Trudeau Says New Spending Won’t Fuel Inflation. Scotiabank Disagrees.

The_Foxer

Council Member
Aug 9, 2022
1,298
790
113

Of COURSE it will fuel inflation.

And he has to know that. But it'll take a little time so it won't show up as higher inflation until sometime early next year.

In the meantime people think he's being nice to them.

More evidence of an election late this year or early next year?
 
  • Like
Reactions: Ron in Regina

Ron in Regina

"Voice of the West" Party
Apr 9, 2008
18,023
3,778
113
Regina, Saskatchewan
Recently, both the Bank of Montreal and CIBC have warned that any increase in government spending would add to inflation, not help fix the problem. Avery Shenfeld, chief economist for CIBC World Markets, said that extra spending will heat things up rather than cool them down.

“In a period of high inflation and excess demand, cutting taxes or handing out cheques can add fuel to the inflationary fire, and make the job of a central bank that’s raising rates to cool demand all that more troublesome,” Shenfeld wrote in a note to CIBC clients.

Into this walks Pierre Poilievre, the newly minted Conservative leader, who called out Trudeau for not offering any real help to those struggling while adding fuel to the fire with new payroll taxes coming in just a few months.

“The problem is the money will be vapourized by inflation,” Poilievre said when asked why he would oppose measures to help the lowest income earners.

“He says he’s going to give people $500 to help with the rent. Well, that works out to $40 a month in Toronto, that will not buy you even one days rent for your $2,300-a-month average rental cost.”

Poilievre has been warning the Trudeau government about the dangers of high inflation for more than a year; they’ve ignored the issue.

Now, Trudeau will spend $4.5 billion, which is more likely to make the problem worse rather than improve the lives of Canadians.

If you are on the low end of the income scale, you might be saying thank you and Hallelujah, but here is why this won’t be a long-term fix for these Canadians.

The help will last only a matter of months, while inflation won’t. These solutions don’t help stop the increases in inflation, they just make it easier to cope – for some. When the supports end in six months, these measures will have added to inflation but not brought down prices.

They also don’t impact most families.

Trudeau claims his measures won’t add to inflation, but economists at Canada’s biggest banks, which Trudeau praised Tuesday, would beg to differ. In June, Scotiabank warned that government spending was already a contributing factor to inflation.

“Lower government spending on goods and services could help lower inflation,” the report from Scotiabank stated.

Without lower government spending, they warned, the pressure would be on the Bank of Canada to hike interest rates, hurting small businesses and anyone with a mortgage.

Trudeau is promising to double GST rebate payments for the next six months, a one-time $500 rent subsidy for low-income Canadians, and a sliding scale dental care rebate that will top out pretty quickly and evade the average family.

To get a significant GST rebate, you will need to be a single parent earning $30,000 or less or a couple with kids earning less than $35,000 combined. This is the “Middle Class” that Trudeau is targeting

For the rental rebate, you will need to be a low-income Canadian paying more than 30% of your income on rent, have filed your taxes and fill out the right form.

As for dental benefits, those top out at $260 for a child once your combined family income is between $80,000-$90,000. For months, Justin Trudeau has been warned that his own government’s spending is part of the problem with inflation. His response to the worsening situation Tuesday was more government spending.
 

Ron in Regina

"Voice of the West" Party
Apr 9, 2008
18,023
3,778
113
Regina, Saskatchewan
So, anyone who’s managed to buy a home (or at least get a mortgage) is out on this one, but the one-time top up to the Canada Housing Benefit will be available for renting families with a net income of less than $35,000, or renting individuals making less than $20,000, “who pay at least 30 per cent of their income on rent,” according to a government statement.

Breaking down the $20,000 or less annual for an individual to qualify, divided by 12 months is $1666.67/month & assuming full time employment (this is the weird variable) divide by 168 hours = $9.92/hr which is about $2/hr lower than the lowest minimum wage in Canada.

The benefit is expected to go to roughly 1.8 million Canadian renters, and be about $500? Meanwhile, interest rates for anyone who has a mortgage including the people renting to the renters being targeted here will increase….so their expenses go up…so the vicious circle? This fuels inflation and that cost gets passed onto whom?
 
  • Like
Reactions: The_Foxer

Tecumsehsbones

Hall of Fame Member
Mar 18, 2013
50,509
3,991
113
Washington DC
So, anyone who’s managed to buy a home (or at least get a mortgage) is out on this one, but the one-time top up to the Canada Housing Benefit will be available for renting families with a net income of less than $35,000, or renting individuals making less than $20,000, “who pay at least 30 per cent of their income on rent,” according to a government statement.

Breaking down the $20,000 or less annual for an individual to qualify, divided by 12 months is $1666.67/month & assuming full time employment (this is the weird variable) divide by 168 hours = $9.92/hr which is about $2/hr lower than the lowest minimum wage in Canada.

The benefit is expected to go to roughly 1.8 million Canadian renters, and be about $500? Meanwhile, interest rates for anyone who has a mortgage including the people renting to the renters being targeted here will increase….so their expenses go up…so the vicious circle? This fuels inflation and that cost gets passed onto whom?
It gets passed on to everybody.

If you're going to say "But it hits the poor the hardest," I can only respond "Duh. Everything hits the poor the hardest."
 
  • Like
Reactions: Ron in Regina

The_Foxer

Council Member
Aug 9, 2022
1,298
790
113
So, anyone who’s managed to buy a home (or at least get a mortgage) is out on this one, but the one-time top up to the Canada Housing Benefit will be available for renting families with a net income of less than $35,000, or renting individuals making less than $20,000, “who pay at least 30 per cent of their income on rent,” according to a government statement.

Breaking down the $20,000 or less annual for an individual to qualify, divided by 12 months is $1666.67/month & assuming full time employment (this is the weird variable) divide by 168 hours = $9.92/hr which is about $2/hr lower than the lowest minimum wage in Canada.

The benefit is expected to go to roughly 1.8 million Canadian renters, and be about $500? Meanwhile, interest rates for anyone who has a mortgage including the people renting to the renters being targeted here will increase….so their expenses go up…so the vicious circle? This fuels inflation and that cost gets passed onto whom?
It's not just higher rents that will hit people, it's the costs of pretty much everything else as inflation still goes up. You've got the double edged sword of both higher interest rates and higher costs of goods, meaning even a guy living in a tent in a park is going to suffer.

The BOC is trying to lower the amount of capital out there (having dumped a tonne of unearned dollars into the economy which is what helped cause this) and the gov't is dumping more in - this is the economic equivalant of pushing the breaks and the gas as hard as you can at the same time.
 
  • Like
Reactions: Ron in Regina

The_Foxer

Council Member
Aug 9, 2022
1,298
790
113

A soft landing? More like a crash landing, say economists, who warn Bank of Canada’s rapid rate hikes will likely trigger a recession​

Businesses could cut jobs even as consumers struggle to afford basic necessities.​

Economists are growing increasingly concerned that the Bank of Canada’s aggressive campaign to raise interest rates will plunge the economy into a recession.
On Monday, RBC’s economics arm warned clients that an economic soft landing — where the Bank of Canada hikes interest rates and lowers inflation without causing an economic downturn — is becoming a “increasingly unlikely.”