August’s consumer price index figures mark the second consecutive month inflation has accelerated in Canada, even as grocery prices saw some relief.
Oh good, this must mean that they’ll solve the problem of me not having money by raising the cost of my home and debt incurred from not having enough money.
Please find another way other than raising interest rates again.
The other classic way to reduce inflation is simply taxing the rich. It’s especially efficient to tax the wealthiest when inequality is high, as it is now. This is macroeconomics 101. Meanwhile, very dubious fringe conservative theories get mentioned instead, like intentionally causing unemployment. All the “solutions” put the burden on the poor.
The fact that taxing the rich never comes up in mainstream discussion as a possibility shows how captured our media and politicians are.
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It would remove money from the overall money supply making each dollar worth more per unit.
Money is subject to supply and demand, if demand is high and supply is low, the market value of each dollar goes up; If demand is high, people are willing to pay more.
Right now the supply of all CAD in our economy is higher than demand and so the dollar’s value is lowered.
We can’t fully control demand, but we can affect supply.
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The other classic way to reduce inflation is simply taxing the rich.
You mean the poor. Inflation is tracked using the CPI, which is measured using a basket of goods modelled around what poor people buy. The activities of the rich tend to not show up here.
The impacts of taxing the rich may eventually “trickle down” to the poor if you hit them hard enough, but that is rather roundabout and slow. Best to go to the source to get it done quickly.
Lots of mistakes here.
Do you think central bank rates “go to the source” and take money directly from the poor? No, it’s already convoluted. By raising the federal funds rates, it forces banks to raise the money it charges other banks to borrow money. This in turn makes loans and mortgages more expensive, which means businesses stop spending, loans and mortgages are more expensive, etc. This eventually “trickles down” to consumers. The most direct manifestation is a home mortgage or car loan, but that is only a small fraction of the economic effect of the central bank rate.
The basket of goods is NOT modelled around what poor people buy. I’m not sure where you got that from. The basket is modelled around what consumers buy overall, proportional to how much they are spending on that category of good. It is true that the poor spend a greater proportion of their income, which is I guess the grain of truth that you’re basing that mistake on?
Traditional views of inflation have been turned upside down by “seller’s inflation” (the media calls this “Greedflation”). This is when companies raise prices above increases in input costs. It was dismissed by economists at first, but the academic consensus is now that it accounts for a significant portion of inflation. Hurting the poor will not help with corporations forcing prices up through tacit coordination and lack of competition.
Yeah, interest rates are blunt instrument, and aren’t going to “fix” this.
I get that the BoC only really has the one tool, but this is bigger than the BoC.
Until we can all agree that our goal as a society moving forward should be “sustainability and stability” and not “profit increases year by year at any cost”, its not going to get better.
Good news everyone: “Excluding gasoline, the CPI rose 4.1% in August”
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