The Candice Malcolm Show - May 18, 2022


How to cope with the coming recession in Canada (Ft. Michael Campbell)


Episode Stats

Length

40 minutes

Words per Minute

194.26434

Word Count

7,860

Sentence Count

495

Misogynist Sentences

1


Summary


Transcript

00:00:00.000 Life in Canada is more expensive than ever. Inflation has increased the cost of goods and
00:00:05.360 services. Housing prices continue to soar. And yet, our government refuses to reduce spending or take
00:00:11.980 any kind of responsibility for this looming economic storm. What can Canadians do to protect
00:00:18.300 themselves? I'm Candice Malcolm, and this is the Candice Malcolm Show.
00:00:30.000 Hi, everyone. Thank you so much for tuning into the podcast. So you know that I was critical of
00:00:37.940 the Conservative Party of Canada debate last week. I thought it was a terrible format, really boring.
00:00:42.840 They didn't really get into the issues that I personally care about. But there was one
00:00:46.300 interesting and explosive moment in the debate when the candidates began slamming and piling on
00:00:51.960 frontrunner Pierre Polyev for his position against the Bank of Canada and for supporting cryptocurrency.
00:00:58.100 It seems like there was sort of a generational divide on the stage where everyone was opposed
00:01:04.620 to Pierre talking about cryptocurrency, but they were also really taking his position out of context
00:01:09.200 and pretending as though he had advised Canadians to put all of their savings in crypto, which
00:01:14.740 I don't think Mr. Polyev ever did. But it does raise an interesting question about the role of
00:01:20.940 inflation, the flooding of the money supply, printing obscene amounts of money from the Bank of Canada,
00:01:26.060 the government, the Trudeau government spending up a storm, burying the country into $1.2 trillion
00:01:31.400 worth of debt. And it is worth having a bigger conversation to unpack some of these issues.
00:01:38.360 So we spent yesterday's podcast speaking to Matt Spoke. Matt is a tech entrepreneur and writer in
00:01:43.780 Toronto. And he's very enthusiastic and optimistic about the crypto space. And he much like Pierre
00:01:50.340 Polyev is excited about the potential and the idea of freeing money from the clause of government. So if
00:01:56.700 you haven't listened to that podcast already, I encourage you to go and check it out. But I also
00:02:00.860 think it's fair to criticize Pierre for, you know, perhaps being too enthusiastic about Bitcoin,
00:02:07.280 especially given what's happened in the last week or so, which is that Bitcoin has lost a substantial
00:02:12.360 amount of its price. It's collapsed, which shows the vulnerability and lack of stability when it comes to
00:02:17.800 decentralized currencies. The reality is that the market is taking a hit across the board. And so,
00:02:24.020 you know, you've seen tech stops plummet, you've seen the NASDAQ down, S&P, I think is down 10% so
00:02:29.300 far this year, we're definitely into correction territories in the markets. And many analysts
00:02:33.960 predict that we are entering a recession. And so to Pierre's credit, at least he's talking about the
00:02:39.120 important issues of the day that are facing Canadian pocketbook issues, the cost of living cost of
00:02:44.220 housing, the impact of inflation, talking about the cost of gasoline and these issues, it's really
00:02:50.160 important. And I wanted to, again, talk more in depth about the economy and what Canadians can do
00:02:56.460 to protect themselves. And so I'm very, very pleased today to be joined by Michael Campbell. Michael is a
00:03:02.000 top business analyst, a successful entrepreneur, business owner, and investor in the manufacturing,
00:03:07.400 tech, entertainment and real estate space. He is the host of a very popular long running radio show out
00:03:13.700 in Vancouver called Money Talks. Money Talks is now a podcast about finance, money and investment in
00:03:19.080 the economy. He's also a senior business analyst for BCTV News over on Global. He's based in Vancouver
00:03:25.520 and he prides himself on bringing Canadians the finest independent financial thinking. I was a,
00:03:30.600 I was incredibly pleased to be a guest on Michael's podcast over the weekend. And so he is returning the
00:03:35.280 favor by joining my podcast today. So Michael, it's great to have you on the program. Thank you so much for
00:03:39.880 joining us. Well, it is my pleasure. I mean, there's so much going on that are impacting us
00:03:44.820 directly, whether it's somebody all of a sudden discovers economics, finance, international affairs
00:03:49.720 are impacting them when they just simply go fill up at the pump, but it's across the board. And I think
00:03:54.480 you outlined it very well. They're saying this is a phenomenal challenge for individuals and their own
00:04:00.920 just sort of cost of living. It's the number one issue you read in, you get poll results, that kind of
00:04:06.580 thing. Number one in the States, it's having a huge impact, I think, going forward to their midterm
00:04:10.800 elections. No, it's a big deal. No one should underestimate. It's a big deal. Well, and what
00:04:16.300 we sort of saw that, you know, the criticism I would have against the candidates that were critiquing
00:04:20.500 Pierre Pauly, look, it's totally fair to say, look, Pierre, you shouldn't criticize Bank of Canada,
00:04:24.560 or, you know, you shouldn't sell people on cryptos if it's a magic way to hedge against inflation.
00:04:30.460 But at least Pierre is talking about these issues. I know he never told everyone to, you know,
00:04:34.580 sell off their house and put all the proceeds into crypto. He's just talking about it as another
00:04:38.660 alternative and a place where you might want to part of your investments. But I'm wondering if
00:04:43.760 just off the start, before we talk about, you know, the precarious situation in the economy,
00:04:48.420 if you could just comment on what you thought about Pierre Pauly and his criticisms against the Bank of
