We’re Lost Without A Leader In An Economic Storm
The Saturday Huddle is a weekly column that features opinion, analysis, and reflections on Huddle stories, podcasts, and business news in the region. Derek Montague is a Huddle reporter based in Halifax.
Is this the most hopeless we’ve been in three years? Is this the darkest of dark times? Yes, Covid-19 was scary back in March of 2020 when all our social and work lives changed forever. But we had strong leadership from the medical community. And politicians took the best advice (until they decided the public was fed up with restrictions). We were shown a path out of the mess, even if we had to take a long road.
Most importantly, there was an emphasis on protecting the most vulnerable.
Now we are lost in financial turmoil. The most vulnerable have been given exactly zero inches of rope. On Wednesday, the Bank of Canada hauled out the lone tool they wield in their pathetic chest – it’s a tool that is about 50 years old and has grown quite a bit of rust – raising interest rates (for the seventh time this year).
In a matter of months, the interest rates in Canada climbed from 0.25 percent to 4.25, making homeowners with variable-rate mortgages vulnerable to increases with no time to adjust.
I’ve since talked to several Halifax homeowners who have told me how much their mortgages have climbed recently. I’ve heard numbers ranging from $400-$1,000+ per month, depending on the time frame and, of course, the cost of their home. That should be considered insane and cruel punishment for the masses.
Instead, certain economists and politicians consider this sound economic policy. It is proof positive that there is a rot in our economic foundations if the only solution is to harm work-a-day people to cool an overheated economy.
We’ve heard over the years how many Canadians are so stretched on their budgets that they are one or two missed paychecks away from not being able to pay bills. Now the Bank of Canada is telling thousands of homeowners to find hundreds of extra dollars a month or get stuffed.
I often find food banks are ground zero to gauge human financial suffering. And the stories are sad. As you can imagine, fewer people are able to donate to food banks and more people need their services.
The other night, CTV ran a story about a Cape Breton food bank that (smartly) decided to change its Christmas turkey drive to a chicken drive. Chickens are cheaper, so they can feed more people this way.
I can’t imagine how much more pressure food banks will face after the latest rate hike. There is a stereotype that food bank users are already poor. They’re on social assistance, couch surfers and renters – not homeowners with good jobs.
But imagine if you have a family, your mortgage is $500 more per month than it was just a calendar year ago. If one must choose between paying for food or a mortgage, many will pay for their shelter first, in the hopes that a food bank can help. There aren’t any charities out there offering to pay off your mortgage every month.
The financial situation is bleak. Economists haven’t been shy in predicting a likely recession – both in Canada and globally (wonderful!).
But what adds to the sense of hopelessness is the utter lack of leadership across the board. The pain of inflation is not new. Yet the Trudeau government and provinces have failed to act. They act as if it’s only the responsibility of the Bank of Canada to deal with. It’s like a weird church-and-state arrangement that absolves elected officials from dealing with the worst crisis facing the average Canadian.
Just look at this depressing quote from Finance Minister Chrystia Freeland in a recent CBC explainer on interest rate hikes. She is basically telling people to trust the Bank of Canada’s process, despite its lackluster results thus far.
“Our economy will slow as the central bank continues to step in to tackle inflation.”
“There will be people whose mortgage payments will rise. Business will no longer be booming in the same way it has been since we left our homes after the Covid lockdowns and went back out into the world. Our unemployment rate will no longer be at its record low.”
One can say they are tackling inflation, but it looks more like a fumble from here.
While doing research for this piece, I was hoping the internet would prove my bleak outlook to be extreme and unwarranted. I searched for articles that would highlight a sweeping federal bill that would provide support for Canadians or tackle systemic issues creating this unaffordable situation.
Besides some articles about Alberta’s plan to introduce inflation relief, and Quebec offering one-time payments of a few hundred bucks, I came up empty-handed. There’s no way around it, our elected “leaders” are acting like clueless cowards while the most vulnerable suffer. And the list of people we can call vulnerable is steadfastly increasing.
RELATED: Halifax Families Facing Increased Costs As Interest Rates Rise
Reading people’s comments on my inflation stories demonstrates people’s frustration with our officials. There is a growing sense that those in power will look after the richest in our society first before anyone else.
“People in NS will die this winter. Whether they freeze or starve, people will die because our gov’t could care less about us,” wrote one reader.
“Bank of Canada is harming the most marginalized to protect the elite.”
These sentiments are nothing new in politics, where elected officials appear so out of touch. But the evidence has never been starker.
Tackling inflation and its ill effects will require a multi-pronged solution. There is one such prong staring the federal government right in the face but they refuse to budge. Ever since 2020, certain corporations have been making historic profits. The list includes grocery chains and oil giants.
You’ve likely heard a lot of talk worldwide about “windfall taxes”, especially in the oil and gas sector. Even the business-friendly conservative government in the UK introduced such a tax, and it is due to increase over time.
Such a tax will bring in much-needed billions that can be used to help struggling citizens. The federal government in Canada has not budged on this, however. Nor have any officials done anything about soaring grocery store profits, at a time when people are finding it more expensive to feed themselves.
Can you blame anyone who claims government does more to protect the richest among us when they refuse to take the most obvious steps to help those in need?
This is no longer just bluster from people who always had a disdain for politics.
Speaking of bluster, I wouldn’t blame you if you’ve read this far and accused me of being full of anti-capitalism hot wind. I’m not an economist. Hell, I can’t even do math in my head.
So, I made sure to check in with a Dalhousie economist the day before I wrote this. I was expecting a calm, academic voice to tell me I was overreacting. Instead, a very passionate Talan Iscan voiced his own concerns with some colorful quotes and heavy criticism for the Bank of Canada.
“The Bank of Canada, for more than two decades, said whatever they do will only start showing within a window of 18 and 24 months. That has been the narrative,” he said.
“Why can’t they do something faster? Because they don’t have those tools at their disposal. And the other things that can actually help, they don’t want to discuss. Why can’t we discuss whether corporations are gauging prices?”
“…People are living now. What can you do about it? And why did we get into this mess in the first place?”
Iscan, by his own admission, isn’t a “conventional” economist. But he is also far from being a crackpot. During his long career, he has won various academic awards and accolades as a member of Dalhousie’s faculty.
And he is far from the only Canadian economist who has expressed concern over the Bank of Canada’s strategy.
This is looking like a bleak winter, folks. It’s too bad we don’t have a single leader to help us wade through the driven snow.