, 06.16.2022 07:48 AM

My latest: rates up, everything else down

Interest rates: Going up.

Voter confidence: Going down.

On Wednesday, the U.S. Federal Reserve did something it hasn’t done in nearly three decades: It raised interest rates by three-quarters of a percentage point. That’s the biggest rate hike since 1994.

Anyone who thinks that the Bank of Canada won’t do likewise in July is dreaming in Technicolor. The only question is how much.

In recent months, the Bank of Canada has boosted its key interest rate by a half a point twice — moving the borrowing rate to 1.5%. For all of us who borrow — to purchase a home, or a car, or lines of credit, or credit cards, or student loans — those interest rate hikes have a meaningful and measurable effect on the bottom line.

Austrian economist Ludwig von Mises — who, tellingly, fled Europe to escape the advance of Nazism, and would go on to influence generations of economists — once said: “Public opinion always wants easy money, that is, low interest rates.”

But easy money is getting increasingly less easy to get.

Why raise rates, you ask? Well, the economy, as the experts say, was too hot. Inflation was higher than its been in decades.

Unleashed from the strictures of the pandemic, consumers started spending like the proverbial drunken sailors, pushing prices of just about everything up. Inflation — that is, a drop in the bang you get for your buck — was back, with a vengeance.

Inflation was made worse by factors that were myriad and multiple. Russia’s insane invasion of Ukraine. Supply-chain chaos. Labour and housing shortages. Rising prices. And fear of yet more rate hikes. As Joann Weiner, an economics expert at George Washington University, inexpertly observed: “It’s a pretty bad storm.”

Pretty bad indeed. And where there is bad news, nervous politicians can sometimes be observed, tip-toeing away from the danger zone, trying their utmost to go unnoticed. For example: Has anyone seen Prime Minister Justin Trudeau lately?

For many politicians, rising interest rates — and rising inflation — can be existential. In the late ’70s and ’80s, the oil crisis, government spending, and higher prices ended many political careers — President Jimmy Carter and Prime Minister Pierre Trudeau among them. (Trudeau bounced back, but Carter never did.)

In Canada in the New Twenties, the dominant political issue is the cost of living. That issue, more than any other, is driving the political agenda, and causing no shortage of disingenuous finger-pointing.

In the U.K., rising fuel prices have prompted a cynical “windfall tax” on energy companies — and Spain and Italy are likely to follow suit. That sort of stunt won’t assist any consumers. (But reducing taxes on the price of gas, as Alberta recently did, will.)

Federally, the coming interest rate hikes will play an oversized role in the futures of Liberal and Conservative politicians. If the Bank of Canada overplays its hand, and pushes the country into recession, Conservative leadership frontrunner Pierre Poilievre — who has recklessly promoted InfoWars-style conspiracy theories about the central bank, and childishly called for its governor to be fired — will almost certainly benefit.

As Canadians grow angrier about the state of the economy, and as they feel more and more powerless about rising rates and inflation, Poilievre may reap the rewards.

Trudeau and his Liberals, however, will not. It’s been apparent for some time that the prime minister and his inner circle do not have the faintest clue what to do about an economy that is super-hot and looks like it could implode. As my Sun colleague Mark Bonokoski noted recently, the Trudeau government has insisted that inflation was “transitory.”

Well, it isn’t. And it’s getting worse.

The late, great Alberta political guru Rod Love once said to me: “When the water dries up, the animals all start to look at each other funny.”

The water, along with cheap borrowing, is drying up. So too consumer — and voter — confidence.

We human animals may be edging closer to an economic and political drought. Who will thrive? Who won’t survive?

Because, make no mistake: Politically, not everyone will.


  1. Notice: Undefined offset: 180 in /home/q84jy4qfdyhq/public_html/wp-content/themes/warroom/functions.php on line 314
    Peter Williams says:

    Justin’s solution to inflation? Borrow more money and raise the carbon tax, and add another tax; the clean fuel standard.

    Don’t like it? Well a majority of ridings voted for it.

    • Notice: Undefined offset: 180 in /home/q84jy4qfdyhq/public_html/wp-content/themes/warroom/functions.php on line 314
      Sean says:

      Justin’s solution to inflation is to say that inflation is bad because his staff gave him some polling that said so yesterday morning.

  2. Notice: Undefined offset: 180 in /home/q84jy4qfdyhq/public_html/wp-content/themes/warroom/functions.php on line 314
    Ronald O'Dowd says:


    Inflation is always primarily a monetary phenomenon. In the United States, 45% of the money supply has been recently created by The Federal Reserve via the digitization of money. QE started in 2008 and was relatively benign for over a decade.