00:04:54.960 Canada. Well, first of all, the attraction of something like a cryptocurrency is because people
00:05:00.700 don't trust government. That's the number one issue facing, you know, it's global, it's an overriding
00:05:05.080 theme that I use to then drill down and to say what's really happening. Because if you don't have
00:05:10.820 confidence in the system, there's a real problem. And I think that's underestimated, actually.
00:05:15.100 And I'll give you a quick example. If I said to you, Candace, hey, look, do you want a five-year
00:05:18.720 government bond? By the way, it pays 83%. You know, hey, 83% every year in a five-year? Oh,
00:05:24.560 little problem. It's Argentina. Well, you don't trust the Argentinian government. You know,
00:05:29.500 I could go Turkey and say 24% five-year bond. They get to those levels because people don't
00:05:34.720 trust government. That's been the attraction in the whole cryptocurrency space, you know,
00:05:40.660 led by Bitcoin, that it's not centralized finance. It's not, you know, under the rule. And we got an
00:05:46.180 example in the trucker's convoy. We've had an example with the sanctions on Russia, where all of a
00:05:50.400 sudden, you know, some people in Canada had their bank accounts frozen. We couldn't do that if they
00:05:55.400 held it in Bitcoin, for example, because there's no central place you go. You don't go to the Bank
00:06:01.120 of Montreal. You don't go to the Toronto Dominion Bank and say, freeze these accounts. There's no
00:06:05.040 equivalent there. And the same when they came in and they made the sanctions against Russia's central
00:06:10.320 bank. And presto, all of a sudden, they don't have access to the gold that they've got held outside
00:06:15.140 of Russia. This is the politicization, the weaponization of bank accounts has serious
00:06:20.580 long-term implications. Because someone's sitting there going, wait a second, I'm not sure if I trust,
00:06:25.420 if I run afoul of the government, it doesn't matter if you're sympathetic or not sympathetic. The
00:06:29.560 message was, if you run afoul of government, internationally or domestically, you may have
00:06:34.400 a problem. That money may actually not be yours. But you can't do that with decentralized. So that's
00:06:40.280 where the attraction came. And then the second side is kind of interesting. Because for a lot of
00:06:44.640 people, it's not either or. It's not cryptocurrencies or housing. No, some of them are the product of the
00:06:52.040 same thing, which is we're worried about the devaluation of the purchasing power of our
00:06:55.760 currency. So we're looking for other things. So, you know, when they flush the system with money,
00:07:00.480 all of a sudden, you've got people going, I'll buy stocks, I'll buy baseball collectibles. We just had
00:07:05.280 a record art piece, you know, that famous Andy Warhol, Marilyn Monroe piece. And it went for 192.5
00:07:12.600 million US sold in four minutes. Well, that's someone who's got another store of wealth. They're
00:07:18.500 saying, I don't want the paper, I got to do something other than this paper called dollars. And so I'm
00:07:23.840 choosing other things. So that's another huge dynamic in the investment markets over the last
00:07:28.220 couple of years.
00:07:29.480 It was definitely interesting. My husband's really into this space as well. And he got interested in
00:07:34.140 NFTs and, and Ethereum and just again, the same concept trying to, you know, find find new and
00:07:40.580 unique ways to to invest money. Because, you know, you look at the, the economic situation out there,
00:07:46.840 and it is looking pretty bleak. I did want to just ask you one question about the Bank of Canada,
00:07:53.140 because I know that there's been a lot of sort of ink spilt in the, you know, pages of our
00:08:00.260 establishment legacy newspapers, criticizing Pierre saying how dare he criticized the Bank of Canada
00:08:07.260 for their role. You know, they're independent from the Trudeau government, and they shouldn't be
00:08:11.120 brought into the fray of politics. So I'm wondering if you'd help us understand whether the Bank of
00:08:16.460 Canada bears some blame for the inflation that is happening, the rising cost of living. And if you
00:08:24.200 could give us your thoughts on whether you think Pierre's criticisms are valid, or whether you agree
00:08:29.040 that you think they're offside. And there's a lot there in what you're asking. And I'm smiling,
00:08:33.600 because, you know, careful asking me a question, I might answer it and might take a week and a half.
00:08:37.560 But let's go back. And this is like frightening words coming out of my mouth. Let's go back to
00:08:43.600 September 16, 2019, the overnight credit marks. But this is key to understand at the time, I called it
00:08:49.740 the event of the year that wasn't getting reported. So what happened is remember, if you're going to
00:08:54.860 borrow money, you've got to have somebody lend it to you. And you know, the government can't
00:08:58.260 control who lends it to you. They can't say, you know, Candace, you must lend Air Canada x amount
00:09:03.600 of dollars at this rate. So it's a free market, there's an overnight market very quickly, you know,
00:09:09.400 short term lending, you know, one corporation knows that they're going to have a cash crunch,
00:09:13.740 maybe it's a payroll coming. So they borrow maybe for one day or two days or a week or something.
00:09:18.620 Well, what happened is nobody wanted to lend September 16, that night, nobody wanted to lend.
00:09:23.820 They have other concerns. I think at the time, they were worried about what was inside of
00:09:27.360 Deutsche Bank, you know, in Europe, but they didn't want to lend. So you're the borrower,
00:09:31.900 you got to have money. So you go, well, what if I pay you 4%? Nope. What if I pay the equivalent
00:09:38.000 of 6% annually? And you say, Nope. How about 8%? I'm not lending it to you. Then you said 10% done.
00:09:45.260 That's what the overnight interest rate did. It went from 2% to borrow to 10% to borrow in a matter of
