he Canadian government announced it has extended its pandemic recovery benefits (also known as helicopter money) until October 23, 2021. It’s getting hard to track all these programs, not to mention how many times they have now been extended. The following money drops are ongoing:
1. The Canada Recovery Benefit (CRB)
2. The Canada Emergency Wage Subsidy (CEWS).
3. The Canada Emergency Rent Subsidy (CERS)
4. The Canada Recovery Caregiving Benefit (CRCB)
5. The Canada Recovery Sickness Benefit (CRSB)
“Extending these supports — which have been lifelines for many — is needed,” Finance Minister Chrystia Freeland said in the release. “This is of particular importance for those workers and businesses that have been hit hardest by the pandemic and are still reopening and rebuilding.”
Politics aside, these programs have certainly been useful in avoiding an economic calamity, however, when and how to exit these programs remains a big question mark. Many businesses are already reporting difficulties getting people back to work, and with the money supply growing close to 20% year-over-year there are increasing fears of inflation. Ironically, in the same week these measures were extended, the CPI inflation printed north of 3%, and the Bank of Canada’s Tiff Macklem decided to write an opinion piece in The Financial Post.
Macklem reminded Canadians he remains firmly committed to keeping inflation under control, while blaming higher inflation on base effects, and supply chain issues, “All these factors have driven prices up, but none of them are likely to last. So, we shouldn’t overreact to these temporary price increases.”
Transitory, but for how long?
Macklem concluded, “The message I want to leave with you is this: The Bank of Canada remains firmly committed to keeping inflation low, stable and predictable. Even with the gyrations caused by the pandemic, inflation has averaged pretty close to target through the past few years to today. You can be confident that we will keep the cost of living under control as the economy reopens.”
Keep the cost of living under control? National home prices have accelerated by 24% over the past 12 months, the quickest pace of home price inflation ever.
Does it not seem odd to you that the head of the central bank is writing opinion pieces in major newspapers telling everyone that inflation is nothing to worry about and that it is under control?
Control the narrative, control the people. Inflation expectations remain a key threat to the central bank printing presses, and losing control also jeopardizes the federal governments ambitious spending plans. There’s an election looming, after all.