Like all of Dan's articles, this is an enjoyable and informative read.
A couple of points might add some context.
First of all, the CPI and inflation are not synonymous. CPI is an indicator of inflation, but not a definition. This is a subtle, but important distinction. Inflation is the rate at which the general price level increases over time, but not all price adjustments are inflationary; nor should all price adjustments be measured as such. So, Dan mentioned that gasoline prices have fallen due to supply issues; this is a market price adjustment that is independent of inflation.
This is precisely why Pierre Poilievre was able to rightly predict that the inflation of 2022 was not transitory, but was, in fact, endemic to the growth in the money supply. Bankers waited too long to put on the monetary brakes, after printing too much money for too long during and after COVID.
Central Banks are inflation machines. That is, they exist to create inflation, among other things, of course. The stated goal of most Central Banks is to create an inflation rate of two per cent. It is important to note, that at 2 per cent inflation, prices double every thirty-five years.
It is interesting to take a moment to research the foundation for the two per cent target. Is it founded in economic theory? Why 2 per cent? Why not 1 per cent or 0 per cent? Why not adopt a rules-based system where the money supply grows at, or near, the rate of growth of the economy?
It turns out it was more of an offhand idea by the Reserve Bank of New Zealand than a strictly derived policy prescription. The Bank first suggested 0-2, then 1-3, and then settled on 2. The Bank of Canada soon followed.
I have found the best way to think about inflation, is this little story: many years ago, when I was a younger man, I had a crush on a girl who was the sister of a friend of my brother. We were 12 or 13. I would invite her over to watch television. I would go out, buy a bottle of Pepsi or Coke, and serve it like champagne. The bottle cost $.79 plus deposit. (pop came in glass bottles in those days)
Now, that bottle costs $3.99 or more. Has Pepsi or Coke changed its formula to taste better? Has soda pop demand increased so much that it has outstripped the supply, or outflanked all substitutes? If anything, productivity increases and near substitutes would have a downward effect on prices.
What has happened is a deliberate fifty-year debasement of our currency. A Canadian dollar today buys only about 14% of what it could in 1973. In other words, $100CDN in 1973 had the same purchasing power as $702 does in 2026. (Source AI Google)
Finally, Canada has a production problem. We do not produce enough. We have all heard about the productivity crisis, but what does it actually mean? Since 2018, US real manufacturing growth in GDP increased by 10 per cent. In Canada, it fell by 5 per cent. Canada now has the smallest manufacturing sector in the G7.
The average salary for an unattached Canadian was only $19,125 in 1973 so there is that. The real assessment is whether wages have increased at the same rate since that time. I’d guess that average wages and prices have risen at roughly similar rates since 1993 though the last 5 years are likely an anomaly given the inflationary impacts of COVID on prices and the supply chains. Whether the increases in wages and prices roughly align going forward remains to be seen.
I haven’t done a deep dive on the data, but I’d think that inflation wasn’t a significant problem in Canada until after 2020. By my recollection the interest rates in Canada, which is the main tool used by the Bank of Canada to combat inflation, have been pretty low for at least the last 10 years or so, at least mortgage rates have been historically low. But since the pandemic ended prices for pretty much everything have increased, especially for food and groceries. How much of that is due to inflation, supply chain disruption, and even price gouging by end retailers is different to determine. And of course the tariffs have driven costs higher in the last year. My understanding is that a significant portion of US retailers have absorbed the added tariff costs so far, but if that is the case then it won’t continue indefinitely. I’d say in the next year that prices for pretty much everything will increase even more, except perhaps for energy. But to really understand what is causing price increases you need a significant amount of time to compare data to form a conclusion.
Yes, mortgage interest rates are significantly lower even now compared to what they were historically. On the Bank of Canada website you can see the weekly average rates for various products since 1975. The rates today are about the same as what they came down to in 2005. The peak for a 5 year conventional mortgage is shown as 21.75% back in 1981.
