The Throne Speech: Justin Trudeau’s Brilliant Plan To Fix Surging Inflation By Spending A Bunch Of Money!

How could it fail?

By now, there is nobody who can claim inflation isn’t surging.

Even those who have a huge interest in denying it – the Bank of Canada, statist politicians – have been forced to acknowledge the reality.

And in the throne speech by the newly re-elected Trudeau government, the Liberals are promising to address the rising cost of living?

How are they going to do it?

By spending more money.

You can probably see the problem here.

The throne speech focused largely on increased government spending and “fighting climate change.”

This will include new spending on childcare programs, public transit, mandating zero-emissions vehicles, “increasing the price of pollution”, capping oil & gas sector emissions, and giving money to municipalities to build more housing.

What is the common theme here?

More government intervention, and more spending.

Now, it’s easy to understand why many people would see this as a good thing.

After all, it seems to make sense that if the government spends more money on making life more affordable, it will make life better for people.

Unfortunately, that viewpoint is based upon a mistaken view of why the cost-of-living is increasing.

Government spending and money printing is the real problem

Let’s ask ourselves this question:

Has there been a massive change in the quantity of goods available in our economy?

I’m not talking about a minor shift, I’m asking if there has been a change of historic proportions in the availability of goods?

The answer of course is ‘no.’

Now, let’s ask ourselves another question:

Has there been a massive change in the quantity of money available in our economy?

Yes, indeed there has, as the two charts below make clear:

Canada Money Printer Go BBRRRRTTTTTT
Source: Deterministic Optimism, Twitter

Bank of Canada Assets Growth

This is what is really causing the rise in the cost-of-living.

And, when we think about it, it makes perfect sense.

If an economy is flooded with money, while the supply of goods fails to increase by anywhere near the same proportion, then what do you end up with?

More money chasing fewer goods.

That makes each ‘unit’ of money worth less. This isn’t obvious to most people, because we rarely measure our dollars against anything else, other than what we want to buy with those dollars. So, a decline in the value of our individual monetary units appears to be an increase in prices, since you need more units to buy the same thing.

Now, given that Canada’s economy has been flooded with an immense amount of fiat currency, we have surging prices.

A key reason for the flooding of the economy with money has been massive increases in federal spending, and the enabling of that spending by the Bank of Canada.

What do you think will happen if Justin Trudeau tries ‘fixing’ the problem of inflation by further increasing federal spending?

If you said ‘make the problem worse,’ you are 100% correct.

Shifting our perception

Because so many people see money and wealth as the same thing, it is easy for governments to remain popular by promising to spend a bunch of money.

There are two ways to help shift people out of this mindset.

First, ask the following question:

If printing money out of thin air could generate real wealth, why doesn’t the government simply just print 38 million $1 billion bills and distribute them to each Canadian?

Wouldn’t that make all of us billionaires?

Why yes, we would indeed be ‘billionaires’ when measured in Canadian dollars.

But would we feel like ‘billionaires’?

Nope.

Instead, prices would skyrocket by such an immense amount that nobody would be any better off.

Using such an extreme example can help shock people out of the idea that more government money = real wealth, instead demonstrating that wealth is really about what you can actually afford to buy, not what is written on a piece of government-issued paper.

The second way to help wake people up is to show them a chart like the one below:


US Dollar Priced In Non-QE Assets
Source: Pantera Capital https://panteracapital.com/blockchain-letter/sound-money/

 

 

 

 

 


While the chart above is about the US Dollar, the money printing policies in Canada and the US have been similar, with similar results, so this is a great way to really see what is happening.

In the article in which the above chart is included, the following sentence sums things up quite well:

“It seems like the price of everything is surging up. At first blush, this seems odd during a worldwide financial crisis. A better perspective is that the value of most things is relatively stable — it’s just the value of paper money that is being debased at a rapid rate.

To help visualize what money printing is doing to the price of the U.S .dollar, we’ve plotted the value of the dollar in terms of things that cannot be quantitatively eased:”

That is what people should be looking at.

And as they see what is happening, they see that they are being robbed by their governments and central banks.

The more money that floods into the system, the more our currency is debased, and the more we lose purchasing power.

As a result, for Justin Trudeau and the Liberal government to claim that increased government spending will help ‘address inflation’ is not only incorrect, but will in fact ‘accomplish’ the opposite.

You can’t fix a problem caused by overspending and money printing by continuing to overspend and print more money.

Only a return to Sound Money principles, limits on the growth of the money supply, cuts in government spending, and tax cuts can begin to address inflation.

Now, some will ask why tax cuts would help address inflation, rather than add to it.

The answer is that in addition to rampant overspending and money printing, we also have artificial price increases caused by distortions of price signals due to carbon taxes. By pushing the price of energy above what it should be, carbon taxes drive more inflation. Further, since cheap energy is a prerequisite for a strong economy, carbon taxes are a deeply inflationary policy when combined with the flood of fiat money into the system.

Trudeau is robbing you, and the robbery is set to continue

Justin Trudeau’s throne speech demonstrates that he plans to double-down and triple-down on the same policies that are robbing you of your purchasing power.

We are being subjected to an arrogant experiment pushed by statist politicians who don’t have an inkling of how the economy works.

Spencer Fernando

Photo – YouTube

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