Chart of the Day (CotD) Canada's Inflation and CPI

June 20, 2023

eldric.substack.com

This is a presentation of Canada’s inflation and Consumer Price Index (CPI) . The source of inflation is from a country’s central bank, in this case, the Bank of Canada (BoC) and M3 Money Supply. The “Selected Monetary Aggregates and their Components” can be accessed via the BoC website: https://www.bankofcanada.ca/rates/banking-and-financial-statistics/selected-monetary-aggregates-and-their-components-formerly-e1/#table. The Consumer Price Index CPI is an artificial “construct” which presents the apparent cost of living. The CPI data can be accessed via Statistics Canada website:https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1810000601&cubeTimeFrame.startMonth=06&cubeTimeFrame.startYear=2021&cubeTimeFrame.endMonth=05&cubeTimeFrame.endYear=2022&referencePeriods=20210601%2C20220501.

Here are some general comments by the author:

- Monetary Inflation via the BoC has averaged 7.3 percent per year since 1982 and the cost of living (CPI) based on official Statistics Canada data has averaged 1.8 percent per year over the same time frame.

- Since April 2022, Monetary Inflation has averaged 8.1 percent versus the average CPI of 6.4 percent.

- If one were to believe the news stories “this is the worst inflation seen in 40 years”, one would run for the hills, however, that is not entirely accurate. During the year 2020, Monetary Inflation averaged 13.4 percent, with a high of 16.3 percent in April of that year.

- The highest Monetary Inflation rates occurred during the period 1971 to 1982. Monetary Inflation averaged 16.5 percent per year for this period with peak Monetary Inflation rates reaching 27.6 percent in June 1974.

- Note the unprecedented CPI rate of change relative to Monetary Inflation since 2020. This is likely due to the artificial suppression of the CPI since 1992.

- Economic Divergent Gap Edifice (EDGE) is the calculation of "Inflation minus CPI" which is a construct of this author.

- Factors amplifying the EDGE include the fiat money/fractional banking system, lack of government balanced budgets, increasing debt, increasing taxes from all government levels, corruption, wars and deterioration of real wages to name a few.

- Many Canadians “live on the EDGE” meaning they are just getting by with minimal to no savings at the end of the day.

- The Merovingian in The Matrix movie said it quite clearly “action…reaction, cause and effect”. It appears the Inflation pigeons are returning home to roost for a while.

Panel 1

One is able to download the data from the above mentioned websites and create this graph.  M3 Money Supply is shown in Billions of dollars.  The CPI is a calculation of the cost of living presented in an Index number form.

Panel 2

This graph is the actual Monetary Inflation and CPI rates based on the data.  In mathematical terms, this graph is a derivative of Panel 1 graph.   Again, since 1982, Monetary Inflation has averaged 7.3 percent per year versus the CPI of 1.8 percent per year.  This represents a cumulative difference of about 850 percent which is not sustainable….“action…reaction, cause and effect”.