As the saying goes…”you can fool some of the people some of the time, but you can’t fool ALL of the people ALL of the time.” The world is in a colosal mess, with world leaders living in an elite fantasy world. Common sense appears to be severely lacking. Money and power dominate.
That 30% spike in coffee prices mirrors the angry debates we track at the Hansard Files. I reviewed recent transcripts from the Agriculture Committee where MPs grilled grocery CEOs on supply chains. The data shows those committee showdowns haven't actually lowered the price of beef or beans. It seems political pressure isn't helping us at the checkout line yet.
Grocery is a low profit margin, high volume business. This is why all the major grocers are diversifying and adding other product lines such as prescription drugs. Taxes on farmers, fertilizers, and diesel fuels are all major contributors to food inflation. Instead of bullying grocers - the Liberal government should reduce those taxes. They collect too much taxes on the backs of working Canadians and families. The fact they can quickly write a cheque over the holidays for $2.5 billion to Zelenskyy with no vote or parliamentary oversight is proof positive. The root cause if the government. Not Trump, not grocers, the government. The Liberal government.
Mike, spot on about that $2.5 billion cheque to Ukraine. Hansard shows the government announced it over the holidays as loan guarantees and IMF support with no debate in the House. Meanwhile, farmers face carbon taxes on fertilizer that push food costs higher. Cutting those taxes would hit inflation where it starts, at the farm.
really sad part is 3/4 of that money will be stolen and does not get to who needs help. Zelensky gets a fresh supply of blow, another big deposit on another place , do you know it was reported he has been sending $50M a month to a Swiss bank account and that was reported by a U.S. intelligence officer. Freeland will fit right in there.
I have exactly who is robbing his so called country blind. They are investigating, how much has gone missing. It won’t matter, he won’t be around long enough to serve his time
I’d say that the $2.5 billion in support of Ukraine is worth it if it prevents a dictatorship from conquering a democratic country and ally. That would undermine all of Europe as Putin would certainly not just stop after taking Ukraine. Or do you think Europe at war would not lead to inflationary pressures any where else?
Plus it will weaken the response to America annexing Greenland. As long as NATO is focused on Putin, Trump can do what he likes. A win win. Your correct again Kevin.
The numbers that I have seen is that the grocery business operates on a 2 - 3% profit margin. This makes sense based on experience; in the late 70s through the mid 80s my parents operated a small grocery store and we only made a profit in the summer when we started to get tourists in. Why? Lets say that you get a case of 24 cans of soup in, for $24. You price it at $1.50 per can. That means that the first dollar goes to your supplier, and the other $0.50 is used to pay the wages to the employees (they don't work for free), heat, water, electricity, mortgage, etc. Lets say that adds up to $0.45. So you are left with a nickle profit, or $1.20 on the case. In theory. If the can gets damaged and you can't sell it, or if it is stolen, then what you have lost is $1.45 or more than the profit on the entire case. People look at the markup, but that needs to cover all the costs, including losses.
So were these “inflationary taxes” on fertilizers, and fuel, etc. in place before the pandemic? If so, why didn’t they cause inflationary spikes before 2020? Or was it perhaps that the global pandemic impacted supply chains (ie. shortages) and also grocery stores took advantage and raised prices also? Not sure that it is entirely on the government for the prices increase over the last 5 years.
I don’t know and I don’t care, it’s a moot point. Canadian families are struggling with affordability, the tax burden is too heavy, and that lies within the control of the federal government. Not Trump, not pandemic. Grocery is a low profit margin business. The federal government has too much of Canadian’s money, that they could write a cheque for $2.5 billion on a PM Mark Carney whim to Zelensky passing through Canada during the Christmas holidays. No vote or parliamentary oversight while Canadian families struggle with basics. How is this fair?
How is it a moot point if the taxes didn’t lead to inflation or price increases before - but suddenly now they are a root cause of inflation? That argument doesn’t hold water. In my opinion there are a number of factors all contributing to higher prices which which includes pandemic supply chain disruption, more money entering the economy due to government programs that were intended to help people and businesses, as well as the recent tariffs (yes, Trump is the cause of that) as well as business gouging ( why is coffee, which doesn’t come from the US, suddenly 20% higher priced?). But to blame it on too much tax is overly simplistic - there are multiple factors leading to stressed affordability (including too many foreign students and immigrants leading to higher rents and house prices).