00:09:52.740 hours, because nobody wants to lend. So what happened, the Federal Reserve said,
00:09:57.640 well, we can't have this, obviously, you've broken the system, the credit system. And so they stepped
00:10:02.140 in. And they said, Oh, I know, we'll be the lender, we'll be the ones and we'll do it back at 2%.
00:10:07.780 Well, let's keep going. So that was September 2019. Then you get into, you know, the lockdowns,
00:10:14.960 the problems in March of 2020, the pandemic was growing there. Same problem. The level of
00:10:21.580 uncertainty was such that people didn't want to lend money. I mean, would you want to lend money
00:10:25.740 to a cruise ship line when there's a lockdown or a airline when there's a lockdown or even to
00:10:30.480 government? What's going to happen to government? You know, my gosh, the economy is being locked
00:10:35.320 down. They're not going to get the tax revenues. So people wanted to hold their money. Or if I am
00:10:40.460 going to lend it to you, I want more. I don't, I'm not going to lend it to you 2%. I need 6, 8,
00:10:45.920 10%. Well, again, the central bank said no. So they stepped in, they guaranteed, basically
00:10:53.000 guaranteed mortgages. That's why all of a sudden mortgage rates dropped because the risk went out
00:10:57.360 of them. And they started to lend the government money. I mean, I'm not going to get into the
00:11:01.420 mechanism. But basically, they're saying, we will give you the money, we will create the money,
00:11:05.800 and we will give it to you, government of Canada, at 1% for 10 years, whatever it was, record lows.
00:11:13.680 So that's the role they played. And they continued doing it in Bank of Canada, continued doing that
00:11:18.080 right through into November of 21. Then they said, we're not going to increase that amount. They
00:11:24.720 bought about $400 billion or so of government bonds. Otherwise, our government wouldn't have had
00:11:31.660 the money. You know, I mean, it was sort of ironic when the prime minister said during the 2021 campaign,
00:11:39.000 I don't think about monetary policy. And I'm going, well, goodness gracious, that's interest rates.
00:11:45.500 Who do you think provided you the money to do CERB, to do whatever it was, the subsidies for small
00:11:51.500 businesses, you name the program, the hundreds of billions of dollars, who provided the money? It was
00:11:57.200 the Central Bank of Canada, again, through a mechanism. But bottom line is they created the
00:12:02.500 money, ended up with government, you know, floated four or 500, actually 576 billion in bonds over two
00:12:09.600 years. That was the Bank of Canada. That's who provided the money. That's the role they played.
00:12:15.300 And it started with their worry that we had an absolute problem in the credit market, like it was
00:12:20.520 dysfunctional. And you can't have a dysfunctional credit market when you've got a world full of
00:12:24.280 credit, that you've got five, you know, the record amount of loans out there, record amount of borrowing
00:12:31.240 and debt out there. You can't do it that way. So that's sort of the dynamic. And now you already
00:12:36.700 regret asking me that. I can see that. But that's what Canada played. Without them, they were worried
00:12:42.840 the system comes to a halt. No lending takes place, but we have a system built on lending and borrowing.
00:12:47.720 So it would come to a halt. They stepped in. Government of Canada couldn't be borrowing at six or
00:12:52.460 eight percent or whatever would have ended up if they went to an individual or a mutual fund or a pension
00:12:56.840 fund. They're the ones that kept interest rates to the record low. Government got the money and the
00:13:02.440 government started to spend. Well, I appreciate you breaking that all down for us because I sort of vaguely
00:13:08.240 remember the news that you were talking about in late 2019. Couldn't have been, you know, a more
00:13:15.220 precarious time given what we experienced in the following four months. But I do remember I had Pierre
00:13:20.060 probably a guest on my podcast. We did a very long interview where he was also very concerned back
00:13:26.380 then about about the inflationary impact of those kinds of decisions. And you're also right to bring
00:13:33.320 up Trudeau's comment about not thinking about monetary policy, because here we are, what, a year later,
00:13:40.220 and we're in this incredibly, you know, loomy system, loomy situation where it seems like we are
00:13:47.920 heading towards a recession. We have a prime minister that doesn't care or think about it and,
00:13:53.240 you know, media that don't hold him accountable for it. So I'm just wondering, you know, at this
00:13:59.020 point, do you think that we are heading into a recession? What role did Justin Trudeau and his
00:14:05.620 spending have in that? And what's the best thing that the government can do at this point to help
00:14:10.640 protect Canadians against what could be really, really dark times ahead financially?
00:14:15.240 Well, let's talk about how you get inflation. And as Milton Friedman, you know, maybe the most
00:14:21.840 famous economist the last hundred years, but said, inflation is everywhere and always a monetary
00:14:28.020 phenomenon. So when we're flushing the system with money, the key was, yes, the Bank of Canada created
00:14:33.260 the money, lent it to the central, to the federal government, then the federal government started
00:14:38.660 to spend. And it wasn't pandemic relief only. In fact, the majority of that money went to people
00:14:43.980 who were not impacted financially. Everyone's impacted socially, et cetera. It may be health-wise
00:14:49.340 too, tragically, but they were not impacted financially. And well, that's why we have record
00:14:55.000 savings rates all of a sudden. I mean, we had these stories of, not stories, the facts of 40,000 grade
00:15:01.200 nine students got CERB payments. Like, are you kidding me? 40,000? Yeah, they are not the breadwitter.
00:15:07.260 And if you recall, back in May of 2020, we had the Canada Revenue Agency come and said,
