Mr. Speaker, everybody is asking the same question. Whether it is 28-year-old couples living in their parents' basements because they cannot afford the $300,000 increase in the average house price that occurred since the government took office; or the single mother walking down the grocery aisle noticing that she cannot afford nutritious food for her kids; or the senior who is watching his savings disappear as inflation gallops through his bank account and vaporizes what he spent a lifetime storing away for his golden years, all are asking the same question. Why are prices rising so fast?
Even the finance minister has had the epiphany that there is an inflation crisis. In fact, just last fall, she said that the greater risk was deflation, not inflation. She ignored my warnings to the contrary. She was not alone in that false prophecy. The current and the former Governors of the Bank of Canada, a Liberal journalist and Liberal academics all laughed when I started warning about inflation back in May of 2020.
Before we can answer why prices are rising today, I have to answer the other question that I often get, which is, how did I get it so right when so many others got it so wrong? The answer is that the Liberal academics, journalists and the finance minister relied on ideology; I relied on empirical economic science.
The man who wrote the book on inflation, the empirical economy scientist who won the Nobel Prize for it, Dr. Milton Friedman, published famous graphs in which he demonstrated a nearly perfect correlation between the rise in inflation and the increase in money supply per unit of economic output. He showed in all five of those graphs, the U.S., the U.K., Germany, Japan and Brazil, that the correlation was nearly perfect. When there is more money chasing fewer goods, we always get higher prices.
When I saw the government beginning to print money to pay for exorbitant spending, I knew that inflation was just down the road. The Liberals said that those old rules did not apply, that history was over, that it no longer repeated itself and that they could ignore the thousands of years of economic history, which had demonstrated this correlation again and again, because they had reinvented the laws of economics. I was expecting the Liberals to introduce a bill repealing the law of gravity, given their penchant for thinking they could do away with the laws of economics.
Of course, history has not been repealed. Nor has economic law. The massive influx of cash as a result of a half-a-trillion dollars of deficits has, indeed, driven up prices. This is the funny part. The same people who said that COVID would give us deflation now blame it for inflation. The same doctors who misdiagnosed the disease now can tell us that the disease's cause has nothing to do with them.
What is the cost? Some people say it is supply chain kinks resulting from COVID. They point to the fact that other nations are also getting high levels of inflation, therefore it cannot be the government's fault here at home. The truth is other countries are getting inflation. Those countries that are doing the same stupid things our government is doing are getting a lot of inflation. and the correlation holds up even today.
For example, yesterday the minister pointed out that other G20 countries had high levels of inflation, and she is right about that. Argentina has 52% inflation. Why? It has increased its money supply by 80% in a year and a half. Turkey has 20% inflation. Why? It has increased its money supply by 43%. The Americans south of the border, the money-printing mammoths in Washington, have 6.2% inflation. Why? They have increased their money supply by 35%. In Canada, we have a two-decade-high record of inflation of 4.7%, after we increased money supply by 23%.
In fact, if we put the G20 countries on a graph, we see a near-perfect correlation between money supply growth and inflation. Those countries that have flooded their economies with deficit spending have high inflation and those countries that are also supply chain dependent but have kept their money supply in control have low inflation.
Let me give some examples. Japan's inflation is 0.2%. Why? Its money supply growth has been half of ours in relative terms. Saudi Arabia's inflation is 0.8%. Its money supply growth has been a third of ours. Switzerland has 1.2% inflation. Its money supply growth has been a mere quarter of ours, only 6.5%. In other words, those countries that are not printing money to pay their bills have maintained a low cost of living and an affordable life for their citizens. Those countries that are flooding their economies with cheap cash are driving up the cost of living for their people.
The Liberals will say they had no choice, that COVID made them do it. This will be their excuse for everything. Let us remember that the Prime Minister tried to give half a billion dollars to a group that had paid his family half a million dollars, and the Prime Minister said, “COVID made me do it”.
COVID required that we spend money, but we did not need to have the biggest deficit in the G20. All the other G20 countries had COVID too. COVID did not force the Prime Minister to give CERB cheques to wealthy families that did not need it; to people who could have been working, with over a half a million vacant jobs; to prisoners; to organized criminals; and even to people whom the public servants suspected of making fraudulent applications. He did not have to give wage subsidies to large corporations that had so much money they were simultaneously paying out dividends and bonuses to their executives.
COVID did not force any of that on the government. Those were decisions. The government knew it could not pay for those decisions by simply borrowing from the marketplace. There was not enough money in the whole world to lend the government enough to spend and fulfill its appetites. That is why it directed the Bank of Canada to create the cash out of thin air, which, unfortunately, the bank was all too happy to do, and now we see the consequences.
Now that I have demonstrated the correlation between money supply growth and inflation in the G20 countries, let me show another piece of incontrovertible evidence that our inflation problem is not just the result of supply chain quirks.
This evidence is that the biggest inflation in our economy has been in an area where there is no supply chain: land. Land is not waiting at a port. Land is not stuck on a ship. Land is not held hostage by a COVID outbreak in some faraway place.
Land was supplied to us by geological forces millions of years before we even arrived, it is right under our feet, and yet land prices are up 20%. How does the government explain that? Is it that the acreage of land caught COVID and all of a sudden became more expensive? Of course, not. Land prices started rising after the government started printing money.
Let us get very specific here. In the first two months of COVID, real estate prices actually started to drop, which we would expect. We would expect that when people's incomes fall, when a hundred billion dollars disappears from the GDP, when people are afraid about their ability to earn a future living and when we shut off immigration altogether thereby decreasing the demand for real estate, prices would go down. In fact, CMHC, our housing authority, predicted there would be a 14% reduction in housing prices. It made sense to predict that at the time. However, then, all of a sudden, in May, 2020 real estate prices started to rise. In the middle of a lockdown, when people cannot even go and see the properties they are buying, why would prices suddenly and supernaturally go up?