You have to look at the tax schedule, Kevin. The carbon price was not flat during those years. It started at $20 per tonne in 2019. It climbed to $80 per tonne by 2024. That is a 300% increase. The Parliamentary Budget Officer confirms this adds costs to everything farmers grow and truckers haul. The pandemic started the inflation. But a tripling of the tax rate kept it going.
Despite the fact Carney thinks everyone stupid enough to believe these stats.everyoneI know smells the b s a mile away. When you pick up a pound of ground beef marked $10.49, the same package that cost them $6.50 a year ago, you don’t have to be a wizard to know that’s inflation. Two days in a row, one a family with a baby and the other a single mom with three kids under 11, had to take out most of their groceries and only ring a few items they had cash for, a the single ,o,s credit card was declined. Tell them food prices have gone up only 2%. This referendum in AB can’t come fast enough, even people who play poo pooed the idea are now seeing it’s our only hope. All Canada voted in was a frequent flyer, older playboy, that not one person I know believes the bs that comes out of his mouth. Thank you Dan for printing the truth, because no one gets it from the lying msm.
Gee, none of this is a surprise….trump’s fucking up the world economic homeostasis has caused all democratic states and countries to face financial challenges. Only the conservatives thinks this is something they can capitalize on… but Canada isn’t so gullible… your party is in the basement because you have abandoned conservative values for trumpism glory of profit and power at the expense of Canadian democracy and citizens. Besides…every party in power since 1867 have fudged $$$ reports…nothing new here.
Like all of Dan's articles, this is an enjoyable and informative read.
A couple of points might add some context.
First of all, the CPI and inflation are not synonymous. CPI is an indicator of inflation, but not a definition. This is a subtle, but important distinction. Inflation is the rate at which the general price level increases over time, but not all price adjustments are inflationary; nor should all price adjustments be measured as such. So, Dan mentioned that gasoline prices have fallen due to supply issues; this is a market price adjustment that is independent of inflation.
This is precisely why Pierre Poilievre was able to rightly predict that the inflation of 2022 was not transitory, but was, in fact, endemic to the growth in the money supply. Bankers waited too long to put on the monetary brakes, after printing too much money for too long during and after COVID.
Central Banks are inflation machines. That is, they exist to create inflation, among other things, of course. The stated goal of most Central Banks is to create an inflation rate of two per cent. It is important to note, that at 2 per cent inflation, prices double every thirty-five years.
It is interesting to take a moment to research the foundation for the two per cent target. Is it founded in economic theory? Why 2 per cent? Why not 1 per cent or 0 per cent? Why not adopt a rules-based system where the money supply grows at, or near, the rate of growth of the economy?
It turns out it was more of an offhand idea by the Reserve Bank of New Zealand than a strictly derived policy prescription. The Bank first suggested 0-2, then 1-3, and then settled on 2. The Bank of Canada soon followed.
I have found the best way to think about inflation, is this little story: many years ago, when I was a younger man, I had a crush on a girl who was the sister of a friend of my brother. We were 12 or 13. I would invite her over to watch television. I would go out, buy a bottle of Pepsi or Coke, and serve it like champagne. The bottle cost $.79 plus deposit. (pop came in glass bottles in those days)
Now, that bottle costs $3.99 or more. Has Pepsi or Coke changed its formula to taste better? Has soda pop demand increased so much that it has outstripped the supply, or outflanked all substitutes? If anything, productivity increases and near substitutes would have a downward effect on prices.
What has happened is a deliberate fifty-year debasement of our currency. A Canadian dollar today buys only about 14% of what it could in 1973. In other words, $100CDN in 1973 had the same purchasing power as $702 does in 2026. (Source AI Google)
Finally, Canada has a production problem. We do not produce enough. We have all heard about the productivity crisis, but what does it actually mean? Since 2018, US real manufacturing growth in GDP increased by 10 per cent. In Canada, it fell by 5 per cent. Canada now has the smallest manufacturing sector in the G7.