00:15:13.300 we're suspecting a lot of fraud here. And the government said, no, don't worry about that.
00:15:18.020 That's not our goal. They were pushing money into the system. And I mean, depending on which
00:15:23.100 political party you support, have various attitudes about how much debt we should be taking on.
00:15:28.780 But we know that we took on this monstrous amount. We had the parliamentary budget officer just
00:15:32.960 two weeks ago, tell us is about $576 billion, of which $204 billion were not pandemic-related
00:15:39.900 spending. I mean, it was just flushing money out. And it's that amount of money that created this
00:15:45.920 record savings. All of a sudden, the economy opens up. People have pent-up demand, whether it's for
00:15:51.300 travel or whether they were going to do a reno or whatever they were going to do. Presto, prices go up
00:15:57.660 because it's taking place right at the same time as we've got some supply shortages, which also play
00:16:03.240 a part. But at all, the foundation of that was if everyone was broke, it wouldn't matter that we
00:16:08.500 didn't have supply because we wouldn't be buying anything anyways. You know, the lowest people on
00:16:12.620 the income scale are not causing inflation. They don't have the money to spend, you know. So we flushed
00:16:18.320 the money across the board. I mean, one of the stats coming out of the government programs was that
00:16:23.860 only $0.14 of every dollar went to the lowest income group, the lowest 20% of income earners.
00:16:30.780 And we had out in British Columbia, in British Columbia, there was a great example where you had
00:16:35.160 the premier, John Horgan, stand up and say, if you make $125,000 in your family or less, we're going to
00:16:44.500 send you a grand. $125,000 to break up. It wasn't if you got impacted by the pandemic, if you lost
00:16:51.720 financially by the pandemic, if you're at the lower income rate. No, it was anybody at $125,000
00:16:59.400 in a family, it's a family income, got $1,000. And I'm going, you know, and that didn't include,
00:17:07.520 by the way, it's something we always make a mistake in the broad media of not including
00:17:11.040 remuneration being benefits. So let's say I've got make $125,000, I've got an extra enhanced medical
00:17:17.360 plan, I've got an enhanced pension plan. So I could have been making $125,000 and 20 more
00:17:22.960 in benefits and still got $1,000 to me. That's how you get inflation. That's the essence. It's not
00:17:29.560 Bank of Canada. It's, I mean, they have a part to play for sure. I'm not saying that. But the real
00:17:34.100 cause is the indiscriminate sending out of money. Well, it was going to go somewhere. And as I say,
00:17:39.820 one of the measures was record savings account. So yeah, we've got inflation, then you compound it
00:17:45.300 two ways. But first with, yeah, supply shortages on some things, but that's still not the essence,
00:17:50.300 because the essence for me is not the CPI number. It's what am I paying for food? What am I paying
00:17:55.080 for energy? What am I paying for my housing? You know, rents or whatever. I can't avoid those. I
00:17:59.820 don't have to buy furniture next week or clothing next week. So that doesn't compute in my personal
00:18:05.440 cost of living. It doesn't have to. So presto, all of a sudden, so yes, we had supply shortages,
00:18:13.320 but that wasn't why we got higher energy prices. You know, and that was a killer. That's not why
00:18:18.880 on Money Talks, we were talking about the supply shortage, or rather the commodity boom in February
00:18:26.200 of 2020. That's how obvious it was. We hadn't invested anything in oil, anything in copper or
00:18:32.400 nickel, you know, in seven years. Well, as soon as demand picks up, you got a problem. Then you
00:18:37.120 exacerbate it with other, I mean, it's the most direct line you can draw through government policies
00:18:41.480 around the world and what we're doing with energy. It's like horrendous. That's the killer. So that's
00:18:46.380 what Canadians are dealing with is they just can't avoid that energy price increase or that food price
00:18:51.140 increase or that rents have gone up dramatically across our country, well above the CPI rate,
00:18:56.880 you know, in Canada. So yeah, that's what we're dealing with. And it's not easy.
00:19:01.400 Right. And well, there's so many, and everywhere you look, there's, you know, something else to be
00:19:04.980 concerned about. One of the things that I'm constantly concerned about, Michael,
00:19:07.560 is there's this, there's, there's a survey that comes out every few months that talks about
00:19:12.220 Canadians. This one's done by Ipsos. But how many Canadians are within $200 of not being able to
00:19:19.220 make their ends meet? So, so people who don't have any kind of emergency savings, people who just
00:19:23.720 basically live paycheck to paycheck, according to the latest Ipsos service survey, it's now 49% of
00:19:29.700 the country. So, so we're talking about, you know, we're not just talking about working class Canadians
00:19:34.460 or people, again, who make minimum wage, we're talking about a big, big swath of the middle
00:19:39.580 class who just don't have any money saved, they don't have the ability to absorb a big price shock
00:19:46.540 or, or, you know, and so so you look at this, this, this number, 49% don't have savings of more than
00:19:53.820 $200 each month. And then and then, you know, you just suppose that with the incredibly quickly
00:19:59.740 rising inflationary numbers, I think they were at seven or 8%. You know, the cost of gasoline,
00:20:05.860 I know you're out in British Columbia, I think you've seen gas numbers of over over $2 a liter,
00:20:10.980 which, you know, when I got my driver's license, I think gas was 49 cents a liter. And, you know,
00:20:17.740 that was that was a long time ago now, 20 years, but still, you know, the cost of living is is going
00:20:25.160 up dramatically. How is this going to impact Canadians? And what advice I know part of what
