Last week when I was at the grocery store it was shocking to realize just how much food prices have risen over the last year. It’s insidious, and hard to notice until the final bill tallies at the checkout – a few percentage points here, deceptive product “shrinkage” that leads to less of an item for the same price, and every dollar just buying less and less each trip. It’s one of the most undeniable effects of large economic forces on the everyday lives of people, and for many Canadians, it’s causing pressures that are hard to endure.
Food insecurity due to rising prices is rapidly increasing and expected to get even worse in 2022. If we’re to believe government statistics, which are well known to manipulate data to understate consumer inflation, food prices in Canada rose 5% in 2021, and will see another increase of 7% in 2022, for an average predicted increase of almost $1000 next per family.
But the reality is, I paid almost $9 for a package of bell peppers, and global estimates tracking food commodity prices found a leap of 28% last year – which seems much more in line with what we actually experience at the grocery store. The government’s statistics don’t even begin to tell the real story of just how much expensive life is getting, especially factoring in the ridiculous 30%+ increase in house prices, even in what were once less desirable markets, and which are controversially left out of the Consumer Price Index.
With just the very basics of survival in our world – food and shelter – increasing by nearly 30% in a single year, it seems like ensuring wages keep pace with prices should be a top priority. But it isn’t, and decades of statistics prove that real wages, or wage buying power adjusted for inflation, have stagnated since the 1980’s, meaning that people are functionally earning less every year, even with modest raises.
Bear in mind that these “inflation-adjusted” real wages don’t take into account housing costs and are based on the same flawed data that claims our food prices rose 5% last year, when the commodities behind them increased 28%. In reality, people are taking massive, involuntary pay cuts each year, which explains why half of millennials – the oldest of whom are now over 40 – think home ownership, a basic part of adulthood accessible on a single family income for previous generations, is a “pipe dream”.
These are economic forces that erode our society, reduce the ability of hard-working people to start families or retire, and are particularly disturbing in light of the massive growth in labour productivity that has coincided with wage stagnation. Not to mention Canada’s billionaires increasing their wealth by $78 billion during the pandemic and it becoming increasingly unlikely for new generations to improve on the economic circumstances of their parents.
“Inflation makes the wealthiest people richer and the masses poorer.”
– Captain James Cook
As a society, we’re heading for a very bad place. There is no indication that younger generations are going to see any real improvements in their ability to own a home, afford children or obtain anything even close to the lifestyle that people used to take as a natural outcome of following the rules, like getting a degree, working hard, and being responsible with credit.
When a system stops working for people, with no sign that people in power are willing to address problems honestly, they start looking for alternatives. This is what first led me to Bitcoin six years ago – for the first time, I saw a system where all-powerful central banks weren’t in control of the money supply – instead, a transparent and immutable algorithm, visible to all, governed a limited supply of currency that would never increase.
Alan Greenspan once said that; “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.”
Bitcoin, with its programmed scarcity, is a technologically advanced “digital gold”, just as the difficulty of mining physical gold has always been a limitation on its supply. Its function as an effective store of value since the Bitcoin network’s founding in 2009 by Satoshi Nakamoto, who issued a famous warning in one of his board posts:
We’re living in one of those breaches of trust right now, with government reported inflation bearing no resemblance to our lived experiences, and the Bank of Canada’s $2 billion a week of new money stimulus each week in 2021 – which, relative to our economic size, outstripped the US Federal Reserve’s far more public and criticized quantitative easing over much of the same period.
How long will it be until people have had enough? If I was in power, I’d be highly concerned about a next frustrated generation of young people saddled with an unpayable debt load of student loans, unable to afford the families that support social and economic stability due to wage erosion, and what this would mean for the policy makers who allowed this situation to decay while the very wealthy benefited at the expense of everyone else.
Personally, I believe that a new system that embeds principles of sound money and decentralized control from the beginning is the solution, and even investment in Bitcoin by the most entrenched interests in our current economy can’t shift the policy of the network to create, with the stroke of a keyboard, brand new coins that erode the value of those who chose to save.
Bitcoin may be volatile – we’re currently starting to emerge from a fear-fueled selloff based on factors like a wave of declines in overall technology stocks and misplaced concerns that central banks will take meaningful action against inflation – but what matters to me is that at a foundational level, this is a currency I can trust.
There will only ever be 21 million coins – and as more people wake up to the ever-worsening economic game of inflationary catch up we’re being forced to play, this is a system for the people that I believe will win.