Inflation Is Far Worse Than The Government Admits

The lived experience of Canadians clashes significantly with what government institutions claim.

Inflation has increasingly become the top political and economic issue of our time.

In large part, this is because inflation is the weapon governments are wielding against their own citizens, in an effort to get people to slowly accept a lower standard of living.

Whereas in the past governments sought to raise the standard of living and ensure their populace became wealthier – thus making the country more powerful and secure – many political leaders like Justin Trudeau now see their main job as restricting economic activity in their countries to ‘save the planet.’

This is a fundamental, historic, and drastic shift in the mindset of political leaders, and it isn’t getting nearly enough attention.

It’s bad enough that Justin Trudeau went to the COP26 conference and made a bunch of economically devastating promises in an effort to burnish his image for a global crowd, but the absence of countries like China and Russia from the conference demonstrates how self-destructive Trudeau’s approach is.

Weakening Canada’s economy will do nothing for the environment, as our emissions are incredibly low globally speaking, and because countries like China easily counteract whatever Canada does.

The end result will be this:

Canadians will become poorer.

This is already happening.

Take a look at the wording in this BNN Bloomberg article, where they discuss how wages aren’t keeping up with inflation:

“Average hourly wages for permanent workers were up 2.1 per cent from a year earlier, suggesting the impact of rising consumer price inflation has yet to drive pay gains higher. That should give some comfort to policy makers at the Bank of Canada, who argue broader price pressures aren’t likely to trigger a labor cost spiral.

“Wages are still tepid,” Jimmy Jean, chief economist at Desjardins Securities Inc., said by email. “It will leave the Bank of Canada unimpressed and comfortable in the idea that we’re not yet on the verge of massive wage cost pass-through to inflation.””

Consider that for a moment.

We are supposed to think it’s a good thing that inflation is rising higher than wages?

If inflation is surging, but wages don’t keep up, then that means people are becoming poorer and poorer.

Sure, you can have all the ‘money’ you want in your account, but if that money is being robbed of value month after month, than what really matters is what you can buy with it, not the overall number you see in your account.

This is often ignored by governments, and by much of the public, and that’s exactly the way governments want it.

This is the ‘Money Illusion,’ described thusly by Investopedia:

“Money illusion is an economic theory positing that people have a tendency to view their wealth and income in nominal dollar terms, rather than in real terms. In other words, it is assumed that people do not take into account the level of inflation in an economy, wrongly believing that a dollar is worth the same as it was the prior year.

Money illusion is sometimes also referred to as price illusion.”

While economists debate whether the money illusion is real, it certainly seems to be, and it takes advantage of how we perceive fairness:

“Notably, people’s perceptions of financial outcomes are colored by money illusion. Experiments have shown, for example, that people generally perceive a 2% pay cut in nominal income with no change in monetary value as unfair. However, they also perceive a 2% rise in nominal income, when inflation is running at 4%, as fair.”

Since most humans have ‘loss aversion,’ governments love inflation since it acts as a hidden tax, causing people to lose purchasing power without them feeling like they are losing anything directly.

Consider that if a government increased taxes by 5% in a single year, there would be widespread outrage from a significant part of the population. But when inflation hits 5%, leading to people losing 5% of their purchasing power, it is effectively the same as the government hiking your taxes and taking more of your money.

But, as we’ve noted before, rising inflation often feels like ‘the mean companies raising prices,’ leading people to blame ‘capitalism’ or ‘greed’ for what is really the result of government action.

Inflation is being downplayed by governments

All of this would be a serious issue if governments were being honest about the rate of inflation.

But, I think most of us would agree that the real rate of inflation is far higher than what governments are claiming.

The tweet below is one of many instances of people talking about how expensive life is getting:

“I work in a grocery store in Saskatchewan.
I have to drive 45 minutes to get to work. I dont know how ANYONE can afford to eat.
I dont know if I’m gassing up to go to work or working to gas up. Either way, I can rarely afford to buy the food I sell.”

Does anyone really believe that inflation is only 4.4%, as the government claims?

Does that track with your lived experience?

I’m guessing not.

When we look around, we see stories about how food prices have surged, gas prices have surged, car prices have surged, electronics prices have surged, and on and on.

And those price increases are far above just 4.4%.

The ongoing battle

Governments want to downplay inflation, because it allows them to hide behind their agenda to lower our standard of living.

It also allows them to continue to pour money into the system, maintaining the illusion of rising economic activity, even when things are getting worse.

For those who think this will soon change or ‘return to normal,’ it is essential to realize that politicians – particularly statists like Justin Trudeau – don’t want things to return to normal.

They want inflation to remain high, they want people to be robbed of purchasing power, and they want to lower your standard of living.

This is why we must continue to speak out and share the stories of Canadians on the ground, to help expose what is really happening in our economy.

Spencer Fernando

Photo – YouTube

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