The problem is medical or regulatory bottlenecks somewhere along the production chain.įorecasting is always difficult but in uncharted (not unchartered!) waters it’s especially daft. The price signals are already urging increased production. Pumping more liquidity into those supply-restricted markets won’t get output delivered any faster. And we’ve got it because in many of those markets there are supply problems - almost Soviet-style supply problems (a problem I reflect on these days as I queue, like a Brezhnev-era Muscovite, outside supermarkets and pharmacies). But the problem in markets where people are actually spending is inflation.
If you’re the Bank of Canada, what do you do? There is a lobby for printing all the money the presses can print. So while the official data tell us life is getting a little easier for consumers because the prices of historically important consumer goods are going down big-time, the data on the street tell us that with people’s earnings being squeezed and prices rising for the essential items they’re focusing on for the moment, life is getting harder. Our economic behaviour depends on our real, i.e., inflation-adjusted, costs and incomes. Which matters? Where people live is generally what matters. As for clothing and footwear: you can buy it online but most people still like to try things on - which hasn’t been possible since mid-March. In fact, they’re available precisely because no one can take advantage of them.
(Living in hope, I did get my winter tires changed this week.) Traveller accommodation? Great deals are available but no one can take advantage of them. Massive unemployment and lack of monetary and fiscal stimulus led to consistently falling prices all through the early 1930s - a comparison that, apart from being totally depressing, makes some people think we should torque the stimulus levers and crank up the Bank of Canada’s already smoking money machine.īut did you notice something about the big price drops quoted? For gas, for clothing and footwear, for traveller accommodation? These are all things nobody is buying.
You know the last time prices fell like this? That’s right, during the Great Depression. This advertisement has not loaded yet, but your article continues below.
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