The Bank of Canada’s argument is over simplistic. The wage-price spiral oversimplifies the complex dynamics of inflation. Wages are just one factor among many that can influence inflation. The BOC geniuses that are attributing inflation mainly to wages (last week it was mainly due to high interest rates increasing mortgage costs) are overlooking other crucial factors such as productivity, supply chain disruptions and changes in demand patterns.
Yes. Wage increases can potentially contribute to higher production costs but businesses have multiple strategies to absorb these costs without resorting to raising prices.
- cost-cutting measures
- improve efficiency
- reduce profit margins
Moreover, in competitive markets, businesses often face pressure to keep prices stable to maintain their market share.
If wage increases are accompanied by a corresponding increase in productivity, the impact on prices can be mitigated. When workers become more efficient, businesses can maintain or even lower prices while still offering higher wages. This productivity-driven wage growth does not necessarily lead to inflation.
Germany’s public banking system had this dynamic understood before the current lecherous US-Dutch-UK banking system tore this efficient and life-style enhancing banking structure apart after WW1. Successful remnants of the system remain in places such as the great state of North Dakota!
Changes in demand patterns and supply chain disruptions can have a more significant impact on inflation than wages. Global events, such as trade wars, proxy wars or pandemics can disrupt supply chains, leading to higher input costs and price fluctuations. Similarly, shifts in consumer preferences or technological advancements can alter demand patterns, affecting prices independent of wage increases.
Further…the small number of global corporations that control source raw material production can operate as cartels, strategically restricting supplies, driving up prices and competition for the now “scarce” product resulting in what our impotent politicians call inflation. Next, governments react in feigned terror to this “inflation” and call for increased interest rates to get inflation under control.
Who profits from the increase in interest rates? Same corporate web of businesses that own the source raw materials.
Hmmm…don’t think too critically. It will make you mad.
Apparent Complexity…Simple Clarity in Reality
The debate surrounding the relationship between wages and inflation is apparently complex, with arguments on both sides. While the Bank of Canada asserts that rising wages are mainly stoking inflation (when last week it was high mortgage interest rate costs), other people with critical thinking skills dispute this claim.
It is important to acknowledge that the impact of wages on inflation is not the whole story. Inflation also depends on productivity, small businesses that are under a post-pandemic mountain of debt, supply chain nonsense blamed on a proxy war and changes in demand patterns.
I wonder what a change in demand pattern actually means? Maybe that’s when a Canadian decides to hit up the food bank because they don’t have enough income to put gas in the car and eat dinner.
Conclusions and Further Thoughts
It’s really important for Canadians to wake up to this charade. Economics isn’t complicated, despite what the empty suits tell you. It has a lot to do with sociology and it has a lot to do with politics. That’s why the subject was originally called Political Economy.
Today, the subjects are separated to keep you in the dark.
For example, debt is rarely included in an economic discussion. That’s why the current Canadian Federal Liberal government calls any question about our onerous and life sucking national, mortgage or consumer debt levels as “fiscal fear mongering”.
Debt makes up a large percentage of every dollar spent in our economy. Some say over 50% of every dollar is made up of interest charges. That debt, when the interest is compounded, exerts an enormous burden on people, business and the country. It is the reason that economies stagnate, why households and businesses fail, squeezing the life out of a society while driving that same society back to feudalism.
The politicians rightly fear that if Canadians understood that $40+Billion dollars goes out the door every single year to a cabal of international bankers to “service the debt” when that same money could be “printed” interest free through the Bank of Canada’s original mandate, they may polish up their hunting rifles and tune up their big rigs.
Knowing that you live in a circus is the first step to knocking down the tent.
PS – One of my hobbies is blogging about mortgages, debt and government policy. During the day I’m a MORTGAGE BROKER in Kelowna, BC!
Check out the Huber Mortgage Home Buyers Guide HERE