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Opinion: The bad news about the economy – CNN

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Jeffrey Sachs is a professor and director of the Center for Sustainable Development at Columbia University and president of the UN Sustainable Development Solutions Network. His most recent book is “The Ages of Globalization” (Columbia University Press, 2020). The opinions expressed in this commentary are those of the author. View more opinion on CNN.

(CNN)The inflation report for April brought no good news. The year-over-year inflation rate was 8.3%. The monthly “core” inflation, stripping away volatile food and energy prices, was 0.6%, which comes to 7.4% at a compounded annual rate.

Inflation, in short, continues running at near 40-year highs.
For the first time since the 1970s, we are at risk of entering a period of worldwide stagflation — meaning high inflation combined with low or negative growth.
Notably, the preliminary estimate of America’s GDP for the first quarter of 2022 showed an outright decline, though we should not read too much into preliminary data for just one quarter. We can expect a slowing US and world economy however as the Federal Reserve raises interest rates in order to reduce the inflation rate and as other disruptions hit the world economy.
President Joe Biden has called the inflation “Putin’s price hike,” implying Russia’s invasion of Ukraine is the main culprit for the jump in inflation. While it has played a role, we need to look more deeply.
Just as was the case 40 years ago, when I published my first book, “The Economics of Worldwide Stagflation,” there are many factors in play. Several are under our own control. As in the 1970s, we must look to a mix of conditions, including disruptions to global supply chains, monetary policy, and geopolitics.
The first factor in the current inflation is the highly expansionary monetary policy in recent years. The Federal Reserve issued more dollars between December 2019 and December 2022 ($3 trillion) than in the preceding 23 years. The monetary base (currency plus bank reserves) soared as the Federal Reserve bought up vast quantities of Treasury bills and bonds used to finance Covid-19-related budget deficits.
Advocates of so-called modern monetary theory told us not to worry, on the dubious idea that we could print money without inflationary consequence — or at least we’d know just what to do if inflation started to rise.
Well, it’s far past time to worry. I warned 15 months ago we could not borrow or money-print our way through the budget deficits. We would indeed need to raise taxes to prevent inflation.
The second factor is the massive disruption of Covid-19, and the failure of the government and public to get the virus under control. Yes, vaccines have reduced deaths markedly, but the rush to eliminate all other kinds of public health controls and to declare the pandemic over, despite the continued arrival of new variants, has meant an ongoing high rate of disease transmission and continuing disruption of supply chains.
The third factor is the fallout of the Ukraine war itself, which is blocking ports in the Black Sea and impeding export of grains, fertilizers and other commodities from both Ukraine and Russia.
The fourth factor is the fallout of the US and European sanctions on Russia, which are also designed to reduce or stop the export of Russian oil, gas, and other commodities by Russia to world markets. Biden told us the US would have to make sacrifices to support Ukraine, and so it is the case.
The fifth factor is the ongoing geopolitical tension with China. The Trump Administration unilaterally imposed tariffs on more than $300 billion of Chinese goods, thereby driving up their prices, and Biden has kept those tariffs in place until now. The US is also restricting the sale of technology to China that in turn is disrupting China’s own supply chains, with a knock-on effect on US prices.
Because of the huge increase in the money supply in recent years, the Federal Reserve does not have any sure fix on stopping the inflation. The Fed has begun to gradually raise interest rates, but interest rates are still negative in real terms, meaning the level of interest is lower than inflation by a wide margin.
The Fed is still borrowing at a one-year horizon at just above 2%, far less than the inflation rate. Speculators are borrowing at negative real rates to buy commodities, thereby pushing their prices up still higher.
We will likely be living with high inflation for the next couple of years under almost any realistic scenario, but there are several steps we should be taking now to help bring inflation under control.
The first is to urge Russia and Ukraine to undertake serious peace negotiations. The longer this horrific war continues, the more will be the stagflationary consequences for the whole world, not to mention the utter devastation to Ukraine itself.
The second is to ratchet down the hostility with China, first by dropping the Trump-era tariffs on consumer goods, and second, by returning to prudent lines of cooperation. The State Department recently, and for no reason, ratcheted up tensions with China by provocatively changing the description of US relations with Taiwan. (In a press briefing Tuesday, State Department spokesperson Ned Price said, “There’s been no change in our policy (toward Taiwan). All we have done is update a fact sheet, and that’s something that we routinely do with our relationships around the world.”) This kind of needless taunting is tantamount to shooting ourselves in the foot in our attempt to engineer a soft landing for the economy.
The third is to raise taxes, following a line recommended recently by Sen. Joe Manchin, a Democrat who argued we should raise corporate taxes and other taxes on the wealthy in order to reduce the budget deficit while also funding some infrastructure, energy efficiency, and social programs. Manchin is right: higher taxes should be used for three purposes, to restrain inflation, fund important programs, and cut the budget deficit.
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The fourth is to end the reverie that easy money can go on indefinitely. Both modern monetary theory and Republican supply side economics have long evaded the basic budgetary arithmetic.
Yes, we need sizable government investments and social services in order to transform our economy to be more fair, productive, and environmentally sustainable.
We need to learn, after 40 years of unaffordable tax cuts for the rich and recent years of excessively expansionary monetary policy that the federal government must pay its way with sufficient taxes to fund the needed public outlays to secure a productive, fair and sustainable economy.

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A timeline of events in the bread price-fixing scandal

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Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

The Canadian Press. All rights reserved.

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S&P/TSX composite up more than 250 points, U.S. stock markets also higher

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TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

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VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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