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I have never heard inflation explained quite this plainly before. Thank you.

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The talk the newspapers would be giving if they weren't mostly neoliberal is the simple analysis in The Guardian to counteract the "Inflation is the Terrible Top Problem for Joe Biden" subject of most Times and Post inflation articles right now.

It used three numbers for Jack Average (American, our numbers are lower). Inflation is 6.2% since last October, but Jack's wages are up 5.8%. Jack is also an average $66,400 in debt on the mortgage and car.

So where Jack used to have $100 in his pocket and $100 in grocery bills, he now faces paying $106.20 with his $105.80 in wages, and must pull 40 cents from his luxuries budget to pay for necessities. But his full necessities are $30,000 per year, vs $10,000 in 'luxuries' (or at least, non-necessities), so he has to do that 300 times, sucking $120 from his bar/restaurant/nice-clothers/Xmas/vacation fund into his food/clothing/shelter budget. (Worse, those luxuries are up $620 from their $10,000 start, so he's lost 7.4% of his luxuries.)

Sucks to be Jack, by $740 of fun lost to inflation.

BUT! Jack's $66,410 in debt has effectively shrunk 5.8% in size relative to his ability to pay, so his *wealth* has increased by $3851. (Shrinking debt == increased wealth).

Until Jack has to renegotiate his mortgage at new, higher rates, he's clearly winning from inflation. And the rich end of the economy, that makes money by loaning their great wealth to Jack, have effectively lost 6.2% of the wealth they go a-loaning with.

Reckoning at least the first few years of modest inflation as a wealth-transfer from the rich to the indebted class, as I did with Jack getting $3851, is also a useful model to view it with.

And that, says the lefty Guardian, is why every paper that's neoliberal may be recognized as such by how alarmed they are by the very first news of inflation. In 2008, it was posed as "Wall St. vs Main Street", and oh, my god, how Wall Street won that one.

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Ken Boessenkool's and Mike Moffatt's banana analogy is wrong. Their analogy should have been written as:

"You can think about demand-pull inflation like this. Imagine a two-person, two banana, two-dollar economy. Each person pays one dollar for each banana. Now imagine you TAKE ONE BANANA OUT OF the economy. Each person now pays two dollars, IF THEY HAVE TWO DOLLARS, for each banana. But nothing else has changed and this would be 100 per cent inflation. This is demand-pull inflation, and the solution is simple: eliminate two of the dollars."

So now, let's "eliminate two of the dollars." How does this grow bananas?

The inflation issue today is supply, not too much money. Reducing demand does not increase supply. In fact, it makes increasing supply more difficult, because two ways governments and central banks reduce demand are increasing taxation or interests rates or both.

Just asking, would you, personally, rather endure a short term supply shortage OR increased taxes and increased interest rates?

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The discussion about inflation perhaps would benefit with a little more context: the United States, the United Kingdom and the European Union are all facing the same inflationary pressures we are here in Canada. I am not sure that a coordinated monetary policy would help, but in the good (bad) old days of high inflation in Canada, the rest of the world was not experiencing the same issues. It is an impossibly tough call to make for Central Bankers, good luck to us all.

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I'm sure the Bank of Canada will just adjust the CPI calculation to control inflation. Consumers have adapted and don't need transportation, food or shelter anymore. Real Canadians can survive off a narrow basket of inclusive widgets. Deflation is the real issue! It's getting tougher and tougher to throw on the rose coloured inflation goggles, but they also can't do anything about it without causing a recession of some magnitude. A decade plus of low interest rates and easy money has trapped us into a corner and the only options from here on out are "policy errors". That or story-time from the BOC I guess.

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Funny, just literally read this before checking my email, The Cantillon Effect is the most important economic concept you’ve never heard of. Here's a breakdown of what it is (and why you should care). It has to do with money printing and inflation.

Short Twitter Thread, https://twitter.com/SahilBloom/status/1460242310420123651?s=20

Longer post: https://sahilbloom.substack.com/p/how-the-rich-get-richer

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