00:20:31.320 you do on your show is you give financial advice to Canadians? What advice do you have to people who
00:20:36.000 are, you know, getting ready to absorb the big price gains that have come and are continuing to
00:20:42.780 come? Just a couple of things on that. And let's come back to so much of this is direct relation to
00:20:49.260 government policy. And it's not just, yes, it is the flushing the system with money. That's one thing.
00:20:53.740 But when you look at energy policy, for example, seven years of underinvestment, I mean, who in
00:20:58.720 their right mind would say, I'm going to invest $10 billion in a refinery because the problem,
00:21:03.900 actually, I can come back to this is a refinery problem first, you know, oil prices are up 70%.
00:21:08.900 But my goodness, look at the refining product, we don't have the capacity, but who would build a
00:21:14.080 refinery anyways, we got 18 in Canada haven't built one in 30 years, why would we, but why would you
00:21:20.320 drill for oil in a country, and this is consistent, it's not just Canada, it's the US, it's throughout
00:21:27.020 Europe, when they're telling you, we want to put an end to your product, we don't want your product.
00:21:32.220 When there's protests that meet any kind of decision to expand oil production, despite the fact that the
00:21:39.060 existing production continues to drop, it's just a natural sort of phenomena or a natural part is the
00:21:44.720 well doesn't produce as much, it ages out. We weren't even keeping up to what we needed. This
00:21:50.380 is huge. You know, did we not think that emerging markets wouldn't all of a sudden decide they need
00:21:55.920 energy to raise the lifestyle, the life, you know, standard of living for their people? I mean, it's,
00:22:02.640 it was inevitable. This isn't one where you go, see, that's an unintended consequence. No, that's one
00:22:07.620 with anybody who got a C minus in first year economics would have understood. You cannot restrict
00:22:13.340 supply, you have discouraged anyone from drilling. And now you have demand picking up, emerging market
00:22:20.320 demand, obviously pandemics ending, you know, put a lot of people back in demand, the list is a long
00:22:26.860 one. So presto, you get these high energy prices, they were inevitable, and they continue to be.
00:22:32.920 Well, it's because we have ideology and ideologues, you know, governing our policies clear, they don't, they don't
00:22:39.220 like energy, they don't like oil and gas. And so they, you know, have these punitive bills, C69,
00:22:43.240 which recently got struck down by an Alberta Superior Court, basically said, you know, you can't
00:22:48.420 build a energy project, like a pipeline, unless you, you know, do this sociological study on the
00:22:54.720 gender impact in the communities. I mean, who would sign up to, to build a project, you know, whether
00:23:01.500 it's LNG or refineries or anything, when you have to jump through these ideological hoops? I think
00:23:06.900 you're right, it's not unintended, it's, it's perfectly intended. But anyway, I sorry, sorry
00:23:10.400 to interrupt, I'll let you continue. No, no, that's, that's, it's a great point. And we're
00:23:13.440 paying for it. So I mean, and I don't think people should sit there and go, yes, you can get dips,
00:23:18.160 if we cause a recession, I'll come back to your question on that in a second. But if we cause a
00:23:21.900 recession, obviously, demand will go down, industrial demand will go down for energy. So yeah, you can get a
00:23:27.940 dip in prices, but we have a structural problem. Like, for example, you know, when the prices started to
00:23:33.260 really grab the headlines, I mean, it started well before this, but they started the headlines
00:23:37.680 politically in, say, February, and we had Joe Biden going to Venezuela, you know, his people
00:23:42.680 going to Venezuela, begging for more production, like, are you kidding me? They went to OPEC,
00:23:47.600 OPEC plus saying, please increase your production. Well, here's a little fact about OPEC. Their last
00:23:52.800 month, eight out of 10 producers in OPEC plus couldn't even meet their existing quotas. It's just
00:23:58.720 not so simple. You don't have a switch you can flick. You know, oh, just produce more. Well,
00:24:03.200 first of all, why would they? Where's the capital investment going to come? Where's the expertise?
00:24:07.500 I mean, the industry has shrunk in terms of expertise and across the board. And then back
00:24:12.860 to the other thing I mentioned, we have a refining problem. Like, none of us buy crude oil. That's
00:24:17.960 always a shock to people. I say, you look at the crude price, but you've never bought any, you know.
00:24:21.660 You bought gasoline, you bought diesel or impacted by diesel, maybe protein, home heating oil,
00:24:27.400 jet fuel. When we fly, all of that is a manufactured product. Well, you need refineries
00:24:33.440 to take crude oil and manufacture those various products we make from petroleum. We don't have
00:24:39.200 enough refineries. We don't build refineries. What? I mean, I'm going to, I'm going to kick in as
00:24:43.880 much as five to 15 billion, have a sort of a seven, eight, nine year lifespan. Oh, but we're cutting
00:24:50.400 out oil. So we really won't need you in, you know, Greta Thunberg told me we didn't need you next
00:24:55.620 Wednesday, but let alone 2030 or 35, the numbers they start throwing out. It, it's just so
00:25:02.680 fundamental. Nobody would invest in that stuff when you've told them you're not going to be able to
00:25:07.560 sell your product in whatever timeframe. And certainly they were talking 2030, 2035. That's
00:25:14.120 not a long enough to recoup. I can't even get the darn thing open by 2030, you know? So we're just
00:25:19.540 living this result. It's structural. We've got a problem. We better get used to paying more.
00:25:23.880 People are aware of gasoline. They're not near as aware of diesel, which is at all time highs. Now
00:25:29.560 diesel's used in farming equipment. Oh good. More food price increases, you know, used in freight
