Connect with us

News

Inflation in Canada soared 40 years ago. Is today’s price surge any different? – Global News

Published

 on


Inflation in Canada continues to surge despite the Bank of Canada’s efforts to tamp down on price growth, with some economists and the central bank’s own governor expecting an even higher reading in the June report due Wednesday.

Inflation, which hit an annual rate of 7.7 per cent in May, has topped the Bank of Canada’s estimates through the first half of 2022.

Tiff Macklem, who holds the top post at the central bank, told a group of business owners last week that inflation will likely top 8.0 per cent in due course. The Bank of Montreal (BMO) said in its updated inflation forecast earlier this week that it now expects inflation will average 8.3 per cent across the third quarter of the year.


Click to play video: 'What the latest interest rate hike means for your family’s bottom line'



5:26
What the latest interest rate hike means for your family’s bottom line


What the latest interest rate hike means for your family’s bottom line

The higher the temperature rises on Canada’s inflation thermometer, the more Canadians of a certain age flash back to the 1970s and 80s, when annual inflation hit 12.5 per cent in 1981.

Back then, the Bank of Canada was forced to raise its benchmark interest rate to 21 per cent to get prices back under control, triggering the deepest economic contraction since the Great Depression.

Experts tell Global News there are some striking similarities between today’s inflation episode and the price pressures of 40 years ago — as well as a few key differentiators that could mean the difference between hitting a recession or achieving the “soft landing” the central bank is after.

Striking similarities

James Orlando, senior economist with TD Bank, first started tracking the similarities between today’s inflation period and the highs of the previous generation back in April.

Then, he noted that the causes of inflation today — surging food, fuel and shelter prices — were the same ones driving Canadian prices higher over two distinct periods, one in the early 1970s and one later in the decade, stretching into the 1980s.

“Current inflation is very much just like what happened back then,” he tells Global News.


Inflation surged in the 1970s and 80s, with many economists drawing similarities to today’s price pressures.


Global News


The annual rate of inflation has steadily been rising throughout 2022.


Global News

For instance, many economists point to Russia’s invasion of Ukraine and the spillover effects on oil and food supplies as a primary source of global inflation today.

In the 70s, the Yom Kippur war, followed a few years later by the Iranian Revolution and the Iran-Iraq War, also put immense pressure on the prices of oil.

Meat prices, meanwhile, skyrocketed 70 per cent in 1978, according to Orlando’s analysis, leading to higher costs in the deli aisle that would feel familiar to many Canadian households looking at their grocery bills today.


Click to play video: 'Inflation: Why the price of groceries are expected to rise'



2:03
Inflation: Why the price of groceries are expected to rise


Inflation: Why the price of groceries are expected to rise

Orlando wrote back in April that while today’s price hikes might not be at the same magnitude as the 70s and 80s, it might feel just as significant. When inflation hits the staples we buy regularly in the grocery store, it elicits a more intense, emotional reaction from consumers, he explained.

But while prices were high, Canadians also were spending heavily through much of the 70s thanks to rapidly rising wages and low interest rates.

Ian Lee, associate professor in the Sprott School of Business, remembers working through that inflationary period at BMO, handling mortgages for the bank in 1980.

He says in the 70s, it made sense to borrow rather than invest and buy later, because interest rates were low and tomorrow’s prices were expected to outpace any returns on savings and investments.

Read more:

Bank of Canada interest rate hike is a ‘hammer to housing’ market: BMO economist

“Saving didn’t make any sense at all. So it created a real spend, spend, spend, borrow, borrow, borrow culture,” he tells Global News.

Lee said that many Canadians — himself included — put their money into homes. A run-up on housing prices as Canadians rushed into the market only fuelled inflation further.

Shelter has been a primary driver for today’s inflation episode as well, with rents now surging at the same time as rising interest rates make mortgages more expensive to carry.

Key differences

Lee says one of the most important differences between today’s inflation and that of the 70s is the tightness of the labour market.

The 1970s and 80s saw stagflation materialize — slowing economic growth and high unemployment with prices surging nonetheless.

Today’s unemployment rate sits at a record low of 4.9 per cent, on the other hand.

Macklem has pointed to the strong labour force readings as proof that the economy can take higher rate hikes, even as some economists warn layoffs will follow suit if the bank is too aggressive.


Click to play video: 'Too much, too soon? Experts say rapid interest rates are pushing Canada closer to a recession'



4:08
Too much, too soon? Experts say rapid interest rates are pushing Canada closer to a recession


Too much, too soon? Experts say rapid interest rates are pushing Canada closer to a recession – Jul 6, 2022

Indeed, when the Bank of Canada had to raise its policy rate above the 20-per-cent mark in the 80s, following the U.S. Federal Reserve into the “war on inflation,” the economic pain was intense: the unemployment rate rose to 12 per cent in 1983.