The average salary for an unattached Canadian was only $19,125 in 1973 so there is that. The real assessment is whether wages have increased at the same rate since that time. I’d guess that average wages and prices have risen at roughly similar rates since 1993 though the last 5 years are likely an anomaly given the inflationary impacts of COVID on prices and the supply chains. Whether the increases in wages and prices roughly align going forward remains to be seen.
Long term wage growth is a function of productivity.
Inflation is a tax; perhaps the cruelest tax of all.
If wages have kept pace with inflation, why are so many so worse off?
I haven’t done a deep dive on the data, but I’d think that inflation wasn’t a significant problem in Canada until after 2020. By my recollection the interest rates in Canada, which is the main tool used by the Bank of Canada to combat inflation, have been pretty low for at least the last 10 years or so, at least mortgage rates have been historically low. But since the pandemic ended prices for pretty much everything have increased, especially for food and groceries. How much of that is due to inflation, supply chain disruption, and even price gouging by end retailers is different to determine. And of course the tariffs have driven costs higher in the last year. My understanding is that a significant portion of US retailers have absorbed the added tariff costs so far, but if that is the case then it won’t continue indefinitely. I’d say in the next year that prices for pretty much everything will increase even more, except perhaps for energy. But to really understand what is causing price increases you need a significant amount of time to compare data to form a conclusion.
Yes, mortgage interest rates are significantly lower even now compared to what they were historically. On the Bank of Canada website you can see the weekly average rates for various products since 1975. The rates today are about the same as what they came down to in 2005. The peak for a 5 year conventional mortgage is shown as 21.75% back in 1981.
As the saying goes…”you can fool some of the people some of the time, but you can’t fool ALL of the people ALL of the time.” The world is in a colosal mess, with world leaders living in an elite fantasy world. Common sense appears to be severely lacking. Money and power dominate.
Inflation should rise quite a bit in April, once the year-on-year effect of removing the carbon tax disappears.
That 30% spike in coffee prices mirrors the angry debates we track at the Hansard Files. I reviewed recent transcripts from the Agriculture Committee where MPs grilled grocery CEOs on supply chains. The data shows those committee showdowns haven't actually lowered the price of beef or beans. It seems political pressure isn't helping us at the checkout line yet.
Grocery is a low profit margin, high volume business. This is why all the major grocers are diversifying and adding other product lines such as prescription drugs. Taxes on farmers, fertilizers, and diesel fuels are all major contributors to food inflation. Instead of bullying grocers - the Liberal government should reduce those taxes. They collect too much taxes on the backs of working Canadians and families. The fact they can quickly write a cheque over the holidays for $2.5 billion to Zelenskyy with no vote or parliamentary oversight is proof positive. The root cause if the government. Not Trump, not grocers, the government. The Liberal government.
Mike, spot on about that $2.5 billion cheque to Ukraine. Hansard shows the government announced it over the holidays as loan guarantees and IMF support with no debate in the House. Meanwhile, farmers face carbon taxes on fertilizer that push food costs higher. Cutting those taxes would hit inflation where it starts, at the farm.
really sad part is 3/4 of that money will be stolen and does not get to who needs help. Zelensky gets a fresh supply of blow, another big deposit on another place , do you know it was reported he has been sending $50M a month to a Swiss bank account and that was reported by a U.S. intelligence officer. Freeland will fit right in there.
I think you have Zelensky confused with Trump. Trump is the real grifter.
I have exactly who is robbing his so called country blind. They are investigating, how much has gone missing. It won’t matter, he won’t be around long enough to serve his time
I’d say that the $2.5 billion in support of Ukraine is worth it if it prevents a dictatorship from conquering a democratic country and ally. That would undermine all of Europe as Putin would certainly not just stop after taking Ukraine. Or do you think Europe at war would not lead to inflationary pressures any where else?