00:25:34.400 and trucking, the list goes on. And yeah, I guess my message is it's going to impact all of us. And
00:25:41.360 it's a direct result of government policy globally. You know, the green revolution was unrealistic to say
00:25:48.060 we can replace the fossil fuel grid with, uh, renewable energy in three years or five years or
00:25:55.520 10 years. I mean, we, there was nothing to support that claim and there's so much wrong with it. I mean,
00:26:00.780 I could just go on and on that. It was just fundamentally incorrect. And that's what we're
00:26:05.020 living though. That's what we're living is that kind of price increase. So, uh, you know me, I can keep
00:26:11.400 going, but I w I do want to not go over your, uh, miss your question about recession. This is the big
00:26:16.080 deal here. You've got the central banks going. The only thing we can do, we can't change supply
00:26:21.780 of oil or energy. We can't change. I think the food dynamics, we can't change any goods shortages,
00:26:28.000 uh, China's lockdowns just opening up now, but that create more, uh, short. What we can do is,
00:26:33.680 uh, make people not buy stuff by raising interest rates. They were on the, you know,
00:26:39.140 when they had record low rates, they were part of the problem and pushing money in the system.
00:26:42.560 That's why housing went up. I mean, that was the number one thing. Give me a one and a half
00:26:47.120 percent, five-year mortgage. I'm a buyer, you know, and I was an investor because the rates were so low.
00:26:52.740 They want to make those higher. So discourages us from demand. That's the only weapon they have.
00:26:58.360 Here's the problem. So how high would rates have to get mortgage rates have gone up significantly,
00:27:03.160 you know, say 16, 18 months ago, say they're at 1.7. Now we're over 4% for a five-year fixed.
00:27:09.140 You know, 1.7 going back a year and a half for over 4% first time since 2010. Will that choke off
00:27:16.600 the housing market? Will enough people say it's not no longer affordable. I'm out of here.
00:27:21.660 That's what they're looking at on the economy as a whole. Obviously housing is very important to our
00:27:25.640 economy, but it's on the whole, what interest rates do we have to move them to? Where do we have
00:27:30.400 to push them to, to choke off the economy and cause a recession? They don't want to cause a recession.
00:27:36.920 Think about this. This is the dilemma they're in. If I cause a recession, presto, government revenues
00:27:42.680 go down. Oh, but they've got record debts to service and interest rates for government have
00:27:47.620 gone up. I can't have a recession. That's the dilemma and the big, you know, they always talk,
00:27:53.140 we're going to have a soft landing or the probabilities of soft landing. Well, good luck with that. It's not a
00:27:57.760 dial. It's not some little fixed thing that they turn like the temperature in my room. No,
00:28:02.960 they've missed it all the way up. Keep in mind, our central banks told us we had transitory inflation
00:28:08.420 right through December of this past year. And I'm going, well, the Roman empire was transitory too.
00:28:14.660 Good luck with that. You know, we have structural problems. And so they've got a lot wrong. And now
00:28:20.540 they're telling us, don't worry, we're going to get inflation back down to 2% in three, in two to
00:28:26.420 three years. And I'm going, yeah, what's the pain along the way? So this is the dilemma. There's
00:28:32.340 no magic formula here. How much, how high do rates have to get to choke the economy down to recession?
00:28:38.780 So we'll have to see. Well, it's so interesting, Michael, because you kind of pick on up on two,
00:28:43.440 two different areas where we have these sort of expert class of technocrats who act like they can
00:28:48.520 simply change behavior, like you said, by turning a dial, like, oh, we can, we can solve global warming or
00:28:53.380 climate change. We can, we can change the earth's temperature on a dial. All we have to do is
00:28:57.040 completely redesign the energy system, you know, from scratch. And lo and behold, that just doesn't
00:29:02.100 work. And we're all paying for that now. And I get the same sense when I'm reading, you know,
00:29:06.200 my financial updates and financial news. It's like, oh, this is a delicate balance between, you know,
00:29:11.240 interest rates and inflation and the unemployment rate. And, and again, acting like there's these central
00:29:16.220 planners that have all of the information and all of the knowledge needed to, you know, manage a very,
00:29:20.700 very complex economy. And, and I can't help but wondering and thinking, you know, this is,
00:29:26.760 this is the, the problem in our society is that you have these experts and these elites who, who,
00:29:31.460 who treat everything like it's a blank slate and they can just design it perfectly without really
00:29:36.740 being in touch with the concerns and demands of everybody. I think this is why we see so many
00:29:41.660 populist uprisings and things like the trucker convoy, because people are fed up with these experts and
00:29:46.700 elites looking down their nose, telling them what to do without really understanding their,
00:29:50.640 their situation. And so I, I, I wonder, cause I know I, I, I, I, we've been talking about this a
00:29:57.500 little bit, but you give financial advice to families. You know, that statistic I mentioned
00:30:01.660 earlier about 49% of Canadians were within $200 of being unable to pay their monthly bills.
00:30:07.700 Like what can, what can everyday Canadians do at this point? What, what's, what's your advice to
00:30:13.260 like a young family that's looking to buy a house or a young family looking to save up, uh, or, you
00:30:19.080 know, just manage to get through whatever it is that we're about to get through? Uh, what, what,
00:30:23.760 what advice would you give to them? It's difficult because first of all, it's, if somebody is a low
00:30:28.620 income, that's who gets impacted. We knew that, excuse me, going in. And as we were alluding to
