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Global CPI Surge Comparison by Country in the Covid-19 Recovery

Inflation is surging everywhere. Here's a country by country comparison of select countries.
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CPI data from OECD, chart by Mish

CPI data from OECD, chart by Mish

Reader Robert asked for a Covid fiscal and monetary comparison by country and how that tied to inflation. 

The chart shows half of what he asked for. 

That data is from the OECD. If you are interested in other countries, here's the OECD Price Data

Fiscal Stimulus Comparison

Fiscal Stimulus is far more difficult because there are multiple forms. Putting money directly into people's pockets is vastly different than spending money on shots and medical supplies. 

The IMF has Fiscal Stimulus Data for every country but comparisons are not easy.
Let's take a look at Canada vs the US.


Key measures adopted by the Bank of Canada include: i) reducing the overnight policy rate by 150 bps in March 2020 (to 0.25 percent); ii) an extension of the bond buyback program across all maturities; iii) launching the Bankers' Acceptance Purchase Facility; iv) expanding the list of eligible collateral for Term Repo operations to the full range of eligible collateral for the Standing Liquidity Facility (SLF), except the Non-Mortgage Loan Portfolio (NMLP); v) supporting the Canada Mortgage Bond (CMB) market by purchasing CMBs in the secondary market; vii) announcing a temporary increase the amount of NMLP a participant can pledge for the SLF and for those participants that do not use NMLP; vii) announcing an increase in the target for settlement balances to $1,000 million from $250 million; viii) together with central banks from Japan, Euro Area, U.K., U.S., and Switzerland, announcing further enhancing the provision of liquidity via the standing US dollar liquidity swap line arrangements; ix) announcing the launch of the Standing Term Liquidity Facility, under which loans could be provided to eligible financial institutions in need of temporary liquidity support; and x) announcing the Provincial Money Market Purchase (PMMP) program, the Provincial Bond Purchase Program (PBPP), the Commercial Paper Purchase Program (CPPP), the Corporate Bond Purchase Program (CBPP), and the purchase of Government of Canada securities in the secondary market. More details here. Bank of Canada put out "forward guidance", communicating that it would not increase the policy interest rate until the recovery is well on the way and inflation is sustainably at the Bank's target level. 

Other measures in the financial sector include: i) the Office of Superintendent of Financial Institutions (OSFI) lowered the Domestic Stability Buffer for D-SIBs to 1 percent of risk weighted assets (previously 2.25 percent); ii) under the Insured Mortgage Purchase Program, the government will purchase up to $150 billion of insured mortgage pools through the Canada Mortgage and Housing Corporation (CMHC); iii) the federal government announced $95 billion in credit facilities (including $13.8 billion in forgivable loans) to lend to firms under stress, with ; and iv) Farm Credit Canada will receive support from the federal government that will allow for an additional $5.2 billion in lending capacity to producers, agribusinesses, and food processors. 

In October 2020, Bank of Canada rolled back some of the liquidity measures (Bankers' Acceptance Purchase Facility, Canada Mortgage Bond Purchase Program, and Provincial Money Market Purchase Program), deeming them no longer necessary. On March 23, 2021, reflecting the improved general functioning of Canadian financial markets, the Bank of Canada announced discontinuation of the Commercial Paper Purchase Program (CPPP), the Provincial Bond Purchase Program (PBPP), and the Corporate Bond Purchase Program (CBPP), effective in April and late May 2021. Further, the bi-weekly Term Repo operations and the Contingent Term Repo Facility (CTRF) were suspended effective May 10, 2021, and April 6, 2021, respectively. 

In April 2021, the Bank of Canada decided to adjust its purchases of Government of Canada bonds to a target of $3 billion weekly net, down from a minimum of $4 billion per week, in response to the faster-than-expected pace of the recovery. 

Housing prices in Canada have been growing rapidly in 2020 and in 2021. To ensure that households do not borrow in excess of their debt service capacity, OSFI introduced a "mortgage stress test". Effective June 1, 2021, the minimum qualifying rate for uninsured mortgages is the greater of: (i) the mortgage contract rate + 2%, or (ii) 5.25%. Qualifying households then sign mortgage contracts at the rate offered by the lender. 

