The Candice Malcolm Show - How to cope with the coming recession in Canada (Ft. Michael Campbell)

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 0.96

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 0.77

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.

The Candice Malcolm Show - May 18, 2022

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

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