00:30:33.340 earlier, that level of what's considered a, you know, full impact of the inflation in a difficult way,
00:30:38.280 changing your lifestyle has moved way up the income scale. Now we're about half of Canadians
00:30:42.860 are impacted in a way that is changing their lives. It's really tough for them because it,
00:30:48.680 the, the structural problems that we've got are real. We're keep in mind, even a year from now,
00:30:54.400 if oil say oils, let's make an easy number for us a hundred dollars today. And that's way up,
00:31:01.180 obviously, uh, from sort of the $60 range, just going back four or five months and way more than a
00:31:07.900 year ago, but a year from now, let's say oils at, uh, $115. Well, the inflation will be reported
00:31:14.720 as $5 increase on the 110, you know, that it's, it's, it's compared to the previous year.
00:31:21.500 So when we get all these lofty prices, inflation rate will probably go down. We're not going to keep
00:31:26.980 going up at 40% a year on something, you know, so they're really stuck in this. Um, the one thing
00:31:33.220 they're also measuring, and I wish I want people to understand this, what you're measuring is those
00:31:37.100 paper things called dollars don't buy you as much. That's what we're really measuring inevitable
00:31:42.040 consequence. When you produce a lot of something, usually the price goes down. So we produced,
00:31:47.400 you know, hundreds of billions of dollars. No wonder the value of them, the purchasing power
00:31:53.360 went down and that's what's happened. So their money doesn't buy as much. And, uh, you know,
00:31:59.460 we were chatting, uh, before where I'm just saying, it's really interesting revelation for
00:32:03.880 people that we say, Hey, the Canadian dollar is 78 cents against the U S dollar. I'm going,
00:32:10.120 who cares? I don't eat U S dollars. I don't live in a U S dollar. I that's not the relevant
00:32:16.240 measure of your currency. It's what it can buy. And we know it's going to buy a heck of a lot less
00:32:21.740 food coming up in the next year. You know, it's a, you know, if you're wanting to buy lumber
00:32:25.880 for a deck, you know, you're building whatever it is, it doesn't buy as much stuff. And so if
00:32:32.540 you're just at that 200, you know, like you're breaking even, and that's a significant number
00:32:36.700 when someone says I'm within, you know, inflation rates at 6%, keep in mind what that actually means
00:32:42.040 to people. It means if you're the average Canadian, you probably have to spend about $4,000 more
00:32:48.840 for the same stuff you bought a year ago. If that keeps going at that, say 6% rate.
00:32:54.240 And then wait a second, that's after tax dollars. So I got to make like 5,500 bucks,
00:33:01.600 pay 1,500 in income tax. Oh, now I've got that 4,000 left over. That's the challenge.
00:33:07.020 And there's no easy way other easy. There's no way out. Actually people's lifestyles are going to
00:33:11.520 change when you have extra money, you know, so you're an investor. My advice has been since February,
00:33:17.940 2020 by commodities, by stuff. Why? Because, and you can see, it's been a great call, by the way.
00:33:25.300 It's just, that's the way it is. Because it's the stuff that's getting, compared to our dollars,
00:33:31.300 getting worth more and more and more. And I still believe that. I'm still a big fan of oil
00:33:36.620 as an investment, Canadian oil, because we still undervalue it. But it's not just that. If we're
00:33:41.520 going to do the EV revolution, and I believe we are politically, well, you need a lot more copper.
00:33:46.440 I mean, we're not in the ballpark of, and I saw the Globe and Mail just put in a article a day or
00:33:51.660 two ago, and I was laughing. I said, I've been talking about this for two years. Where's your
00:33:55.320 lithium? Where's your cobalt? Where's your copper? Where's your nickel? You know, that's how you get
00:34:00.920 electric vehicles. You need lithium for batteries, you know, or wind turbines. We're not,
00:34:05.940 we're not even in the ballpark of discussing, how do you increase the production? How do we obtain
00:34:11.340 those minerals and metals? And yeah, it's, so I still like the switch into those material things
00:34:18.860 to protect my purchasing power of the dollar. And I'll give you one last example, just to,
00:34:24.320 I'm not, I don't want to confuse people. Let's say you were lucky to have $10,000 and you had it
00:34:28.980 two years ago. Would you rather have 10,000 worth of oil starting two years ago, or 10,000 worth of
00:34:33.200 dollars start two years ago, be way better ahead with oil. And yeah, absolutely. And I mean,
00:34:40.620 to your point, you know, you're, you're making a salary and you know, you don't get a raise
00:34:44.780 necessarily every year. And all of a sudden your salary last year is, is worth, to your point,
00:34:49.400 $15,000 less or $12,000 less because of the cost of living increases and taxes. And there is a great
00:34:55.900 irony, Michael, in the fact that we have a political class and an environmentalist class, uh, that,
00:35:01.720 that, that, that sits in rails against energy and oil, Canadian oil. Um, and yet when the oil price
00:35:06.780 goes up, you know, Justin Trudeau benefits because he gets more revenue and, uh, you know, we have
00:35:10.980 Alberta balancing its budgets because, because of that. So, uh, you know, that, that, that, that,
00:35:15.960 the, the, the rising commodity prices, uh, does help the government helps investors as well. And,
00:35:21.280 and just a final point, you know, the environmentalist movement doesn't like Canadian oil sands.
00:35:25.760 What, what do they think about all the mining of all the chemicals that you just mentioned that are
00:35:28.920 necessary to support their, you know, the worshiped, uh, electric vehicles and wind turbines is
00:35:34.720 something that they never, never seem to want to talk about or address, but it's, it's an obvious
00:35:38.740 contradiction and a bit of a hypocrisy from my perspective. And a fundamental contradiction.
