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Results: 1 - 15 of 84
View Bob Zimmer Profile
CPC (BC)
Thank you, Chair.
I have a question for Dr. Jaccard, a fellow British Columbian. I'm up in northern B.C. right now.
We certainly like renewables and biofuels, but are concerned about some of the implications of that. I was on the agriculture committee for four years prior to this committee, and some of the effects of some of those food crops being turned into fuel crops....
What do you say to the potential upward pressure of growing renewable fuels as opposed to [Inaudible—Editor] and its effects on food prices?
Mark Jaccard
View Mark Jaccard Profile
Mark Jaccard
2021-06-07 12:09
My point, similar to what I mentioned before, is that when we look at studies that suggest a significant upward movement on food prices, these studies are more of what I call all or nothing, a dramatic movement into biofuels to replace all liquid uses of fossil fuel derived hydrocarbons.
Those are not the studies I'm looking at. Those are not the kinds of outcomes I was talking about in my remarks. I was talking more about something like 20%—
View Bob Zimmer Profile
CPC (BC)
Doctor, I'm sorry, but time is tight.
A Bloomberg article from May 20, 2021, entitled “Green-Fuel Push Stirs Food Inflation Fears in Rebound From Virus”, states:
Soaring demand for crops has once again raised the question of whether nations should really depend on ethanol and renewable diesel to save the planet from global warming. Corn, soybeans, palm oil and sugar, which are increasingly processed into biofuels worldwide, are part of a staggering commodities rally that’s making everything from animal feed and noodles to taco shells and chocolate more expensive, putting central bankers worldwide in a tough spot between fighting inflation and seeking to stimulate battered economies.
How do you speak to that?
Mark Jaccard
View Mark Jaccard Profile
Mark Jaccard
2021-06-07 12:11
It is the same answer.
As I said in my opening comments, I've seen studies like that for 25 years. If you look at the Intergovernmental Panel on Climate Change, we run scenarios, and look at food pricing when we don't take an extreme case like the quote you were just using from Bloomberg.
What food costs is a serious question. I don't believe, therefore, that biofuels will solve climate, as I think your quote kind of said it would rely on them. It'll be more like in significant niches. We've been talking about the trucking industry, and that's where we're seeing it happen without those kinds of effects.
View Ed Fast Profile
CPC (BC)
View Ed Fast Profile
2021-05-18 16:58
Mr. Steve Poloz appeared at our committee earlier today. He suggested that the inflationary pressures shouldn't be something we should be too concerned about because, in his mind, they are transitory in nature. Do you have any comments on whether those inflationary pressures are transitory, and whether we should be taking them seriously or generally not worrying too much about them?
Kim G. C. Moody
View Kim G. C. Moody Profile
Kim G. C. Moody
2021-05-18 16:59
“Transitory” is an interesting word, isn't it? My understanding of the definition of “transitory” is temporary or not permanent.
I guess I'd respond to that and use my own life as an example. When I go to the grocery store, do I see my groceries more expensive today? Yes. Do I see toys that are more expensive? Yes. As an example, I wanted to buy my wife an electric bike, just so that we can get the hell outside and do some fun stuff. Last year that bike was $2,500. Do you have any guesses on how much that bike costs today, Mr. Fast, anybody?
Kim G. C. Moody
View Kim G. C. Moody Profile
Kim G. C. Moody
2021-05-18 16:59
It's $3,700, and guess how long it takes for me to get it? Twelve months. By any definition that's inflation. Do I consider that transitory? I don't consider that transitory.
It might be transitory for certain other items, but for the average thing, when I go to the grocery store, buy my wife a bike or even other toys, maybe some real estate, everything that I touch these days is more expensive. I don't consider that transitory.
View James Cumming Profile
CPC (AB)
I know how much you've missed me.
Mr. Poloz, I'll direct my questions to you. It's good to see you at committee again. Thank you for your presentation.
Quantitative easing and the amount of stimulus that we've seen into the economy.... I know when you had appeared previously, you had forecasted that inflation was in check and that it didn't appear to be an issue, but we're seeing some trends now that are quite concerning about inflation. In particular, industry has suggested that because of supply chain and shipping issues—we're seeing that very much in several sectors—we're starting to see that spike up.
Is this not a concern on two fronts? The first is affordability in a variety of different sectors and competitiveness. The second is the potential now for interest rates to start to rise to offset that inflation.
