As with alcohol, the effects of monetary expansion are initially pleasant, if not exhilarating. Economy and finance are enjoying their new cocktail together … until inflation kicks in.
At first, the party’s hosts (the financial authorities) seek to deny the existence of this happiness disruptor. Unfortunately, the negative presence of the agitator causes the departure of several guests (companies decide to slow down production) and the party quickly loses its luster (the economy slows down).
Instead of managing the source of disruption by quickly shutting down the bar (halting monetary expansion), the event organizers are instead hoping that the dying down of the party will make the troublemaker leave on his own. Since no one dares to confront the unpleasant guest or simply shut down the liquor flow, he then continues to inflict his inflationary annoyances like a plague, and even ends up starting fights with broken bottles.
Things end up taking an unfortunate turn: The disruptor is still there, well installed and more agitated than ever, while the party has been over for a long time …
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This information has been prepared by Pascal Charpentier who is a Portfolio Manager for iA Private Wealth Inc. Opinions expressed in this article are those of the Portfolio Manager only and do not necessarily reflect those of iA Private Wealth Inc. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.