00:35:43.040 I agree with you. And I've said, why is it so difficult for people who support renewable energy,
00:35:46.880 have a great concern on climate change? Fair enough. Why is it so difficult for them to acknowledge
00:35:51.580 that that means by fact that you need a lot more and these, uh, raw materials to actually produce
00:35:58.380 that? I mean, I have no idea why they cannot bring themselves. And that's why we've had, come on,
00:36:02.920 we've been talking, uh, climate change 20 years saying renewable weather more 20 plus,
00:36:07.540 and we still don't have any plan whatsoever to actually get it done. That's like the guy,
00:36:12.180 you know, who says, I'm building a mansion. I'm building a heck of a house. And you keep saying,
00:36:16.320 where were you going to get the materials? Oh, well, I'm building a mansion. I'm building a house.
00:36:21.220 You know, there's never any response to that. And, uh, and that's why the EV revolution continues
00:36:28.000 to be delayed. You know, and if that's your thing, you should be mad about that. If that's your,
00:36:32.240 if climate change is your thing, you should be angry that we have no plans to actually institute
00:36:37.300 it. You know, the odd electric vehicle or giving a $5,000 rebate, isn't the challenge. If you're
00:36:42.000 going to impact climate change, it is this massive amount of raw materials. And where's the energy
00:36:48.280 coming? Oh, fossil fuels. Diesel is going to power those machines to create the wood turbine or to
00:36:54.240 mine. And we just haven't had a mature conversation about it. And we're starting to live the results
00:37:00.240 in higher prices. That's just one example of the lack of mature conversation on that subject.
00:37:06.280 Uh, I couldn't agree more. We produced a mini documentary here at True North, uh, I guess it was
00:37:10.240 two years ago now called Green Hypocrisy. And one of the episodes was dedicated entirely to trying
00:37:14.400 to understand the supply chain and the production of an electric vehicle, where it comes from the
00:37:19.540 mining activities, all that kind of thing. And, and, you know, you look at sort of a, a holistic,
00:37:24.760 uh, carbon footprint of producing one of these things versus the lifetime of, uh, of, of, of a regular
00:37:30.700 vehicle. And, and, and, you know, it's, it's not clear that one of them is, is better or worse from
00:37:35.560 the environment. And, and I'm glad that you brought that up because it's certainly an important
00:37:38.840 conversation, uh, to have. One more thing here, because it's one of my things and I appreciate
00:37:44.100 people have different priorities. Mine is, I don't like starving people to death. And it's something
00:37:48.580 I've been talking about. The simple relationship between the price of natural gas and two of the
00:37:56.260 components that are used for fertilizer, ammonia and urea. So when natural gas prices went through
00:38:01.940 the roof as a direct result of government policy, people didn't make that connection. That meant
00:38:07.860 fertilizer prices went. Fertilizer prices are, are more than double in the last year
00:38:12.820 because the components of, of that tripe nitrogen based, and there's also potash too. Uh, but
00:38:18.080 you know, huge amount of the supply of fertilizer is impacted the price of ammonia. And they, I get
00:38:23.780 the impression they didn't even know that. Like literally it's so superficial that we had leaders
00:38:29.240 putting in policies that guaranteed higher natural gas prices, which we are living right now. And this
00:38:35.100 is well before Ukraine. I mean, we're talking in September, some bright people were writing about
00:38:40.200 the food crisis. I'm talking head of fertilizer plants saying energy prices were so high in September,
00:38:45.020 October, we're cutting back production. Guess what happens? Emerging markets don't use as much
00:38:50.120 fertilizer when you've just doubled the cost. If they can get ahold of some, we are going to have lower
00:38:55.000 crop yields. And literally starvation is in the playbook right now. 193 million people in the world
00:39:01.500 are on the edge of starvation. You know, they're that little precipice we're pushing them over.
00:39:06.940 What killed me is that we have decision makers. I don't think who knew that fundamental,
00:39:12.700 you know, relationship between natural gas prices and, you know, fertilizer, because I can't believe
00:39:18.540 they sat there and said, I got a way to get those fertilizer prices up. We can really crush some people.
00:39:23.020 So yes, we're going to get higher food prices. Diesel increase is also impacting that because that's how you
00:39:28.060 run your equipment on a farm. Yeah, it's a very difficult situation. And it all comes back to that
00:39:33.380 same stuff. Well, it's unconscionable that that's happening. And we do see the odd reports here and
00:39:37.860 there about food shortages that it's hard to wrap your head around that living in North America and
00:39:42.440 sort of land of abundance. But you're absolutely right to point that out. It's incredibly bleak. And
00:39:48.540 again, our leaders need to be held much more accountable for the decisions that they make. Well,
00:39:52.840 Michael Campbell, it's really a pleasure to have you on the show. I was so pleased to be invited to join
00:39:56.440 your podcast. I've been listening to on the radio for a very long time. My dad listens regularly as
00:40:01.820 well. And you've been a staple in our household. So it's an honor for you to join the show. And I
00:40:06.240 hope that you'll come back and we can continue to break down some of these big, big issues. So
00:40:11.760 I really appreciate your time, Michael Campbell. He is the host of Money Talks. And thank you for
00:40:16.560 joining us. Absolutely. My pleasure. These are important subjects. They're impacting us directly to
00:40:21.480 bring to people's attention. Excellent. All right. Thank you so much for joining us. I'm
00:40:25.760 Candice Malcolm and this is The Candice Malcolm Show.