Stephen S. Poloz
View Stephen S. Poloz Profile
Stephen S. Poloz
2021-05-18 13:04
Of course, inflation risk is something we can never take lightly. However, I would just add a couple of things to your premise. One is that most of the anecdotal evidence we have around higher prices is coming from commodity markets. Commodity prices, in fact, have been quite depressed for the last while. In fact, if we look at the CRB index of global commodity prices, they're just now returning to the levels they were at back in 2014.
If you look at the Bank of Canada website, you'll see the commodity price index. There, too, with all the basket of commodities relevant to Canada, prices have been low and now are returning. This is not inflation. This is normalization of prices.
I know there are some exceptions and some prices have gone up a lot, such as lumber. It's a good example. There are also still the laws of demand and supply. They still work. Last year, there were plenty of cutbacks in production because the consensus among a lot of economists was that the economy would be very slow for a very long time. As I mentioned in my introductory remarks, the economy has bounced back far exceeding all of those expectations because economists had modelled it in the traditional way that recessions normally work. This one isn't like that at all.
I think some sectors are still catching up to the recovery in demand. Inflation almost never comes from commodity prices because with commodities you can find more product. You can expand capacity in time, so usually when prices go up enough, somebody brings more capacity online and that causes that price to settle back down again.
I agree with what I've heard from various central banks, including our own, that the inflation we're observing right now is very likely to be transitory.
View James Cumming Profile
CPC (AB)
Would you agree, though, that it's not just those commodities? We're seeing a significant spike in real estate and certainly an inflationary run on the value of real estate in the country.
Stephen S. Poloz
View Stephen S. Poloz Profile
Stephen S. Poloz
2021-05-18 13:07
The price of houses is a special item. As you know well, it's not just something we buy. It's an asset. It gives you a stream of housing services literally forever. As a consequence, when interest rates are low, the price of all assets tends to rise, including the price of houses.
Also, the laws of supply and demand have not been ruled out. We still have excess demand for new housing relative to the supply that's being created. I note that the latest numbers show that housing starts are picking up strongly. That's just like commodities. Supply can come on the market and meet that.
I'm not going to pretend that the price of houses has not gone up, but that isn't, strictly speaking and in and of itself, inflation as we describe it. It would need to be something that is sustained for a long period of time for it to be part of inflation. Of course, it is captured in various ways in StatCan's consumer price index.
View Ed Fast Profile
CPC (BC)
View Ed Fast Profile
2021-05-18 13:32
Mr. Poloz, Stephen, it's nice to have you back at committee and see you again.
I want to address your opening comments. You referred to the inflationary impacts of stimulus, and you tended to downplay them. I think the word you used was that they are “transitory”.
Now, if they're not transitory and they are more pervasive and persistent, would you agree with me that that would represent a significant challenge to the sustainability premise of the budget?
Stephen S. Poloz
View Stephen S. Poloz Profile
Stephen S. Poloz
2021-05-18 13:32
It's a highly hypothetical question, isn't it?
To me, the sorts of policies that have been put in place around the world post-COVID all look to people as if they would be inflationary, but what they are doing is counteracting an enormous deflationary force to keep us roughly where we should be.
When things normalize, one would need to transition to a more normalized set of policies across a wide front, and that, of course, is a matter of judgment when that actually takes place. Given that central banks, virtually every one that I know about, are pursuing inflation targets, then you'd expect them to continue to pursue those inflation targets.
To me, it's almost too hypothetical. If you're asking the question what happens to government debt when inflation goes up, indebtedness goes down. The economy, as it's measured in terms of national income.... Today, let's say it goes up, if things settle to normal and we're growing at, let's say, 2% per year real and 2% inflation, that would be 4% nominal growth.
View Ed Fast Profile
CPC (BC)
View Ed Fast Profile
2021-05-18 13:34
That was not my question. My question was about the premise on which the budget was built.
The stimulus measures that were being introduced, the stimulus that's sitting on the sidelines in savings accounts on the corporate and household side, and the massive stimulus on the American side are all said to be transitory and will not have significant pervasive and sustained impacts on inflation, so we are told not to worry about interest rates, as they're going to stay around where they are right now.
If those assumptions are wrong, if you're wrong about the inflationary impacts of the stimulus, that changes a lot, doesn't it? That's my question.
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