Monday, December 13, 2021 | | | Welcome to Mind Your Business ! Consider this your weekly guide to understanding what’s happening in the worlds of economics, business and finance. By Peter Armstrong | | |  | Inflation will take centre stage once again this week (Andrey_Popov/Shutterstock) | | | | |  | | The latest inflation numbers come in on Wednesday as Statistics Canada releases the monthly CPI numbers for November. | | | | | | Finance Minister Chrystia Freeland will release her fall economic and fiscal update on Tuesday. Both an economic forecast and an update on the state of the government's books. | | | | | | The government of Canada will announce a new mandate for the Bank of Canada on Monday. The long anticipated announcement is expected to add new language around employment targets to the bank's mandate. | | | | | Brace yourself. Like it or not, the inflation debate is going to dominate the conversation this week. It runs like an arrow through the three biggest economic events on the calendar.
On Monday, the Bank of Canada will find it out of will start to split its focus between inflation and employment. Right now it has a singular job of targeting inflation. But there is some expectation that the government will add employment to its mandate. (Read up on the debate over a dual mandate here.)
On Tuesday, the finance minister will provide the latest economic statement, giving us a forecast of what's to come and an update on the health of federal finances.
Then on Wednesday, we get the cold, hard numbers. Canadian CPI data will look back at the prices we paid in November.
U.S. CPI numbers came out Friday and blew the barn doors off 39 years of inflation records. The Bank of Canada adjusted its forecast last week, removing any reference to “temporary” in its latest announcement. It said inflation is expected to remain elevated in the first half of 2022, then ease back towards two per cent in the second half of the year.
But the price of just about everything you buy is going up — including and especially food. Canada's Food Price Report from Dalhousie University says the typical Canadian family will see their annual grocery bill rise by $966 next year.
After years of sluggish, below-target inflation, prices have notoriously shot higher during the pandemic. Here’s my favourite chart, courtesy of Trevor Tombe, an economist at the University of Calgary. | | |  | | | Now the question isn’t whether inflation is happening, it’s what can be done to slow it down. As we’ve discussed at length, the usual response is to hike interest rates. But raising rates now may imperil the economic recovery. And more to the point, inflation is happening because of a bunch of very global factors. A hike in the cost of borrowing would do nothing to unclog the jammed-up Port of Los Angeles or make it rain in Brazil.
The other issue I’ve been thinking about a lot lately is the long-term impact of rising costs. Let’s say the Bank of Canada is right, and that by this time next year, inflation is comfortably back into the two per cent range we’ve grown accustomed to.
That doesn’t mean prices have fallen back to the range they were at pre-pandemic. Two years of high inflation will take its toll. Especially if wages don’t keep up.
And inflation isn’t hitting everyone the same way. It’s a very regional and very sector-specific measure. The national CPI measure shows prices have risen by 4.7 per cent.
Try telling that to someone looking to buy a house in Bancroft, Ont., for example, where home prices have skyrocketed 76 per cent in the last two years. | | |  | | | We'll get an update on these numbers when the latest home sales data are released on Wednesday.
Even after inflation is back to "normal" (whatever and whenever that is), the cost of buying a home in many provinces will be markedly higher.
And that's going to be a whole new problem for policy-makers and households and businesses, too.
We are still so incredibly focused on the immediate impacts of the pandemic. We are still digging out from the COVID-19-shaped crater.
But the longer-term impact of the last two years of rolling crises is going to be a defining force of the next many years. | | | | | Three things to read, watch and listen to this week | | |  | Questions about Donald Trump's new media company are swirling. (Inspiring/Shutterstock) | | | 1. Donald Trump's new media company | | | Donald Trump is launching a new media company called TRUTH Social. He says he’s “building a non-cancellable” global community, a sort of right-wing, all-encompassing super-app of social media and on-demand programming. A deck provided to investors says it will take on Twitter and Facebook on the one hand and Netflix and Disney+ on the other.
On my CBC Radio show DAY 6 I spoke with Washington Post columnist Paul Waldman, who says the whole venture is part of what he calls the "GOP grift machine".
The Trump enterprise has a long history of attaching the Trump brand to anything from steaks to ties or universities. Waldman says this venture is no different.
““He’s got a long history of making these kinds of schemes where somehow a lot of other people lose money and he ends up walking away unscathed," he told me on DAY 6.