Lee says the only reason interest rates had to go so high back then was that the Bank of Canada didn’t recognize the inflation crisis before it was too late — prices crept up over the course of more than a decade, compared to the sudden jump in just a few month’s time that we’re seeing today.

Central banks around the world did not chiefly use their policy rates to tackle inflation by that point in history. Canada was among the first to adopt inflation targeting as a mandate in 1991.

Though Lee believes the Bank of Canada again waited too long to address bubbling inflation, today’s reaction is years ahead of the 1980s response.

“The longer you postpone taking the medicine, the worse the problem gets. And the tougher the medicine becomes,” he says.

Read more:

Recession fears won’t faze Bank of Canada, economists say. Why that may be a good thing

Lee projects interest rates will not have to rise as high as they did 40 years ago and the Bank of Canada has reacted in time to skirt double-digit inflation figures.

Orlando says that so far, the Bank of Canada has maintained belief among Canadians and businesses that it will get inflation back to target — a critical tool in its own right to keep expectations in line and stop high inflation from becoming entrenched.

“The belief is still there. And I think the inflation target is a big contributor to that.”

Are we close to peak inflation?

In its forecast this week, BMO projected that inflation would peak in the third quarter of 2022, dropping to an average of eight per cent in the fourth quarter and following a steady decline through 2023.

Tu Nguyen, an economist with RSM Canada, tells Global News that there are signs inflation could peak this summer, but what determines that is largely outside the Bank of Canada’s purview.

Oil prices have shown signs of decline over the past month from their peaks this past spring, and the aggressive action taken by central banks around the world should dampen consumer demand and give supply chains time to catch up.

Read more:

U.S. inflation unexpectedly hits 9.1%, setting new 40-year high

But while global pressures have shown signs of easing, they can just as easily persist or even reverse course through the fall, Nguyen warned.

“There is still a war going on,” she said. “There’s a lot of instability, geopolitical tensions and a pandemic raging. And who knows what’s going to happen on the global stage over the next six months.”

— with files from Global News’ Anne Gaviola

© 2022 Global News, a division of Corus Entertainment Inc.

Adblock test (Why?)



Source link

Continue Reading

News

Zimbabwean lecturer develops low-cost sun cream set to help people with Albinism

Published

 on

Harare, Zimbabwe- Dr. Joey Chifamba, a University of Zimbabwe (UZ) chartered industrial chemist and pharmaceutical nanotechnology expert has developed a low-cost sun cream which is set to help people with Albinism.

According to Dr. Chifamba, the sun cream harnesses zinc and titanium from natural sources as well as indigenous trees and was made using 5th generation emerging technologies including nanotechnology and biotechnology.

Speaking to a local publication, The Herald, Dr. Chifamba said his ground-breaking sun cream will help people living with Albinism who suffer from actinic (solar-induced) skin damage, freckles, sunburn as well as other various skin cancers.

“No product has ever been developed to protect Albinistic persons from actinic damage. The sunscreens that are given to them are designed for white-skinned people and do not take into consideration specific conditions and differences found on Albinistic skins.

This makes them not very effective and not very suitable especially for all-day everyday wear since Albinism is a lifelong condition.

We employ nanosized metallic oxides sunblocks conjugated together with nano-optimized indigenous herbs with antibacterial, antifungal and wound healing effects to create aesthetically pleasing cosmeceutical products for every day all day use by Albinistic persons.

In our innovation we have developed ground-breaking cosmeceuticals which are not only sunscreens but complete actinic damage retarding treatments that consider Albinistic skin differences and deal with various symptoms of actinic damage including wrinkles, premature aging, inflammation, bacterial and fungal infections,” said Dr. Chifamba.

Furthermore, Dr. Chifamba said the products which were developed in consultation with the Albino charity organization of Zimbabwe and other Albino welfare groups, are already available to people living with Albinism who are registered with the charity organization.

People with Albinism have skin that is very sensitive to light and sun exposure. Sunburn is one of the most serious complications associated with Albinism because it can increase the risk of developing skin cancer and sun damage-related thickening of the skin.

Albinism is a rare genetic condition caused by mutations of certain genes that affect the amount of melanin your body produces. Albinism can affect people of all races and all ethnic groups

For most types of Albinism, both parents must carry the gene in order for their child to develop the condition. Most people with Albinism have parents who are only carriers of the gene and don’t have symptoms of the condition.

Other types of Albinism, including one that only affects the eyes, mostly occur when a birthing parent passes the gene for albinism on to a child assigned male at birth.

