July 26, 2024

The debate about inflation in the USA continues without any solid grounding in theory. Orthodox economics does not really have a theory of inflation. They can measure it and phenomena they think are related to it, but they do not agree on what causes it and how.

We have previously discussed the three conditions required for inflation to happen, according to Classical economic theory:

1. Printing too much money (or creating too much credit)
2. "Investment" using that printed money exceeding total value creation
3. Demand straining capacity to produce

There does not seem to be any doubt these days that there was a lot of money printed. Some have now measured that the Federal Reserve increased the money supply by 150% during the pandemic:

That alone is not all that is necessary to cause inflation, but it lays the foundation. The fact that value creation was not the goal at the onset of the pandemic is part of the reason we saw inflation. The money went to profit subsidies. Some of the extra money trickled down to consumers who then gave it back to the financial services to profit from since there was little else to buy, which also resulted in a profit subsidy.

The kicker to the American worker was that the added purchasing power then got eaten up through inflation and high interest rates, from which profit-driven financialized companies were mostly protected.

The result is an inflation crisis paid for by the working class. Low wage growth, high price growth, no negative impact on profits, and a housing crisis resulting from policy makers trying to limit labour market tightness.

It is a typical story that the left liberal crowd will not tell. Instead, they are focused on "soft landings".

While GDP measures are looking like soft landings, all other measures of the economy point to a recession which working Americans are experiencing.

There are several measures for this, but consumer sentiment and debt burden will do.

This is all happening while the Federal Reserve continues to look at measures of economic growth to determine whether to reduce interest rates. A soft landing will be announced, but that doesn't change the realities on the ground.

There is a growing meme around Canada Post failing. It seems to be driven by extremely bad analysis being picked up by the CBC in "video explainers" on CBC Explore featuring the classic crew of folks who think that the government should sell everything.

It seems rather clear to me that if the Conservative get in, they will privatize the postal services in exactly the way the UK didn't: by selling the infrastructure and ending postal letter delivery.

Reform of Canada Post has been made almost impossible by the recent selling off of major revenue parts of the organization and the allowing of unregulated low-waged delivery services to undermine package delivery. All the while, Canada Post has been subsidizing Amazon delivery, Amazon and other package delivery services have been using those savings to invest in undercutting Canada Post.

It is a good time to remind people that the OECD has listed Canada Post as one of the last publicly owned companies that should be privatized (along with VIA Rail). The only reason that it has not been privatized is a succession of accidents, like the pandemic and the desire to subsidize home delivery.

However, it is death by a thousand paper cuts. The recent selling off of the logistics corporation inside Canada Post was really the pre-cursor to the complete dismantling of the service.

It would be a disaster if Canada Post is privatized. Canada needs a logistics company that it runs for meeting the needs of regular Canadians who do not live in large cities and to deal with crises. What the government should be doing is leveraging its logistics program at different levels of government (publicly owned liquor control boards, postal services, ports, airports, rail companies, warehouses, and inland marine) to reduce costs for moving goods around the country. It would be a huge asset to Canadian production, but instead our governments seem hell bent on destroying that through bad privatization initiatives.

Rail is one area in the USA where there seems to be a focus of the populists trying to get the Teamsters on side and the Biden Administration’s specific focus on the rail sector.

It is classic far right opportunism. Focus on the strongest part of your opposition. Here, it is Labour and rail. The focus in the USA is on “precision scheduled railroading”.

Funny that the USA-based rail companies are so powerful that they did not even bother showing up to the hearings. The Canadian companies do exactly the same thing, however the Conservatives are less able to get Teamsters Canada to do what their international president has done with the Republicans. As such unions are facing a wall of legislation by the Conservatives to strip the right to strike through imposed interest arbitration in the federal sector.

The companies are leaning on “data-driven decision making.” I think that Canadian labour will want to include access to that data (in bargaining) and government data sharing (in lobbying) similar to the USA.

The crime stats released yesterday are going to be grabbed by the far right as proof that crime is out of control. Only, they clearly are not. Car theft is only up 5%, though that will be ignored in light of the narrative that car theft is rampant in Canada.

The increase in crime stats are a result of an increase in reporting of child exploitation cases (child pornography offenses) from the newly established National Child Exploitation Crime Centre to local authorities (over 50% increase in 2023).

These are reported as "non-violent" crimes. Robbery, fraud, and shoplifting (all related to the increase in poverty) are up both violent and non-violent.

Other violent crimes are down or not significantly changed almost across the board except extortion (low numbers, high growth).

Also, there is a less complex than it sounds report on misinformation and fact checking released by Statistics Canada yesterday.

This topic has already begun to be explored by other researchers, such as the Information Overload report produced by the Canadian Association of Science Centres in 2022 and 2023. According to this report, many respondents found the search for truth to be a complex and iterative process wherein knowledge is refined over time by considering many different factors and information sources.

It is a concerning and growing problem.