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Opinion | Bank of Canada’s fight against inflation is a war on workers
(www.thestar.com)
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this post was submitted on 12 Jul 2023
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The inflation is fueled by short supply rather than excess demand.
I'm no economist but if our current supplies cannot even meet the baseline demand, rising rate does little to nothing but hurt the average Canadian.
The average Canadian already have nothing left to "cut" on their spending, people gotta eat and shelter. This is the baseline demand. Unless the goal is to make people homeless and starve, without increasing supply and invest in productive investments, the inflation will not end.
There isn't a whole lot of evidence to suggest that there are supply issues. Even the so-called chip shortage later revealed that chip output saw no decline throughout the pandemic or since.
The exception being related to the European fertilizer plant shutdown followed by the Ukraine conflict, cutting off access to Russian fertilizer, prompting some issues related to food. That does explain some inflationary pressure in 2022, however, those issues have largely cleared by now. The farm gate price of food is pretty much back to normal at this point.
This round of inflation seems to be fuelled simply by people being willing to spend more. We saw a similar phenomena following the end of WWII.
I agree there isn't much evidence for current supply issues. However...
Output may have not reduced, but it did change during the pandemic. Many fabs retired their legacy equipment to move to newer processes. However, the auto industry's designs were still based on the old processes, so they experienced a shortage. This compounded the delayed demand of consumers who didn't buy cars due to uncertainty and limited travel. That shortage has mostly been resolved, but hasn't completely settled (there are basically no "deals" and old used cars are still in high demand).
Another good example is the still ongoing Raspberry Pi shortage, a cheap SBC made with legacy processes that was too capable for its low cost and ended up integrated into all manner of commercial and industrial products.
Raspberry Pi is made by the non-profit Pi foundation with a very low target price, but the inability to get cheap legacy silicon made drove extreme scarcity, panic buying and hoarding/scalping behaviour. They have greatly scaled up production, but suppressed demand and continuing scalping are chewing up all production.
However at some tipping point there will suddenly be a vast oversupply of Raspberry Pi.
A lot of that is directly due to manufacturer decisions to keep supply short. Look at GM cutting production at their factory's for an example.
Unpunished corporate greed strikes again, and we're the whipping boy for their shenanigans