How far can you stretch that Dollar…?

Does your dollar have the same buying power that it had before COVID-19?

You may have noticed that when shopping for groceries or any new item that you may have noticed it has increased by at least 50%? Next time you get a loaf of bread or a package of cheese, the amount you get is significantly less than what you normally would get but the cost is higher.  Most producers and manufacturers are making their products significantly less in quantity but the cost has increased.

Early on in the pandemic, the debate was about the shape of the economic recovery, and the type of economy we end up with.  In almost all measures of economic activity, we are approaching, or already have,  pre-pandemic levels of price inflation. I believe that we have exceeded the most optimistic scenarios for economic recovery and the reflation trade has been a key theme to the financial markets for the last several months. What remains to be seen now is whether the acceleration of economic activity will continue or whether we are in for challenges on the last mile of recovery. The more robust the economic recovery the stronger the Canadian dollar will become.

I know that when you are at the store buying something for yourself or for your family, the only thing that you want to know is…why am l still getting value for my dollar? Its also very important to understand how our economic system works and why you are getting less. Central banks and governments around the world have already started pulling back on the huge monetary and fiscal stimulus which was designed to address the economic stoppages resulting from the pandemic. The Bank of Canada and the Government of Canada were amongst the most aggressive in their stimulus programs. The Bank of Canada has also been the most aggressive in pulling back its stimulus programs and projecting rate hikes in 2022.

COVID-19 has been more persistent and more deadly than anyone expected. How the vaccination efforts proceed around the world and how COVID-19 variants spread amongst the vaccinated and unvaccinated population will have much to say about economic activity. The higher the potency of the variants and the greater the risk they pose to economic activity, the greater appetite will be for risk havens like the US dollar and therefore the lower the Canadian dollar.

Some are saying that the dollar crash is still coming and that we haven’t seen the worst yet. COVID-19 is a global health crisis, and the inevitable corollary impact is an economic crisis. In addition to causing a steep drop in economic output, the pandemic has exposed risks inherent to how companies operate their supply chains. More, specifically, as businesses adopt to the changing economic landscape caused by the virus, the balance between supply chain resiliency and efficiency has come into focus.

Until the COVID-19 pandemic started, efficiency meant economies of scale, just-in-time production and minimal warehousing costs. In turn, the shift to resiliency has led to a focus on withstanding supplier and distribution disruptions. However, discussions about increasing supply chain resiliency often overlook the reality that in a market economy, the government does not own the supply chain. Instead, it sets the constraints and incentives for private sector behavior.

Simply put…the total supply chain has been affected globally. Everything  has been affected by COVID-19…. The big question is why ….and was this a conspiracy due to a global reset? The economic effects resulting from this pandemic may be felt much longer than we would like.

Because of the scramble to feed our countries and get the proper supply chain implemented products will become much more expensive and ultimately unattainable. Our reliance on goods is being controlled and supplied by a hand full of elitists which are controlling the narrative as well as the supply chain.

Even if we as Canadians try to be self-sufficient it will not work because we cannot supply our country with everthing we  need. The exchange of raw materials and goods is very crucial to our long-term sustainability. Canada relies on exports for its economic security, and we bring into our country many things from agriculture to natural resources. Our dependency on others is crucial for our long-term sustainability. As indicated, we need our global partners both in private hands as well as governments to be competitive on a global level with all our products.

This may be interesting, but as for me and my family, we continue to get screwed….

Unfortunately in these times the rich are getting richer and the poor are getting poorer…yes, the proverbial cliche, but it has never been truer than today.

Vince Nigro/MS