Thursday, October 23rd7.7°C
23888
22916
Economics Made Easy

Hidden inflation

I’ve addressed inflation many times before in this column, but today I want to look at a little more camouflaged form of inflation. Twenty years ago I bought my first investment property in Calgary. At that time durable goods (items that have a life expectancy in excess of three years i.e.: washers, dryers, stoves, fridges….etc.) came with a warranty of 10-20 years. Items such as mattresses even came with a lifetime warranty. I just purchased a new fridge a few days ago for one of these residences and to my complete shock I was informed that the warranty was only for one year. One year!? Of course the economist in me expected the purchase price to be 1/10th – 1/20th of what I previously paid. The truth of the matter is that fridges as well as other durable goods have steadily increased in price over the past 20 years. Manufacturers know exactly how long their products will last. So now I can expect to repair this fridge in just over a year and probably completely replace this unit within three years. Now over a 20 year period I will likely replace this fridge 5 or 6 times. So I can expect to pay 5 to 6 times more for a fridge over the next 20 years. However government inflation statistics will only calculate the purchase price of the fridge, which is marginally more expensive than the previous year. As with many government inflation statistics this misses the true cost. This revelation spurred me to do some research into other durable goods’ warranties. Across the board washers, dryers, fridges, microwaves, stoves…etc. have essentially seen their lifetime or 20 year warranties whittled away to a measly one to three year warranties. More surprising was that the mattress industry is actively lobbying its manufacturers to lower warranties to 5-10 years. Are you starting to see the picture? Products you would typically purchase once in 25 years are now going to have to be replaced every 2-3 years. This is a form of inflation that is not captured by any government inflation report.

Looking beyond the durable goods we find a smoke and mirrors game being played in the pork industry. When you go to the grocery store you will no longer find the standard 500 gram packages of bacon. The price has remained the same; however the quantity of bacon that you receive has shrunk to 375 grams. Most people assume that the price of bacon has not risen because the package looks the same, but the truth is the price per gram is up 25%. Regardless of how much bacon has increased in price, it really doesn’t matter to the government because Canada’s inflation gauge does not include food and energy. Apparently eating and keeping yourself warm in balmy Canadian winters is not something that the government considers essential. This is fundamentally the same as determining the takeoff weight for an aircraft without considering the weight of the wings. Leave it to government to screw up a calculation that a below normal intelligence hamster could figure out.

These are just a couple of things to keep in mind when Statistics Canada tells you that there is no noticeable inflation in the Canadian economy.

18810


23090


Impeach Christy Clark

So it looks like we are finally coming to the end of the government’s bullying of our teachers and our children as B.C. schools are poised to open next week. Without a doubt this has been handled in the worst way possible. But as I always say, if you want something screwed up, managed incompetently or bastardized then put it in the hands of government: They won’t let you down.

The B. C. government had all summer to deal with this issue, but they played politics (as they always do) and they waited until September when public pressure could be a tool that they could use to their advantage. I firmly believe that Christy Clark thought that come September public opinion would be on her side. I think this strategy backfired on her. The majority of the public continued to support the teachers and most importantly, our children. I want to point out that I believe that the strong arm tactics of the provincial government are something that we would not have seen in an election year. I’m also certain that the government will be counting on the electorate to be too busy watching Dancing with the Stars for the next three years and will forget all about this when our provincial election comes around in 2017. Christy will buy some shiny trinket for West Kelowna and she will get back in to continue wreaking havoc.

As I’ve said in many of my past articles, this is not an issue about a lack of funds. We are taxed to death in this province and this country. The money is there it is just spent on things like providing a permanent residence for Ben Stewart in China (the guy who Christy Clark took the riding from), sending Christy Clark over to China and in a few days, a two week trip to India courtesy of you and me. Tell me something, what the hell is the premiere of B.C. and her entourage doing on an all-expenses paid trip to India? This will be her sixth trip to India to promote business. What’s the matter, couldn’t she do it right the first five times?

Question: Do you know who is best at building international business?

Answer: Companies that do international business!

Question: Do you know who is the worst at building international business relations?

Answer: Politicians and ministers of trade who are not in the business and have no stake in the game.

 

It amazes me that people continue to have faith in the political system. It exists to serve its own under the guise of serving the people. This has been proven time and time again throughout history all over the world. The overt duplicity of government is on display for all to see. But you have to want to see.



Show me the money

I’ve been monitoring the provincial school teachers strike quite closely and am surprised by the fact that one of the questions on the forefront of my mind seems to be absent from others. My concern is that the B.C. taxpayer, regardless of whether they have children in the public school system or not, pays for kids to be in school for approximately 36 weeks per year. Due to initial rotating strike action and then full strike action, the B.C. taxpayer was shorted almost 2 ½ weeks of schooling that they paid for out of their taxes. Consider if you ordered a pizza or some lawn maintenance service and you paid for this up front but never received the pizza or law maintenance. Would you have legal grounds to pursue reimbursement? Of course you would! So when the government steals money from us and does not deliver what they promised, are we justified in demanding reimbursement? You’re damned right we are.

