Editorial: Consternation over inflation conflagration

The 21st century’s version of the Roaring Twenties is doing a lot more than roaring.

It is doing a lot of shaking, especially when it comes to economic and social foundations.

Leaving aside for a moment climate change, these Roaring Twenties have opened with a global pandemic that has shaken economies all over the world, disrupted supply chains and drained labour pools. A followup catastrophe in the form of Russia’s invasion of Ukraine has exacerbated supply chain dysfunction and accelerated the trajectory of an inflationary spike not seen for decades.

That is a lot of roaring for a decade still in its infancy.

And it is a roaring that many residents in B.C. and across Canada have never witnessed.

As the Fraser Institute points out in its recent Primer on Inflation, approximately 40 per cent of the country’s population was born after 1988 and has therefore not been faced with an extended period of high global inflation like the one that ran from the mid-1970s to the mid-1980s.

And nobody else has been faced with the combination of health, environmental and geopolitical crises that is fanning the current flames of inflation in these Roaring Twenties.

That includes governments and central banks.

So, the traditional levers the Bank of Canada employs to control Consumer Price Index inflation are facing an unprecedented stress test. With the country’s inflation rate at last count hovering around 6.7 per cent, those test results are not looking good.

And while Canada’s economic growth has continued to be surprisingly robust, wrestling the country’s annual inflation rate back to the bank’s two per cent target will not be easy considering persistent supply chain logjams that are constraining supply and ongoing federal government spending that shows no signs of subsiding any time soon.

External supply chain issues are largely out of Canada’s control, but its government’s continued outsized spending is not.