Editorial: Inflation worries

Gen Xers have enjoyed the stability the economic system has given them

lumber

I’ve been lucky to have spent most of my adult life in very stable economic times. Interest rates have been low and steady. Global trade and economic growth have been measured and predictable. Governments mostly spent within their means.

Then the pandemic roiled trading systems, supply chains and supply and demand and that’s made me nervous, as I expect it has other Gen Xers like me, who have had a stable foundation on which to grow our families, assets and lives.

Just look at what happened when the age limit for the AstraZeneca vaccine was lowered to 40 and Gen Xers rushed to pharmacy websites as they have for concert tickets and more recently Ontario Parks campsites. Get me the vaccine and let me return to normal life!

Even if we achieve herd immunity through an increasingly effective vaccination campaign, the reverberations of the pandemic will be here for a while yet.

And it must be said that some of the increased instability was already underway before the pandemic. Ex-U.S. President Trump’s anti-trade agenda and his propensity to throw bombs into economic sectors on whims were already creating some winds of change. In other parts of the world, we’ve been seeing the return of larger government spending, with protests against austerity measures in Europe and in the recent federal Liberal budget (although I was expecting worse).

I’d already been wondering if I would see real inflation for the first time in 30 years.

Whether it’s real inflation that continues for a period of time, or stagflation, which is increasing prices while earnings stay stagnant, I don’t know, but it’s certainly different.

Anyone who has bought steel parts or thought about building something knows well how much the prices for both those commodities have increased.

Wood was a useful, inexpensive tool for me. If I needed a 2x4 or a sheet of plywood, I’d just whip out and buy one. Now at double the price, I’m being a bit more picky and rummaging through my discarded wood storage in the rafters of my shed to see what I might have around that could do.

I was also going to upgrade parts of my loader tractor this year, but when the piece is more than double the price it was a year ago – and you might get it in three months if you’re lucky – I’m going to develop some patience and see how I can get by for another year.

Then again, there’s a building project that I’ve had in the works for a while that I’m going ahead with.

I wonder which way people are going? Will the high prices put a damper on, say 20 per cent of building projects and equipment purchases? If that also happens in the wider community, then it could put a lid on the kind of materials inflation we’re seeing. I don’t see much evidence of that happening as it appears people who have been lucky enough to keep their jobs throughout the pandemic are flush with cash.

If they’re not building or renovating, they’re buying. Property values in my rural community about a half hour north of London have escalated quickly as buyers catch the crazy bug that’s been infecting people in the cities.

Some of the farmland prices and rural property prices have been astronomical. And they are sometimes linked. Someone overpaid for 50 acres here recently – but if they can sever the house and sell it for $800,000, then that overpayment makes sense. That game has been underway in municipalities that allow severances for a while, but it’s escalated recently.

All of this means that we’re into interesting and unpredictable economic times. I expect that all this buying and government money coming into the economy is going to result in inflation. Here’s hoping it’s not long-term, as people of my generation, who watched their parents uncomfortably navigate the early 1980s on the farm, have appreciated the stability low interest rates and a predictable economy have brought us.

About the author

Editor

John Greig

John Greig has spent his career in agriculture journalism and communications. He lives on a farm near Ailsa Craig, Ontario. Contact John at [email protected] or follow him on Twitter @jgreig

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