Continue Reading

News

Donald Trump loyalist, Alex Jones ordered to pay US$49 million in punitive damages

Published

 on

Donald Trump loyalist, Alex Jones ordered to pay US$49 million in punitive damages

Austin, United States of America (USA)- A jury in Texas on Friday ordered Alex Jones, a loyalist to former US President Donald Trump, to pay $45.2 million in punitive damages to the parents of a child who was killed in the Sandy Hook Elementary School massacre in 2012.

The jury announced its decision a day after awarding the parents more than U$4.1 million in compensatory damages and after testimony on Friday that Jones and Free Speech Systems, the parent company of his media outlet, Infowars, were worth US$135 million to US$270 million.

Prior to Friday’s Court proceedings, Jones told his audience that the 2012 Sandy Hook Elementary School shooting was a hoax and that the grieving parents of those who died were actors.

The total of US$49.3 million is less than the US$150 million sought by Neil Heslin and Scarlett Lewis, whose 6-year-old son Jesse Lewis was among the 20 children and six educators killed in the deadliest classroom shooting in US history.

“He stood up to the bully Adam Lanza and saved nine of his classmates’ lives. I hope that I did that incredible courage justice when I was able to confront Alex Jones, who is also a bully. I hope that inspires other people to do the same. This is an important day for truth, for justice, and I couldn’t be happier,” said Lewis.

Before the jurors began deliberating about the punitive damages, Wesley Todd Ball, a lawyer for the family, told the jury that it had the ability to send a message for everyone in the country and perhaps this world to hear.

“We ask that you send a very, very simple message, and that is, Stop Alex Jones. Stop the monetization of misinformation and lies. Please,” said Ball.

Jones, who has portrayed the lawsuit as an attack on his First Amendment rights, conceded during the trial that the attack was 100 percent real and that he was wrong to have lied about it, but Heslin and Lewis told jurors that an apology wouldn’t suffice and called on them to make Jones pay for the years of suffering he has put them and other Sandy Hook families through.

The parents told jurors about how they have endured a decade of trauma, inflicted first by the murder of their son and what followed, gunshots fired at the home, online and phone threats, and harassment on the street by strangers. They said the threats and harassment were all fueled by Jones and his conspiracy theory spread to his followers via Infowars.

Jones who was in the courtroom briefly on Friday but not there for the verdict still faces two other defamation lawsuits from Sandy Hook families in Texas and Connecticut.

Nevertheless, Jones has also claimed, among things, that the Pentagon was using chemical warfare to turn people Gay, that COVID-19 is not real and that September 11 was an inside job perpetrated by the government.

 

Continue Reading

News

FBI still worried of another attack from Afghan rebel groups

Published

 on

Washington D.C, United States of America (USA)- Federal Bureau of Investigation (FBI), head, Christopher Wray has expressed grave concerns over another attack from Afghanistan rebel groups such as al Qaeda and ISIS.

His comments come just days after the US killed al Qaeda leader Ayman al-Zawahiri in Afghanistan via drone strike.

“I am worried about the possibility that we will see al Qaeda reconstitute, ISIS-K potentially taking advantage of the deteriorating security environment, and I am worried about terrorists, including here in the United States, being inspired by what they see over there,” said the FBI director during a Senate Judiciary Committee hearing.

Al-Zawahiri was killed in a drone strike, ending a years-long manhunt which placed al-Zawahiri near the top of the FBI’s most-wanted list. The 71-year-old Egyptian national headed up the group after the death of terrorist kingpin Osama Bin Laden in an American raid in 2011 and is thought to have helped plan the 9/11 attacks.

The Department of State also cited it believes there is a higher potential for anti-American violence given the death of al-Zawahiri.

Meanwhile, the FBI is investigating a possible assassination plot against Iranian-American journalist, Masih Alinejad.

According to US news sources, a man was arrested carrying a loaded AK-47 rifle in a possible plot to assassinate her.

Alinejad herself shared security camera footage of the suspect at her front door on Twitter on Sunday, saying, “My crime is giving voice to voiceless people. The US administration must be tough on terror.”

The arrested man was taken in by Police after a traffic stop. They said he ran a stop sign and when they checked his vehicle, they found a gun in the backseat, according to the complaint filed by the FBI.

He was charged with possessing a firearm without a proper serial number. At his Friday (last week) hearing, the Judge ordered him to be held without bail.

The suspect initially claimed that he knew nothing about the weapon and said he was just in the area looking for an apartment, but later he told the investigators that he owned the gun and that he was looking for someone in Brooklyn.

In July last year, US prosecutors charged four Iranian spies with trying to kidnap Alinejad from her home in Brooklyn and taking her to Venezuela. Investigators said that they had also tried to lure her to the Middle East before that.

Continue Reading

Trending