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May 2021 Inflation
June 16, 2021
3:10 pm
Vatox
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June 16, 2021
7:52 pm
COIN
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The U.S. Federal Reserve made an announcement to-day that seems to indicate interest rates will edge up.

June 16, 2021
10:11 pm
Norman1
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Like last month, CPI is just making up for lost inflation in the previous May-to-May period:

May 2019 May 2020 May 2021
All-items CPI 136.6 136.1 141.0
-0.4%
+3.6%
+1.6% per annum
June 16, 2021
10:24 pm
Bud
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CPI is a bogus indicator.

June 16, 2021
11:10 pm
Vatox
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Norman1 said
Like last month, CPI is just making up for lost inflation in the previous May-to-May period:

May 2019 May 2020 May 2021
All-items CPI 136.6 136.1 141.0
-0.4%
+3.6%
+1.6% per annum

  

But, because we lost 0.4% on the indexation and that 1.6%, you add them to get 2.0% and the second 1.6% to get 3.6% and that’s important for benefits. So we need that number, but it’s not run away inflation.

June 17, 2021
4:28 pm
Bud
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"Would savers make money compounding if interest rates were normalized at 7-10%"

June 18, 2021
10:13 am
Alexandre
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I keep reading on CNN Money, among other places, that inflation benefits businesses and does not really impact customers.

Thanks for your propaganda, pro-government media. Everybody needs a good laugh every once in a while.

June 18, 2021
10:37 am
HermanH
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Alexandre said
I keep reading on CNN Money, among other places, that inflation benefits businesses and does not really impact customers.

For the benefit of those who do not read CNN Money, could you expand on that? How does it benefit businesses with little impact on customers?

June 18, 2021
12:01 pm
Norman1
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That is missing lots of context. That would only be the case with inflation around 2% per annum.

Canada had inflation over 10% per annum in the early 1980's. Such inflation was not considered desirable.

Bank of Canada explainer Understanding inflation has a more detailed explanation.

June 18, 2021
12:44 pm
Alexandre
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HermanH said

Alexandre said
I keep reading on CNN Money, among other places, that inflation benefits businesses and does not really impact customers.

For the benefit of those who do not read CNN Money, could you expand on that? How does it benefit businesses with little impact on customers?  

Business: When grocery stores' costs rise, stores will "mark up the full rate of inflation plus a little bit more." For example, if the price of meat that a store pays to its suppliers goes up 6 cents a pound, the store might raise the price it charges for that same meat by 10 cents.

Customers: Once the stores feel like they're safe raising prices a little — well, are you really going to notice if that gallon of milk you're buying has gone up to $3.85 instead of the $3.76 that the store could charge if it wanted to keep its margins steady? Nine cents on a single gallon probably makes little difference to anyone.

----------

Also, my favorite one from different CNN article, why customers are not impacted by inflation. That one says last year people didn't spend much money, so they have extra money left to spend this year, which for them negates inflation impact.

I like reading CNN, because I could find gems like that. Their finance related articles could be almost as funny as their political, sometimes more.

June 18, 2021
5:12 pm
Bill
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Alexandre, you're ignoring that there's more than one "store", not at all automatic that you can raise prices as you say due to having to stay competitive with other stores.

June 19, 2021
6:16 am
Alexandre
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Bill, you are not arguing with me, but with whoever wrote that piece for CNN. I am definitely not in agreement with them.

To be fair, occasionally CNN would quote smart people:

Federal Reserve Chairman Jerome Powell acknowledged during his Wednesday press conference that there is a risk that inflation isn't going away as quickly as many economists think it will.

June 19, 2021
7:26 am
COIN
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Norman1 said
Canada had inflation over 10% per annum in the early 1980's. Such inflation was not considered desirable.  

And interest rate rose to 20%.

June 19, 2021
8:42 am
Norman1
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Really high interest rates was one of the things used back then to bring inflation under control:

Norman1 said
Yes, inflation was a serious problem at that time.

Adding the inflation rate and 5-year GIC rates (from David Trahair's article "GICs and the Inflation Argument" mentioned by Bill earlier) to the table gives a better context for those CSB rates:

Series Issue Date 1981 1982 1983 1984 1985 1986 1987
S36 01/11/1981 19.50 12.00 10.50 11.25 10.50 10.50 10.50
Inflation (CPI) 12.50 10.90 5.80 4.30 4.00 4.10 4.40
5-year GIC 15.36 14.57 11.52 11.97 10.80 9.73 9.61

Fortunately, that hasn't been needed since.

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