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August 2021 Inflation
September 19, 2021
8:10 am
Bill
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Our largest expense, taxes (apparently now more than food, housing & clothing combined, for average Canadian family) is not even counted. Might be useful to include that too.

September 19, 2021
8:32 am
mordko
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Oh, yes. The cost of bureaucracy in Ottawa has to go up every election. 50% a year should cover it. Money well spent too. If Netflix jacks up the price, CPI will count it. When the Feds spend another billion on CBC its like it comes out of nowhere.

September 19, 2021
9:19 am
Norman1
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According to the Statistics Canada CPI FAQ, taxes are included. It would be meaningless to not include duties, HST, GST, or PST in the prices of consumer goods:

How are sales taxes and income taxes treated in the CPI?
The prices included in the CPI are final prices, inclusive of all excise and other taxes paid by consumers. In particular, prices include the Goods and Services Tax (GST), provincial retail sales taxes, or harmonized sales taxes, as well as any environmental, liquor and tobacco taxes if applicable. This means that the CPI could change as a result of changes in any of these types of taxes.

In contrast, the CPI does not include changes in personal income taxes because these are considered transfers and are out of scope for the CPI.

Can I see consumer price data excluding taxes?
Yes – the All-Items Consumer Price Index excluding indirect taxes is based on the CPI All-items index. The effect of indirect taxes (mainly sales taxes, such as HST or PST) is removed in order to show how prices have changed independent of these influences.

September 19, 2021
10:39 am
mordko
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Yes, selected taxes are included.

September 19, 2021
11:25 am
Bill
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Pretty funny, excluding income taxes because they're "transfers". Whatever that means.

September 19, 2021
11:40 am
Norman1
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Income taxes, GST refunds, and PST refunds are not consider to be part of the price of the basket of goods.

As Statistics Canada explains in the CPI FAQ, the CPI is not an index of the cost of living in Canada:

Is the CPI a cost of living index?

The Consumer Price Index (CPI) is not equivalent to a cost-of-living index (COLI). The CPI has often been used to approximate cost-of-living but it is important to note that the CPI and COLI are not directly comparable.

The CPI is based on a fixed basket of goods and services, which represents the average Canadian household's spending habits. The CPI measures the average change in retail prices encountered by all consumers in Canada.

By contrast, the objective of a COLI is to measure price changes experienced by consumers in maintaining a constant standard of living. A COLI can be linked to the notion of the minimum amount of money that would be necessary in different periods of time to ensure a given level of "well-being".

In short, the CPI measures the change in the cost of a fixed basket of goods and services, whereas a COLI measures the change in the cost of a fixed level of "well-being".

September 19, 2021
1:15 pm
mordko
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That’s good news. We can subtract our portion of CBC funding from the income taxes because its nothing to do with the cost of living in Canada.

October 2, 2021
11:12 pm
Righand
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Canada and the U.S. politicians just keep on kicking the can down the road thinking that this could never happen here.

https://www.newsweek.com/venezuela-changes-currency-inflation-skyrockets-price-dollar-rises-black-market-1634860

October 3, 2021
1:30 pm
Bill
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Righand, not to worry, we've been assured modern central bankers, etc are way smarter and now know how to use monetary levers compared to previous eras such as the Dirty 30s, we're good. Though I'm not sure how Venezuela's bankers, etc missed those sessions on how to not have hyperinflation, etc.....

October 3, 2021
1:46 pm
Norman1
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They probably partied late the night before and fell asleep during those sessions!

US Federal Reserve pumped trillions into the US economy after the 2008 crises. Still no hyperinflation in the US over a decade later: Forbes (March 2021): Is Inflation Coming?

The Japanese central bank has tried for many years to inflate their economy with quantitative easing. Didn't work. Can't even get inflation on purpose!

That's why I think such sensational end-of-the-world hyperinflation stories are garbage.

October 3, 2021
2:02 pm
Righand
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I hope you guys are right but I've covered all bases as much as I can just in case.

Interest rates ? JMO, But they can't raise them very much because the whole house of cards will collapse.

How else out except to monetize the debt ?sf-confused

Meanwhile, everything in sight seems to be costing more these days, transitory perhaps ? or maybe not ?

October 3, 2021
8:11 pm
Norman1
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Interest rates can rise without bring everything down if done gradually and when the economy has recovered.

Debt can be rolled over, partly or fully, when the government bonds issued now mature. No need to monetize.

Should the Bank of Canada be still the owner of the bonds, it won't even need to print any more cash then. It just needs to agree to roll them over like people do with a maturing GIC! sf-laugh

The price of the CPI basket has been rebouding at about 5½% per annum since January. The hope is that will moderate in the coming months.

Keep in mind the inflation target is 2% per annum and not zero. The goal next year (two years after the pandemic) is for consumer prices to be around 4% above the pre-pandemic prices, not back to pre-pandemic prices.

October 3, 2021
8:34 pm
Loonie
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Some people did lose their houses when interest rates spiked in the late '80s or thereabouts. Since then, the stress test for getting a mortgage has tightened a fair bit so that it is harder for people to get into such a predicament. I advise first home buyers to lock in their rate for the first five years to avoid surprises during the period when they are probably most stretched and need predictability.

October 3, 2021
9:13 pm
Norman1
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The mortgage stress test currently requires passing using a mortgage rate of the higher of (a) 5¼% or (b) 2% + actual rate.

So, mortgage borrowers should be good for at least eight hikes of ¼% each.

October 4, 2021
5:54 am
mordko
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Mortgage borrowers who struggle to meet the requirements of the stress test can always get a mortgage without one, eg from private lenders.

October 4, 2021
10:22 am
Vatox
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Hopefully inflation subsides but I think inflation control is more critical than dangers from interest rate hikes. We will see this month, as September CPI will be reported on October 20 and an interest rate policy announcement is on October 27.

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