Canada Holding Steady as US Inflation Spirals: The Crisis Crossing the Border

Hello everyone, welcome back.I hope your day is starting off just fantastic.I want to talk to you about an economic story today.The headline here on Bloomberg on May 13th, bond investors flee as inflation worries send yields to 2026 high.Oh boy, I said the word bonds and yield in the same sentence.I know it's already boring.

Well, you may have seen this headline, the latest release in the United States, wholesale inflation jumped 6 % in April on an annual basis, the biggest increase since 2022.you can be sure that they're going to pass on those costs to us and regular inflation, the one that affects us, is going to start following that number.And in fact, U .S.inflation, regular inflation, rose to 3 .8 % in April, eroding Americans' paychecks.See, you read these headlines and most people are already confused.

Well, inflation is 3 .8 % for us, but there's wholesale inflation that's 6%.And that's why most people just check out.And when there's a headline that says investors are fleeing because bond yields are going up, who wants to read that?Well, let me explain why this is so important.because this is the granddaddy of all numbers.If there's one economic number that's worth looking at, it's the U .

S.30 -year bond yield.Here's a graph of that yield from 2022 when it stood at 1 .71 % to today where it's popped over 5%.This number incorporates everything.Okay, you can listen to the news on a day -to -day basis, hear the news cycle, read the latest tweets, the latest slogans, those are all noise.This number actually represents the most important thing.

How much interest do investors expect in return for the U .S.to borrow money from them?Let's go back to the graph here and I'm going to compare the United States to Canada.So in 2022 that yield was down at around 1 .8 percent.Flip to a chart of the Canadian 30 -year bond and Canada as well in 2022 was around 1 .8 percent.

The yields were the same in both countries and in the U .continuing to climb now to over 5%. In Canada,In Canada, the situation was a little bit different.Yields climbed quickly to about 20, 23, and then stayed relatively flat at around three, a little over 3%.Still close to the United States, but we have not increased anywhere near as high as the U .S.

yield.Our yield today is around 3 .8%.That means that our government can borrow money at a lower cost.The government has to pay less interest to people that want to buy our bonds.And the other way of looking at that is that investors are not demanding more return to hold Canadian bonds compared to US bonds.For some reason, investors are demanding a higher rate of return, a higher yield, to hold U .

S.investments, to buy U .S.bonds.This trend is not sustainable in the long run.It's important to step back and look at the bigger picture here.

Here's a more long -term graph of the U .S.30 -year bond yield.For most of our lives, all of you that are watching this video, we've lived in an era where this yield has been decreasing.From 1980, where the yield stood at around 12 percent, just a steady decrease.Yes, ups and downs related to different events through these decades, and each one of these ups and downs at the time seemed like a big movement, and it did affect the economy, but generally the trend has been going down.

But now the trend has reversed, and from the low set in 2020, when the yields were down at 1 .3%, you can see that the trend is going up.And you can see these bond trends can persist for decades.If this trend continues to go up for 5, 10, 15, 20, 30 years, the economic reality for new generations is going to be completely different than it was in our lifetimes.We've basically lived through a 40 -year period of prosperity with recessions and problems along the way.the way, but generally decreasing borrowing costs, decreasing interest rates.It's fueled everything for 40 years.

And now we seem to have turned the corner and we're heading in the opposite direction.And that's why headlines like this, wholesale inflation jumps 6 % in April on an annual basis, are so scary.Because everyone knows that that's an inflation number.And when inflation goes up, the central banks have to increase interest rates to fight inflation.In fact, economists are already disappointed with the job that the Federal Reserve in the United States has done so far.As of mid -2026, the Federal Reserve has faced a prolonged failure to return inflation down to its 2 % target.

inflation exceeding this goal for over 50 consecutive months as of late 2025.And that's exactly what investors are fearing that the buying power, the value of the dollar is going down over time because of inflation.So of course, they're going to demand a higher interest rate for making an investment in a long -term US bond.And there's a president in the United States who all of his policies are increasing inflation.import taxes, the war on Iran, everything that he does seems to push prices higher to make inflation go up.And on top of that, the one guy whose job it is to fight inflation in the United States, the chairman of the Federal Reserve, That's the guy that the president keeps berating on Truth Social, calling him an idiot, wanting to fire him, because the president has the opinion that the Federal Reserve should lower interest rates.

