LACKIE: Government policies to blame for out-of-control inflation

And the ramifications will lead to pain that will be felt more widely than many seem willing to acknowledge.

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As we sit and watch the Bank of Canada do its job, the loudest conversations I seem to hear are about the impact this is having on the housing market.

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If you’re a buyer who threw every penny the bank would give you into the prospect of homeownership over the past two and a half years, you’re probably consumed by such chatter yourself; after all, as rates go up, prices go down. We know it.

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Lost in those conversations about homebuyers who threw their good judgment to the wind and spent too much money at the bidding table, or those who treated their homes “irresponsibly” like piggy banks, lies reality. quiet that he was borrowing against home equity that carried many people, especially small business owners, during the pandemic.

When steady, reliable income has come to a halt following multiple rounds of government-mandated lockdowns or furloughs or supply chain disruptions, how many small businesses have stayed afloat entirely on borrowing?

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Discussions about the impact that fast and furious rate hikes will have on overleveraged speculators have been endless. But what about the entrepreneurs who had no choice but to borrow, borrow, borrow to keep the lights on?

The local hair salon that, miraculously, is still in business? Its owner is almost certainly eye-to-eye in debt, having invariably had to take advantage of every government program, every bank offer, every deferred payment option, loan restructuring offer, and beyond. If they had a house, they almost certainly would have borrowed against it. The idea being that if one could only make one’s way to the other side of the pandemic, business would be back and the recovery would begin.

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And now here we are.

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The fact is that much has been said about Canada’s dependence on cheap debt. We tend to talk disparagingly about how homes are now treated like ATMs, funding trips, cars and renovations we can’t afford.

And yes, it’s true – Canadians have been conditioned to believe in the endless possibilities of investing in home ownership, so comfort with (an alarming level of) debt now goes hand in hand for entire generations of young Canadians.

But now that the Bank of Canada has changed course in the face of runaway inflation with interest rates rising sharply and rapidly with no indication of a pivot in sight, the ramifications will be felt and the pain that is to come. will be felt more widely than many seem willing to acknowledge.

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And our government? Well, they seem to have identified the reality that their decision to flood the economy with stimulus money to sustain our country through a once-in-a-lifetime pandemic was what got us through. And thank God. But now that inflation is skyrocketing and voters are growing increasingly unruly as their cost of living skyrockets, the feds’ solution seems to be to throw more money at the problem. Which should be as infuriating as it is disconcerting.

Either we care about beating inflation or we don’t.

Either we are determined to reduce it or we are not.

But unveiling a whole host of relief spending, including a one-time $500 rent relief and tax refunds that economists say can only be inflationary, while simultaneously crushing other sectors of our economy by the intentional pain of rate hikes is bizarre.

So when we hear the Bank of Canada talk about the pain our economy will have to endure to get it under control, it may help to remember that it was this government’s policies that got us here in the first place, and their commitment using the same playbook is what will keep us here.

@brynnlackie

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