Just pause for a second and think about this. You were forced, under threat of imprisonment, to give money to the government that was then supposed to be delivered to the teachers and assistants to educate our children. The government took our money, but never delivered it to the teachers. So where is it? Well, it’s sitting in the provincial government coffers. If you consider the fact that every taxpayer in B.C. has contributed to this, the total sum is in the millions of dollars. Now this is not new practice for government, but they typically steal from us under the guise that the funds are spent on other things that are purposefully opaque so that we cannot trace these funds. However, this particular situation is extremely transparent. I have made approximately a dozen phone calls to the provincial government, the Ministry of Education and other branches of government to try to quantify and track down these funds. I have been passed from department to department and I have left several voice mails and live messages and have been promised that I would be called back. Well that’s over a month now and not one person or department has returned my call. Why am I not surprised?

Now in the private sector when you abscond with funds that are not yours it is called theft and you are prosecuted for this. In the public sector this is called business as usual and you carry on with your day. Furthermore, sources inform me that the best we can hope for is that our kids might be back in class by October. That will make this theft from the taxpayer even larger than its present value. We will have to wait until our kids are back in class before we can take action because only then will we know what the total sum is that we should be demanding to be returned to us.

Judging from the general mood of the overburdened taxpayers that I’ve been speaking with, they are not about to let this go. They want that money to be delivered to the teachers or back to the taxpayer. They don’t want these funds spent on lavish dinners and trips for our politicians. Enough of our money already goes to fund these activities.





Patriotism = Blind Faith

So once again the patriotic holiday season is upon us in Canada and the U.S. with Canada Day and Independence Day on the horizon. For the past couple of years I’ve been finding myself questioning why everybody is getting so gosh darned excited on these two days. What’s up with this blind faith in patriotism? What is patriotism and more importantly, what are its virtues if any? Who or what is it that we are supposed to be patriotic to? Politicians want us to believe that patriotism should be directed to a flag and government and some artificial red lines drawn on a map by a bunch of politicians. Why should that garner patriotism? Are we supposed to be patriotic just because we were born here? Why? What would happen if one day another bunch of politicians just erased those imaginary lines? It will happen. It always does. Then what?

Further to the point, what is it that we are so proud of as Canadians? Is it the fact that almost 50% of our paycheque is stolen by the government? Are we fiercely proud that our politicians are no longer accountable to the people? It must be that we derive national pride from the fact that Stephen Harper and John Baird consider Canada the 51st state and are both hell bent on getting Canada involved in the next US war. And mark my words; the US has a long list of wars that it can’t wait to start.

Now I know that I will receive a lot of flack from the Budweiser drinking populous that will be three sheets to the wind by noon on Canada Day. I’m sure they will be saying things like; “How dare he question Canada Day?” “That currency guy most not love freedom!” The truth of the matter is that these people would be happily hammered by lunch if you gave them the day off and called in National Cheese Burger Day. I’m not too worried about the general opinion of this sector of the population. Furthermore, if these people think they are living in a free land then they ought to try not paying the property taxes on the home they think you own. Or try entering this free country without a passport. Why not? It’s your home country isn’t it? You’re a citizen of this country aren’t you? Why would you need documents to enter your home? Better yet, when you have passed through the metal detectors at the airport without setting off the alarm, try refusing further security checks when you are “randomly selected” for further security checks. See how free you are then. Any of the previously mentioned acts, which should be acceptable in a free country, will get you a very fast and painful education with respect to the freedoms you don’t have.

Now don’t get me wrong, the physical beauty of our so called country is breath taking. And the vast majority of the people who populate this land are a credit to the human species. That being said, there are many beautiful places throughout our planet. And there are amazing and wonderful people all over the world. However “Patriotism” is a human condition that provides an invaluable tool for politicians to manipulate us like cattle. They put an artificial fence around the land they have staked out and throw a flag in your face and instruct you to worship it. You must sing an allegiance to these symbols at every football, baseball, and hockey and basketball game. And remember when the time comes for war, and there is always time for war, you will know what side you are on by simply having a flag waved in your face.

So what would happen if we rid this planet of these ridiculous artificial borders? Well, it would essentially dry up a very lucrative revenue source for government. Government would lose the power and riches that come from tariffs and every other tax and duty they place on goods and people entering and leaving a country. Without borders you would actually be free to roam the planet as we were meant to do. Goods would flow unfettered around the world without barriers. This would strengthen the global economy to levels never seen before and then we would actually see free trade and true markets evolve. Unlike the highly manipulated markets of today.

I think John Lennon said it best.

“Imagine there’s no countries

It isn’t hard to do

Nothing to kill or die for

And no religion too

Imagine all the people living life in peace…”

 

Do you feel a need to be patriotic? How about being patriotic to the planet earth? How about being patriotic to global liberty? How about being patriotic to a clean environment? I know that this is a bit of a difficult thing for some people to digest as we have been conditioned to believe that borders are a necessity. But this is really not that arduous of a concept. The world wouldn’t fall apart without countries. It would actually be better off. There would be an increased standard of living around the world. War would disappear overnight. And life on this planet would be a far richer experience.



Read more Economics Made Easy articles




About the Author

Derrick Nicholson is a Currency Strategist.  He has been in the industry for the past 20 years.  He specializes in mitigating currency risk for companies doing business outside of Canada.

Questions and inquiries can be directed to Derrick at [email protected].

 







The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet presents its columns "as is" and does not warrant the contents.


Previous Stories



RSS this page.
(Click for RSS instructions.)
22771