Plus it will weaken the response to America annexing Greenland. As long as NATO is focused on Putin, Trump can do what he likes. A win win. Your correct again Kevin.
The numbers that I have seen is that the grocery business operates on a 2 - 3% profit margin. This makes sense based on experience; in the late 70s through the mid 80s my parents operated a small grocery store and we only made a profit in the summer when we started to get tourists in. Why? Lets say that you get a case of 24 cans of soup in, for $24. You price it at $1.50 per can. That means that the first dollar goes to your supplier, and the other $0.50 is used to pay the wages to the employees (they don't work for free), heat, water, electricity, mortgage, etc. Lets say that adds up to $0.45. So you are left with a nickle profit, or $1.20 on the case. In theory. If the can gets damaged and you can't sell it, or if it is stolen, then what you have lost is $1.45 or more than the profit on the entire case. People look at the markup, but that needs to cover all the costs, including losses.
So were these “inflationary taxes” on fertilizers, and fuel, etc. in place before the pandemic? If so, why didn’t they cause inflationary spikes before 2020? Or was it perhaps that the global pandemic impacted supply chains (ie. shortages) and also grocery stores took advantage and raised prices also? Not sure that it is entirely on the government for the prices increase over the last 5 years.
I don’t know and I don’t care, it’s a moot point. Canadian families are struggling with affordability, the tax burden is too heavy, and that lies within the control of the federal government. Not Trump, not pandemic. Grocery is a low profit margin business. The federal government has too much of Canadian’s money, that they could write a cheque for $2.5 billion on a PM Mark Carney whim to Zelensky passing through Canada during the Christmas holidays. No vote or parliamentary oversight while Canadian families struggle with basics. How is this fair?
How is it a moot point if the taxes didn’t lead to inflation or price increases before - but suddenly now they are a root cause of inflation? That argument doesn’t hold water. In my opinion there are a number of factors all contributing to higher prices which which includes pandemic supply chain disruption, more money entering the economy due to government programs that were intended to help people and businesses, as well as the recent tariffs (yes, Trump is the cause of that) as well as business gouging ( why is coffee, which doesn’t come from the US, suddenly 20% higher priced?). But to blame it on too much tax is overly simplistic - there are multiple factors leading to stressed affordability (including too many foreign students and immigrants leading to higher rents and house prices).
You have to look at the tax schedule, Kevin. The carbon price was not flat during those years. It started at $20 per tonne in 2019. It climbed to $80 per tonne by 2024. That is a 300% increase. The Parliamentary Budget Officer confirms this adds costs to everything farmers grow and truckers haul. The pandemic started the inflation. But a tripling of the tax rate kept it going.
Despite the fact Carney thinks everyone stupid enough to believe these stats.everyoneI know smells the b s a mile away. When you pick up a pound of ground beef marked $10.49, the same package that cost them $6.50 a year ago, you don’t have to be a wizard to know that’s inflation. Two days in a row, one a family with a baby and the other a single mom with three kids under 11, had to take out most of their groceries and only ring a few items they had cash for, a the single ,o,s credit card was declined. Tell them food prices have gone up only 2%. This referendum in AB can’t come fast enough, even people who play poo pooed the idea are now seeing it’s our only hope. All Canada voted in was a frequent flyer, older playboy, that not one person I know believes the bs that comes out of his mouth. Thank you Dan for printing the truth, because no one gets it from the lying msm.
It's only the delusion purported by the Liberanos and popularized by CBC the proproganda machine.
Gee, none of this is a surprise….trump’s fucking up the world economic homeostasis has caused all democratic states and countries to face financial challenges. Only the conservatives thinks this is something they can capitalize on… but Canada isn’t so gullible… your party is in the basement because you have abandoned conservative values for trumpism glory of profit and power at the expense of Canadian democracy and citizens. Besides…every party in power since 1867 have fudged $$$ reports…nothing new here.
I still can’t believe that Canadians believe the BS that glows out of this crooks freaking yap
He’s nothing but a lapdog for those at this sick parasite party the WEf