unique physique struck me. I figured it would be nice to get some portraits of the man. Luckily, he walked past me more than once, so I had few chances to shoot a couple of frames as he was doing his work.

How I made this photo

I shot this picture on 24mm 1.4 lens at 1000/sec. Going to the mine is somehow specific. It’s a very dusty and dark environment, so I figured less equipment is better for that. I took two cameras that I covered with foil for protection from the dust and two fixed lenses, 24 mm and 85 mm. I was equipped with a flashlight that you use to navigate through the mine – it also helped for the pictures, as you can light up your subject.

Why it works

I had several pictures of this man but I think in this one, the combination of his strong posture, his facial expression and the dirt on his body reflects the best, just how hard this job really is. Also, the fact that his eyes aren’t seen makes it a bit more mysterious.

For more extraordinary AP photography, click here.

The Canadian Press. All rights reserved.



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