Crawl Across the Ocean

Thursday, April 20, 2006

Economic Update

I'm no economist, but if "Canada's home prices remain superheated", and 'frothy' commodity markets are sending the stock market to record levels, what does it mean to say that, "Inflation Remains Tame"?

It seems like all the easy money generated by an expansionist monetary policy is driving up asset prices rather than goods prices, but I'm not sure that this means there is no reason to worry as the papers seem to suggest.

3 Comments:

  • While I've noticed houses are selling quickly right now, it is the hot season for housing sales. When houses sell in a day during the slowest period of the year -- the fall and winter -- with bidders warring over who can pay more, and vendors looking like cheshire cats, then we've hit the same insanity of the late 1980s!

    By Blogger talk talk talk, at 4:51 PM  

  • I've been wondering the same thing about inflation. It's not just the house/energy price issue. If there is a major labour shortage, and if new construction costs are rising so fast developers are cancelling projects, why is inflation under two per cent?
    I'll have to ask a smart economist, because I have no explanation.

    By Blogger paul, at 6:26 PM  

  • declan and paul:
    Your observations are valid.
    Here's one explanation:
    Inflation is more prominent than authorities would have us believe.
    The CPI is massaged in order to decrease the cost of indexed benefits payable, and even real prices are increasing considerably more than 2% pa.
    The asset inflation you both note IS inflation.
    How well publicised is the fact that the BOC increased the money supply by 10% last year?

    By Anonymous oneeyedundertaker, at 4:40 PM  

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