Have a listen to an ultra -conservative former chairman and CEO of Goldman Sachs, Lloyd Blankfein, talk about the Federal Reserve.

So that's how we default.We default by inflating the currency and paying dollars back that don't carry the purchasing power that they had when they lent us the money if people start to seedon't If you were lending money to your dissolute brother -in -law, you'd prefer not to lend him anything in the first place.But guess what?You might do it at a very high interest rate, which you probably won't pay anyway.And so that's how the U .

S.defaults, which, by the way, This is not what you asked.One of the reasons, one of the many reasons why you need an independent Federal Reserve is because our creditors are relying on the Federal Reserve to make, to preserve the integrity of the dollars that they lend to us.

It's absolutely critical now for the Federal Reserve in the United States to get inflation under control and for the U .S.government to let them do it.Otherwise, investors will be unwilling to hold U .S.investments for the long term without demanding a higher and higher risk yield.

So in this precarious position, when borrowing costs for the United States, and let's face it, the rest of the world will follow the trend, borrowing costs are going up.You have the President of the United States berating the Chair of the Federal Reserve, possibly influencing him to not keep interest rates high long enough.do his job poorly under constant bombardment by the bombastic buffoon.And now the president has appointed a new federal reserve chairman who agrees with him.Kevin Warsh confirmed new federal chair as inflation kicks higher.complicating the central bank's path.

Warsh seems less concerned about inflation persistence than many current Fed officials.So the president has appointed a guy that's going to do what he wants him to do to maybe lower interest rates, even though we're having skyrocketing inflation.And this is why it's so important.You heard from that Goldman Sachs guy that the federal reservethe Governor of the Bank of Canada, the Governor of the Bank of England, they have to be independent.The government should have no role in influencing them.

And there is one politician in Canada who's been very vocal on how he would deal with the Governor of the Bank of Canada.

I've already announced that I will fire the Governor of the Central Bank.

These are dangerous comments and actions by dangerous politicians.Luckily, We have a prime minister who happens to have been a central banker himself, the governor of the Bank of Canada and the governor of the Bank of England.He understands how the body has to work independently, and he understands monetary policy and fiscal policy.Let me just dumb it down here and talk about bonds without being boring.Bonds are issued all the time.That's how governments borrow money.

They hope investors buy bonds.And the bonds are 5 years, 10 years, 20 years, 30 years.And what happens is there's always this cycle that when a particular bond comes due, when it matures, the government has to pay the money back to the investors.But they don't have the money, so as bonds come mature and they have to pay the investors their principal back, well they issue a new bond to pay for that.And we're in the situation now that as bonds mature and the governments have to pay that principal back, they have to issue new bonds at higher interest rates.So the cost of holding your debt is going up.

And if that trend continues and a large portion of the debt has to be funded with 5, 6, 7, 8 % interest rather than 2, 3, 4 % interest, you could do the numbers and get a headache.You and I, just regular schmoes, we can do the numbers and say, well, that's a big number.But it will translate into a crisis in the future.So I just wanted to present you with this data.I have no idea what's going to happen in the future, whether the trend will continue, whether it will flatten out, whether the United States will use this opportunity to deflate their way out of their debt problem.There's so many scenarios.

But the important thing to understand is at this time, right now, we need serious, smart people in charge.These populist, MAGA -style politicians that use the talking points, I'm going to fire the governor of the Bank of Canada.You need to get interest rates down.You don't know how to do your job.You're just a lightweight idiot.You're a fool.

insults and slogans.This is serious stuff, okay.You need people that understand this stuff.Usually it's done as a central banking group of the G7 countries, coordinated, doing things together.This will affect you and me more than any other economic or political decisions that are made in the long term for us and for our children.And we have to hope that smart people are making the decision.

So Keep that in mind.Leave some comments.Let me know what your point of view on this, whether you have anything to add.I'm interested in reading your comments today.Subscribe to my channel if you're enjoying the content.If you want to support my work on a monthly basis and help me fund this channel, consider becoming a channel member by clicking the join button below.

Have a fantastic rest of your day, all my fellow Canadians, and I'll catch you all on the next one.