January 16, 2023

• Inflation is falling, but prices are still rising faster than wages.
• May have another El Nina climate event, but if it goes to El Nina we are in for some very hot and dry weather this summer.
• Lithium is still in shortage territory for batteries meaning that transition that everyone is talking about wanting is going to be expensive and slow.
• Everyone is waiting to see how the economy shakes-out this year. There are some bets on the way that housing costs, food costs, inflation, and interest rates will go, but it is all a lot of betting. No one really knows, not even the central bankers.

• Do not believe the "estimates". Because everyone is waiting, all the commentary coming from markets and policy folks means less than nothing.

  • Central Bankers believe that expectations of inflation have something to do with creating inflation, so they will always say they expect inflation to fall faster than it likely will.
  • Investors want the economy to do better so that the central bankers cannot drive interest rates up and keep them up. They also believe in the "sentiment drives market/inflation" mentality. It is nonsense.

The important thing is to keep an eye on the real numbers.

In the meantime, we need to push wages higher. Persistent "inflation" that continues above wage growth is going to be a problem for working people. Already you see profits outstripping general economic growth. This means the wealth transfer from workers to capital that we have seen over the previous decade (and more) continues unabated. Unfortunately, because of the way the economy is going, we are not seeing that profit being re-invested in new production.

This results in the "strange" situation we have where the number of jobs is not growing, creating tightness in the labour market. If the public sector continues to tighten as well, and wages are not pushed up, we will see a stagnation in the economy unlike what we have seen for a long time.

Trade unions and social democratic parties need to make a big push for public investment in production. The class needs some strong leadership demanding intervention in the economy. This is not only to counteract the enforced malaise of capital investment or the central banks' drive to recession, but to create an opportunity for expansion of needed production and transition.

Even in Davos, the participants of the World Economics Forum understand this. The left needs to dust off their play books and start reading aloud.

Still cannot afford a home.

The country’s benchmark home price fell 1.6% in December to C$730,600, bringing the total decrease since February’s peak to 13.2%, the Canadian Real Estate Association said Monday. It was the biggest peak-to-trough falloff since the group started compiling the data in 2005, while 2022 also saw the biggest price decline for a calendar year since records began, with a 7.5% drop between this December and last.

Compared with November, the number of sales in December rose 1.3%, while new listings fell 6.4% as more prospective sellers opted to try and wait out the market weakness.