So much in our financial world is based on the rate of inflation in Canada. The rate of inflation is based on what consumers pay (Consumers Price Index) for a basket of goods over a month to month basis. The average month over month is what sets the annual rate of inflation which currently is about 2.2% Our banks use this to set interest rates for loans and mortgages. Stock markets, mutual funds and RRSP’s also are based on the rate of inflation.
The big issue I have with this is the way the rate of inflation is calculated. For some strange reason, the cost of your gasoline, your food and utilities is not included in the mathematics. How stupid is this! Instead things like electronics, vehicles, appliances, clothing, etc are used to determine the rate of inflation. How bizarre not to include the things we consume on a daily basis. These items should be what sets the rate of inflation otherwise it is just a shell game.
So now if you were to include the cost of food, utilities and gasoline the rate of inflation would be more like 10% year over year which would explain why consumers are so heavy in debt. Our wages are not keeping up with the true rate of inflation thus consumers are having to borrow just to live. I know my wages have not increased 10% year over year. This all seems a mystery to the economists and bankers who wrongly assume people are living beyond their means, giving into their whims for new, bigger and better. They would have us believe we are stupid, uncontrollable, whimsically spending fools. So instead banks increase the prime lending rate triggering mortgages and loans to do the same. Big banks are just helping big business and could care less about the average everyday Canadian.
More needs to be done to include all items in the rate of inflation to truly reflect what is happening within the average household. We make up the vast majority of people in the nation and contribute most to the Canadian economy but are tossed aside in favor of big banks when it comes to the rate of inflation.
I am floored to hear the big banks are increasing the prime lending rate due to the fact people are getting close to being in over their heads with debt. It is this calculated mathematical smoke and mirror show they call the rate of inflation that is the biggest issue of all.
Please, stop the madness.
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