A few years ago, many Canadian banks raised around $1b as interest rates fell to record lows.  Firms like Microsoft did the same thing.  Not one needed the money, but it was just too cheap to pass up to fund investments and it was cheaper than issuing stock and paying a dividend.  Soon many other big corporations were doing the same thing.  Ant Group (Chinese) has applied to list its shares on the Hong Kong Stock Exchange.  If successful Ant hopes to raise $30b in added capital via issuing new shares.  Tesla is in the process of raising new money by selling $5b in new shares, or by borrowing money.  The London Stock Exchange is trying to buy Refinitiv, a market-data firm for $27b.  All the above are in U.S. dollars.

Today, a billion dollars is fast becoming a small amount.  This is a worrying signal that money is losing value.  A decade ago, you could buy a nice size home for about a $1/4m.  Today that home value has risen to near $1m.  Today, including one’s home, the world has the highest number of millionaires on record.  Billionaires are now common, while 10 years ago there were only a handful.  

For years you could buy all the apples, oranges, tomatoes, and so on for under a dollar per pound.  Today count on $2 or higher for just 1 of the 3.  One Honey Crisp apple, which is a large locally grown apple for sale in our local Save on Foods, costs close to $4.  This is more expensive than a sugar rich ice cream cone.  If lucky, the local farmer might get 50 cents for each apple.  Other varieties of apples maybe up to 30 cents a pound.

My point is our money is fast losing purchasing power which is making everyone poorer.  Unless we get a change of attitude out of Ottawa, which has created this inflation, we can expect prices for everything to continue to rise until the public is forced to stop buying.  We believe we are now entering this phase.  To make matters worse pay raises will be thing of the past for the next year or so because business will not be able to afford to give raises due to COVID-19. 

Ottawa is bankrupt if proper accounting is conducted because of an out-of-control debt mountain and falling tax revenue.  They will raise taxes, but revenue will not increase since Canadians are already one of the highest taxed in the world.  The taxpayer must give up spending elsewhere to meet the coming tax increases.  This is something no one in Ottawa understands.

Ottawa is setting the country up for an economic crash.  The 1929-39 crash was made greater by politicians doing the wrong thing.  Back then it was taking too much cash out of the system.  Today, the problem is the floating of too much inflated dollars.  Ottawa has no clue that savings are the backbone of every economy.  They should be encouraging people to save and allow higher interest rates to reward savers.  This money goes into the banking system where it is lent out to create jobs, built plants, machinery and so on.

We have no idea of how long this party can continue.  If it does the big question of the day will soon be who will be the first person to be worth $1 trillion dollars.   Will it be Bill Gates, Jack Ma, Elon Musk, Jeff Bezos or someone whose name we do not know today?  And being a billionaire will become what a millionaire is today - just someone who has a little extra cash.

Strange as it is, cash is what is needed when the correction comes.  So much value will disappear over night just as what happened during the 1930s.  Avoid unnecessary debt because it will be a fast trip to the poor house.  As was shown during the 1930’s once the economy slips past a certain unknown point it can not be stopped until it has run its course.  The 1929 crash took 33 months to reach the bottom.

You want some of your cash tied up in only blue-chip shares that will continue to pay dividends, as well as insured money market investments.  No politicians will allow insured money market vehicles to default as this would mean the politician will never get re-elected.

Commonsense and caution are the order of the day.