In addition, on June 17, 2021, OSFI announced that, effective October 31, 2021, the Domestic Stability Buffer would be increased to 2.5 percent of total risk-weighted assets, from its current level of 1 percent.

United States Fiscal 

  • On March 11, 2021, President Biden signed into law the American Rescue Plan, which provides another round of coronavirus relief with an estimated cost of $1,844bn (about 8.8 percent of 2020 GDP). The plan focuses on investing in the public health response and providing time-bound assistance to families, communities and businesses. It extends the unemployment benefits programs (including supplemental unemployment benefits), sends direct stimulus payments of $1,400 to eligible individuals, provides direct aid to state and local government, adds resources to the vaccination program and increases funding for school reopening.On December 28 President Trump signed a US $ 868bn (about 4.1 percent of GDP) coronavirus relief and government funding bill as part of the Consolidated Appropriations Act of 2021. The Act includes enhanced unemployment benefits of US $ 300 weekly federal enhancement in benefits through March 14, direct stimulus payments of $600 to individuals, another round of PPP loans, resources for vaccines, testing and tracing, and funding for K-12 education.On August 8, President Trump issued executive orders mostly to address the expiration of certain Coronavirus reliefs provided by previous legislations. These included i) using $44 billion from the Disaster Relief Fund to provide extra unemployment benefits ; ii) continuing student loan payment relief ; iii) deferring collections of employee social security payroll taxes ; and iv) identifying options to help renters and homeowners avoid evictions and foreclosures.US $ 483 billion Paycheck Protection Program and Health Care Enhancement Act. The legislation includes (i) US $ 321 billion for additional forgivable Small Business Administration loans and guarantees to help small businesses that retain workers; (ii) US $ 62 billion for the Small Business Administration to provide grants and loans to assist small businesses; (iii) US $ 75 billion for hospitals; and (iv) US $ 25 billion for expanding virus testing.An estimated US $ 2.3 trillion (around 11% of GDP) Coronavirus Aid, Relief and Economy Security Act (“CARES Act”). The Act includes (i) US $ 293 billion to provide one-time tax rebates to individuals; (ii) US $ 268 billion to expand unemployment benefits; (iii) US $ 25 billion to provide a food safety net for the most vulnerable; (iv) US $ 510 billion to prevent corporate bankruptcy by providing loans, guarantees, and backstopping Federal Reserve 13(3) program; (v) US $ 349 billion in forgivable Small Business Administration loans and guarantees to help small businesses that retain workers; (vi) US $ 100 billion for hospitals, (vii) US $ 150 billion in transfers to state and local governments and (viii) US $ 49.9 billion for international assistance (including SDR28 billion for the IMF’s New Arrangement to Borrow).US $ 8.3 billion Coronavirus Preparedness and Response Supplemental Appropriations Act and US $ 192 billion t.. They together provide around 1% of GDP for: (i) Virus testing; transfers to states for Medicaid funding; development of vaccines, therapeutics, and diagnostics; support for the Centers for Disease Control and Prevention responses. (ii) 2 weeks paid sick leave; up to 3 months emergency leave for those infected (at 2/3 pay); food assistance; transfers to states to fund expanded unemployment insurance. (iii) Expansion of Small Business Administration loan subsidies. And (iv) US $ 1.25 billion in international assistance. In addition, federal student loan obligations have been suspended for 60 days.

