Induced Currency Hyperinflation in Canada

I used to be skeptical about getting in the Home Market in Southern Ontario.  I thought the homes to be overpriced.  I thought the market was due to crash. Let me say…..It will keep going up!  Here is my opinion as to why this is true.

Home Prices

Fixing Nursery Floor

My home is about 1800 sq feet, 3 bedrooms detached with parking for 4 cars.  Beautiful neighborhood, good schools.  Giant hundred year old trees, and something like forty feet spacing between homes.  Can walk to most major amenities easily.  I bought it in 2014 for $157,000.  Did some work, painted. Re-shingled, fixed the fences, Interlocked the driveway, cleaned it up and now it is worth $350-450,000 (2018).  The house is going up in value or so it would appear.  Likely half of the gains are due to induced currency hyperinflation, the other half due to the massive influx of immigrants into Canada, who need a place to live.

The Induced Inflation

Minimum wage is going up.  Expect houses/goods/services to cost 15/11.5 = 130% as the minimum wage rises from $11.50 to $15.00.  So expect to pay about 1/3 more. We all get the raise as most of our salaries are tied to the minimum wage…so we all get the increase!  But alas, it is not really an increase…it is induced inflation!  Food, gas, services, house prices etc are all adjusting to factor in everyone making more money. The gas station attendant needs his cut, so do McDonald’s staff, so does the mason building houses.   We don’t gain….or do we? Let me let you in on a little secret,  the government is deflating their debt, and  in turn deflating our mortgages. Each dollar becomes of less value, and we truly owe less. Thank you Canada for making my mortgage debt worthless and increasing my salary.  The only people who lose out are the poor as they don’t hold mortgages…..the minimum wage earners.  So those who this purported wage increase (i.e. induced inflation) is supposed to help will end up with more money in their pockets, but each dollar will be worth less.

There is one problem with all of this all…..  We cause the inflation by raising the minimum wage.  Salaries (including minimum wage) will be tied to inflation so they will increase to compensate for the induced inflation. Sounds a little like an infinity loop that will lead to hyperinflation (i.e. Venezuela style).

I was watching TV on TVO the other night and Ernie Eves was discussing the problems setting wages.  He suggested the market should decide how valuable a person’s skills are and allow the market to pay them accordingly.