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Trusted Regina Financial Management Consultant John Barabe Discusses Inflation and Investments

John Barabe is a Trusted Regina Financial Management Consultant and he has an unwavering commitment to quality and service which has enabled him to build and retain a successful practice in Regina. He and his team of Regina financial professionals and support staff believe that planning with honesty and integrity are cornerstones to improving their clients' quality of life. He applies his knowledge to help clients make the right choices when considering all the product and service options that exist in today's marketplace. In his latest Trusted Regina financial expert article, he shares information on investment strategies and how to keep up with the pace of inflation. 

Do your Investments Keep Up with The Pace Of Inflation?


If you need $1000 per month for expenses and you have $1,000,000 in deposit accounts (for example a guaranteed investment certificate, term deposit, or savings account) earning 1.2% you are set, right? Well, if inflation is 2% the expenses will increase from $12,000 to $14,628 in 10 years and to $17,831 in 20 years. Your investment falls short of the income you need so you end up spending your original capital to make up the shortfall. 


What you need is a return that will allow you to draw an income that keeps up with the cost of living.  


Let’s simplify further with an example of the poor current deposit account returns:


In 1991 $150,000 invested in one year GIC’s earned enough to purchase a new Ford.

In 2011 $150,000 invested in 1 year GIC’s earned enough to purchase the same 1991 Ford.



Despite record low interest rates, you still need an income from your investments. If your investment return is coming from a guaranteed deposit account currently, you may not even be keeping up with inflation.  

What if there were a way to get a better return, a reasonable return, and still remain low risk? 

Unfortunately many people that need income for retirement or even just an investment return that is reasonable are not getting this direction.  I will provide you with access to unique methods to reduce risk, while allowing you the returns you deserve with the objective of maximizing your returns. I want to assure you there are investment strategies that can outpace inflation and provide you with reasonable retirement income. 


I thank you for reading this article and would like to offer you a value-added service for your time. I will make myself available to act as a sounding board. Please understand, you do not need to become a client to take advantage of this service. The reason I do this is because I became a financial advisor to help people make informed choices with their financial future. It’s very gratifying. One of two things typically occurs when going through this process; either I validate for you that your current approach is fundamentally solid, or I reveal a few minor flaws that you might want to consider adjusting.  As you know, minor adjustments can often lead to major improvements down the road. Either way, I will make myself available and ensure that this is a great investment of your time.


John Barabe, Madison Schenher and team.


John Barabe  is a Trusted Regina Financial Management Consultant




Trusted Regina Financial Advisor John Barabe explains Inflation.

John Barabe has an unwavering commitment to quality and service which has enabled him to build and retain a successful practice in Regina. He and his team believe that planning with honesty and integrity are cornerstones to improving clients' quality of life. He applies his knowledge to help clients make the right choices when considering all the product and service options that exist in today's marketplace.  In this article he gives us a little perspective and insight while ansewring the question does inflation matter.

Does INFLATION matter?


Let’s simplify inflation with a silly story: The U.S. government just printed and deposited 1 billion dollars into everyone’s chequing account. The first thing that happened is a 5-mile-long line up at the Ferrari dealer. But, will the Ferrari dealers sell their expensive cars at yesterdays price? Not a chance, because currency is now nearly worthless. 

 Above sports cars, there are exotic sports cars—and then there’s the LaFerrari! Base model starting at $1,420,112 U.S.

The purpose of my above silly story was to emphasize that printing does cause inflation. Further to that point, 78% of all money the U.S. has ever created was printed since January 2021. Please note that the M2 money supply chart was recently discontinued. I wonder why? What is the value of anything that can be produced for nothing?


Okay, enough theory. Commodities broke out to the upside (by Michael Oliver’s criteria) in October and is currently up ~28% since that breakout. He is predicting a ~50% climb in less than a year and we are on pace for his prediction to play out. 

As commodities are the basis for everything we consume, does it not make sense that costs (actual inflation) will also be increasing by about this amount? 

We have known for a long time that Statistics Canada and BLS (U.S. Bureau of Labor Statistics) understate inflation. Check out shadowstats.com (see below chart) and the Chapwood index for carefully calculated inflation (both of these independent sources calculate inflation amounts and their results roughly confirm each other, and dispel the official calculation).

Understating inflation is done to save the government billions a year. Think about union negotiations when the official inflation is only 1%. This creates unfortunate negative affects, the payout of social programs and pension plans to name a few. Over time we end up with way less income than “actual” inflation would dictate we should have. 

What if inflation, real inflation, were to be 50% from October 2020 to October 2021 (matching the increase in commodities as discussed above)? If this were the case, I would guess that Stats Canada and the BLS would have to increase their official numbers higher, much higher. After all, there is a limit to how far you can pull the wool over people’s eyes.

If “official” inflation were to become 12% (still way below the above “potential” actual) a 5-year GIC (guaranteed investment certificate) becomes ~16% and mortgage rates would jump to ~20% (there is a profit spread for banks). A $1,905 a month payment ($500,000 house with a high ratio $450,000 mortgage at 2%) would become $7,267 a month

The likely outcome for many homes would be that the bank now owns them as this payment is much too high. The bank would then attempt to sell it to recapture the debt lent out.

House prices are dictated by the affordability of the monthly payment. For example, $7,267 is not affordable. Assuming $1,900 is still affordable the $500,000 house would have to fall in price (using the same high ratio 90% mortgage - now $120,000) to $135,000. That is a drop in value of -73% or a $365,000 loss. 

Our money forms the banks reserve (bank deposits are unsecured loans to the bank/credit union/trust company). It does not matter if we deposit to savings, chequing or locked in for a time period. From our deposits, the banks loan money out at a huge leverage. I was shocked when I looked up the reserve that Canadian banks set aside. It seemed as though it was a secret (finding specifics was nearly impossible). The reserve is apparently 0.62% on average for Canadian banks. Less than one percent. Let’s make it 1% to simplify how leveraged the banks are. 

For every $100 in deposits, they loan out $100/0.01 = $10,000. All the banks need to lose is $100 of their $10,000 block of debt to be bankrupt. Considering the above losses with only a 12% inflation rate, I believe that is a real risk. 

In addition to the above, the actual amount that CDIC (Canada Deposit Insurance Corp.) could cover in a system wide banking collapse (which would likely be the result of 12% inflation) is $6737 per $100,000. It is just not designed for a system wide collapse. I do believe the money needed will be printed, but is that not what caused the problem in the first place? I believe more printing will not solve the problem, but will make the problem worse.

Also think about the effect of your money sitting in the bank. If inflation is way higher than the understated official number, deposits are not being compensated. After tax and inflation, what will you gain? Or will you suffer a guaranteed loss? 

Why is it that no one is telling you about this but me? Why is this not front-page news? Should GIC’s still be rated low risk?

So, does inflation matter? I will let you decide. There is more to this story, much more. As this plays out, we will be here every step of the way. Our objective is to guide each of you to the best of our ability and do everything we can to protect and grow your wealth. This is evident with the strategies and investments that are recommended (and more than likely implemented) already.


If you have any questions, or just want to catch up, please feel free to touch base by email, phone or with an in-office appointment. 

John Barabe and his team carefully consider your needs, goals and dreams in order to implement a well-constructed financial strategy, so that you can have peace of mind about your hard-earned money and financial future. They can simplify your life by addressing your complete financial well-being, which encompasses everything from:

John Barabe is a Trusted Financial Advisor



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