US Monetary 

  • Federal funds rate were lowered by 150bp in March to 0-0.25bp. Purchase of Treasury and agency securities in the amount as needed. Expanded overnight and term repos. Lowered cost of discount window lending. Reduced existing cost of swap lines with major central banks and extended the maturity of FX operations; broadened U.S. dollar swap lines to more central banks; offered temporary repo facility for foreign and international monetary authorities.Federal Reserve also introduced facilities to support the flow of credit, in some cases backed by the Treasury using funds appropriated under the CARES Act. The facilities are: (i) Commercial Paper Funding Facility to facilitate the issuance of commercial paper by companies and municipal issuers; (ii) Primary Dealer Credit Facility to provide financing to the Fed’s 24 primary dealers collateralized by a wide range of investment grade securities; (iii) Money Market Mutual Fund Liquidity Facility (MMLF) to provide loans to depository institutions to purchase assets from prime money market funds (covering highly rated asset backed commercial paper and municipal debt); (iv) Primary Market Corporate Credit Facility to purchase new bonds and loans from companies; (v) Secondary Market Corporate Credit Facility to provide liquidity for outstanding corporate bonds; (vi) Term Asset-Backed Securities Loan Facility to enable the issuance of asset-backed securities backed by student loans, auto loans, credit-card loans, loans guaranteed by the Small Business Administration, and certain other assets; (vii) Paycheck Protection Program Liquidity Facility (PPPLF) to provide liquidity to financial institutions that originate loans under the Small Business Administration’s Paycheck Protection Program (PPP) which provides a direct incentive to small businesses to keep their workers on the payroll; (viii) Main Street Lending Program to purchase new or expanded loans to small and mid-sized businesses; and (ix) Municipal Liquidity Facility to purchases short term notes directly from state and eligible local governments.Supervisory action. Federal banking supervisors encouraged depository institutions to use their capital and liquidity buffers to lend, to work constructively with borrowers affected by COVID-19, and indicated COVID-19 related loan modifications would not be classified as troubled debt restructurings. Holdings of U.S. Treasury Securities and deposits at the Federal Reserve Banks could be temporarily excluded from the calculation of the supplementary leverage ratio for holding companies. Other actions include offering regulatory reporting relief and adjusting supervisory approach to temporarily reduce scope and frequency of examinations and give additional time to resolve non-critical, existing supervisory findings. Regulatory action. Lower the community bank leverage ratio to 8 percent. Provide extension transition for the Current Expected Credit Loss accounting standard. PPP covered loans will receive a zero percent risk weight, and assets acquired and subsequently pledged as collateral to the MMLF and PPPLF facilities will not lead to additional regulatory capital requirements. Allow early adoption of "the standardized approach for measuring counterparty credit risk". And there will be a gradual phase-in of restrictions on distributions when a firm's capital buffer declines. Fannie Mae and Freddie Mac have announced assistance to borrowers, including providing mortgage forbearance for 12 months and waiving related late fees, suspending reporting to credit bureaus of delinquency related to the forbearance, suspending foreclosure sales and evictions of borrowers for 60 days, and offering loan modification options.

Data Analysis 

On May 20, 2020 the IMF wrote Tracking the $9 Trillion Global Fiscal Support to Fight COVID-19

Note the date. That was $9 trillion in spent in the first few months alone.  

On March 10, 2021 Business Insider wrote The $5 trillion in pandemic-era stimulus is more than triple Great Recession-era aid — and suggests a permanent shift in the way Congress spends.

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That's $5 trillion in the US alone. 

But it was the direct helicopter drop money coupled with eviction moratoriums that fueled inflation the most. I believe that was about $3.2 trillion:  Checks for Individuals · $1,200 in April 2020, $600 in December 2020/January 2021, $1,400 in March 2021.

But that does not count money spent that should have gone to rent payment. 

Fiscal Stimulus as Percent of GDP

Chart of fiscal stimulus courtesy of Statista 

Chart of fiscal stimulus courtesy of Statista 

Statista provides COVID-19 fiscal stimulus in G20 countries as of May 2021, as a share of GDP

Japan allegedly spent 53% of GDP on stimulus but its CPI only rose from -1.2% to +0.80%. 

Statista does not break out genuine helicopter drop money from medical spending. 

Hopefully you see the problem with summarizing all of this in a meaningful way. 

US CPI Up Most in 40 Years

For more on the CPI, please see CPI Jumps Most Since February 1982, Up at Least 0.5% 9 Out of Eleven Months

Alleged "Benefits of Running the Economy Hot"

Meanwhile, Charles Evans, president and chief executive officer of the Chicago Fed wants to run the economy hot.

For discussion, please see Chicago Fed President Praises the "Benefits of Running the Economy Hot"

This post originated on MishTalk.Com.

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