High unemployment and a weakening economy. The specter of stagflation looms.
At one point in history, the ‘experts’ believed that high inflation and economic stagnation couldn’t happen simultaneously.
Surely, they surmised, if prices were going up fast then wages must be going up fast as well, and economic activity must be booming!
That thinking led to decades of government policy based on simply throwing money around whenever growth was too low.
Statists loved it, because it provided the justification for them to spend, and spend, and then spend some more.
But then, starting in the 1970s, something odd started to happen.
Inflation surged, even when the economy was weak.
Growth was low, yet prices were surging.
There were many reasons for this, including the abandonment of the gold standard.
But the underlying issues was that the ‘experts’ turned out to be wrong.
At the end of the day, there is no way around economic reality.
To have a successful and growing economy, there needs to be real production of things people want, and that production must become more efficient over time.
This can be evaded temporarily, but not avoided, and the years of accumulated avoidance in the form of rampant government overspending inevitably had to be dealt with.
The result was a severe recession, and a rapid rise in interest rates.
Realizing that ‘stagflation’ (simultaneous economic stagnation and rising prices) was possible, a whole generation embraced fiscal responsibility, limited government, and a pro-business, pro-productivity way of thinking.
But of course, success leads to complacency, and people forget how that success was brought about, and the old siren-song of government overspending, money printing, and wealth without work ensnared a new generation of voters.
And here we are again.
With inflation hitting 30-year-highs, the economy is simultaneously weakening.
Many Canadians already believe we are in a recession, and inflation is far outstripping wage growth.
And now, there’s more concerning economic data.
For the second month in a row, manufacturing sales declined.
As reported by BNN Bloomberg, “Manufacturing sales fell 0.8 per cent to $71.8 billion in June as the petroleum and coal product sector helped lead the way down, Statistics Canada said Monday.
The move lower came as sales fell in eight of the 21 industries tracked by the agency and followed a 1.1 per cent drop in May.
Statistics Canada said sales in the petroleum and coal industry fell 7.8 per cent in June as concerns over the global economic slowdown led to lower demand for energy products and contributed to the lower sales.
Wood product sales fell 7.2 per cent in June, while aerospace product and parts dropped 16.8 per cent. Meanwhile, sales of motor vehicles rose 13.8 per cent.”
As noted in the report, Stephen Brown, senior Canada economist at Capital Economics, said the outlook is growing more challenging:
“Manufacturing sales volumes only inched up in June and, with the manufacturing surveys on both sides of the border weakening in recent months, the outlook is growing even more challenging,” said Brown.
Overall, wholesale sales fell 0.1% in constant dollars, and – as has become a trend – one of the only positive sectors is a sector the Liberal government is seeking to weaken:
“The agency said the miscellaneous goods sector rose for the fourth time in five months as it gained 3.5 per cent, boosted by a 15.5 per cent gain in the agricultural supplies industry, reflecting the demand for Canadian fertilizer because of the ongoing conflict in Ukraine.”
The Liberal government appears determined to simply flood the economy with money, while using regulations and taxes to strangle the economic sectors that underpin our prosperity.
There is no way that can possibly and well, and the looming specter of inflation is just the beginning.
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