    But in the real world, it’s self-evident that The Fed’s twin express mandates to keep inflation below 2% and to promote policies that lead to low unemployment are not The Fed’s real priority.

    Their only true priority is to keep the markets up and thriving so they can adjust monetary policy to favour their own stock portfolios. That’s all they care about, keeping the bull market running as long as possible.

    Of course, it almost goes without saying that it should be illegal for FOMC members to participate in the market unless they were in a third-party blind trust. But the ultimate insider traders at The Fed and Treasury will never do that. They’re too busy playing the lower and middle classes for naive suckers.

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      Robert White says:

      What he said. ^^^^^^^

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    Sean says:

    It doesn’t matter because too many swing voters in Montreal and Toronto are more easily persuaded by fake debates about abortion and that is the only issue that will ever matter in Canada from now until the end of time.

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      Steve T says:

      As the old saying goes, people get the government they deserve. So long as voters follow like sheep the phony talking points of the Liberals (abortion! healthcare!), we will continue to get governments that care more about optics than actual tangible issues.
      Same goes with the seemingly-obvious connection between Trudeau’s ridiculous spending spree during the pandemic, and the associated impact on inflation. People seem to love getting their government cheques, and then vote for the benevolent dictator-in-charge who doled it out to them. Keep the citizenry in servitude, and you’ll have voters for life.
      Can you tell I’ve become a bit cynical about the intelligence of the average voter?

    • Notice: Undefined offset: 180 in /home/q84jy4qfdyhq/public_html/wp-content/themes/warroom/functions.php on line 314
      Ronald O'Dowd says:


      Granted contrasting Canada and the United States is like comparing apples with oranges. But I was originally of the view that abortion restrictions in various states would be a God-send for Biden. I no longer believe that anymore. Right now, women are not mobilizing sufficiently for it to translate into the major issue in this fall’s mid-terms. Translation: unless something suddenly changes, those huge Republican gains originally forcasted are likely to come through with Democrats losing both the Senate and the House.

      It could also happen here at some point.

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    Peter Williams says:

    The answer to rising food prices; crickets


    I propose they be served on all government flights to lower costs and so that Trudeau, the GG, and government ministers can tell us all how yummy they are.

    Also the chefs using Justin’s $735,000 kitchen can make up all kinds of wonderful cricket dishes for the PM and his guests.

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    Robert White says:

    Excellent article up until I read that I’m ‘childish’ for asking the Bank of Canada Governor Iffy Macklam to resign as an incompetent central bank governor given his failed core mandate to manage Monetary Policy according to the BofC mandate.

    Dr. Iffy Macklam has a Net Worth of an estimated $5 million CDN and he gets paid approximately $360k CDN to fail miserably as a central bank fiduciary.

    It’s no wonder why I live in abject poverty these days.

    God, I want off the bus now, please!


    • Notice: Undefined offset: 180 in /home/q84jy4qfdyhq/public_html/wp-content/themes/warroom/functions.php on line 314
      Ronald O'Dowd says:


      I watched with interest when the so-called co-mandate was recently created as regards monetary policy, making the government co-manager of monetary policy. And then, nothing changed. So…in this country as opposed to in the States, this government is now directly responsible, in conjunction with the Bank of Canada, for Canada’s disastrous inflation-creating monetary policy. In short, they should be voted out.

      • Notice: Undefined offset: 180 in /home/q84jy4qfdyhq/public_html/wp-content/themes/warroom/functions.php on line 314
        Robert White says:

        My Senior Rulings National Revenue Canada Oil, Mines, & Resource taxation Chartered Accountant father was a Government of Canada fiduciary vis-a-vis the federal tax Act and he raised me to be as responsible as he always was.

        Dr. Macklam is also a fiduciary of government via Finance and he should know enough to actually step down with his forthcoming resignation, but today’s fiduciaries seem to think they are entitled to their entitlements even if they are failures in terms of mandates.

        In Canada we do not give out participation trophies for showing up to work. Macklam is a Finance disgrace IMHO. Freeland is Macklam’s Liberal friend and her comments are partisan.

        If I was in Macklam’s shoes I’d resign due to the failure to adhere to the core function of the bank. Professionally speaking it’s the right thing to do. Waiting for voters to decide his fate is too long a wait IMHO. Poilievre should have said he wanted Macklam to resign under his own decision making.

        I sincerely doubt that Macklam has a sword he can fall on. In brief, he’s not a Social Scientist and he failed best practices of central banking.

        I’d like to run him out of town on a rail.

        I still appreciate Freeland though.


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