Bloomberg’s amazing newsletterist Matt Levine dug into the weird financials of the company this week. Read his edition on the details here. But the gist is that Trump is using a special purpose acquisition company (or SPAC) to raise money.
The particulars of the arrangement allow early investors to buy shares at a deep discount and then sell them on the open market.
The Economist magazine ran this spectacular headline: “Donald Trump’s media SPAC is the zeitgeist wrapped in a complex financial instrument.” Underneath, the magazine noted, “It is also, fittingly, under the investigation of the SEC.”
Read Matt Levine’s newsletter on the subject here.
Read the Economist piece (paywalled) here.
And listen to my conversation with Paul Waldman here. | | | 2. Rothko, Trump and art fraud | | | I spent a lot of time this week thinking about a piece from Canadian journalist Richard Warnica.
I’m not quite sure how to describe it. It’s the story of an art scandal involving millions of dollars' worth of Mark Rothko paintings. But it’s more than that. It's the story of how art and money and power are like a giant Venn diagram.
It’s the story of a journalist trying to cover the weird years leading up to and during the Trump administration. It’s the story of a man obsessing over art and journalism at the intersection of adulthood and parenthood.
It’s compelling, to be sure. But it’s also a quite beautiful read.
I usually lay out the details of the stories I plug here. But I don’t want to give anything away. Find time in your week to sit down and read this. The article will wrap its arms around you and draw you in. It’s really great.
Read Richard Warnica’s piece here. | | | 3. Hockey's billion-dollar franchises | | | I’m a long-suffering fan of the Toronto Maple Leafs. It’s something of a condition. During my 49 years on this fair planet, the team has fallen perpetually short. (Over the last 17 years, it’s failed to win a single playoff round.)
So, my ears perk up when the Leafs find their way near the top of any list.
In this case, it’s the annual Forbes NHL team valuation list. (The Leafs aren’t at the top, of course. The Rangers took top spot with a $2 billion US valuation. The Leafs clocked in at $1.8 billion.)
The list in and of itself is interesting. But the thing I found fascinating was the revenue projection for the NHL going forward. The league was clobbered by lockdowns. A season in the bubble with no fans crushed revenue.
But the NHL is bouncing back. NHL franchise values are up on average over 32 per cent from last year.
Part of that comes from some fancy new arenas that bring in big bucks (once built). Another factor is the sheer volume of cash flowing in from new broadcast deals in the U.S.
“The league’s seven-year U.S. media deals with ESPN and Turner that began this season will pay the NHL an average of $625 million a year, versus the average of $300 million the league was getting from NBC for its TV rights and ESPN for streaming only,” writes Forbes.
It’s good news for anyone following a team pressed up against the salary cap.
Check out the whole Forbes list here. | | | | | How the economy looks beyond Bay Street | | | The pandemic is not over | | | From the earliest days of the pandemic, it’s been clear; economic policy is pandemic policy and vice versa. Every time there’s a lull, it’s easy to start thinking about life AFTER COVID.
I am so very guilty of this myself. I was starting to plan for a winter getaway somewhere warm with sugary drinks. I was beginning to think about columns to write about the lessons learned from the past two years.
But we are still very much in the midst of a crisis. And the new modelling from the Public Health Agency of Canada makes that abundantly clear. | | |  | The modelling is scary and reminds me of how I felt going into the Christmas break last year. Shortly after the schools were closed, businesses shut down in-person shopping and a whole new wave of catastrophe unfolded.
The CFIB says there are more than 180,000 businesses standing on a precipice right now. Businesses that won't survive another wave of restrictions.
Small businesses make up 70 per cent of private sector employment, so this has a way of flooding into all our lives.
But let's not throw our arms up and say a new wave is inevitable.
"We need to respect [the omicron variant] but not be panicked or scared. We have a great number of tools now and we know a lot more about the virus. We know vaccines protect against serious illness," said Dr. Howard Njoo, Canada's deputy chief public health officer.
So, let's all do what we can. Let's follow public health advice and hopefully keep this news wave at bay. | | | That's it for this week. | | | Drop me a line anytime. Send ideas, comments, feedback and notes to peterarmstrong@cbc.ca. Problems with the newsletter? Please let me know about any typos, errors or glitches.
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