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The economy is being held together with financial duct tape right now, but people are starting to worry about inflation.

Inflation fears arise from massive government spending to support the economy through the pandemic. Inflation would be a risk if the economy rebounded strongly while all that government money was sloshing around the financial system.

A more likely outcome is a slow recovery where inflation remains subdued. Think of how modestly the economy has performed over the past decade, and then dial back growth a little further.

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Inflation is largely unknown to anyone who wasn’t an adult during the 1980s and early 1990s. The inflation rate hit low double digits in the early 1980s and then topped 6 per cent in the early 1990s. Since 1995, the inflation rate has averaged 1.8 per cent.

Concern about inflation last peaked in 2008-09, as governments responded to the global financial crisis by pouring money into the economy. But inflation never became an issue. If anything, economic growth disappointed in the past decade.

Demographics help explain slower growth both in the past decade and the one ahead. Aging populations aren’t as economic productive, and that keeps a lid on both economic growth and inflation. In the pandemic, we have other factors working against inflation as well.

The unemployment rate in Canada soared to 13 per cent in April and would have been 17.8 per cent if we counted people who worked recently and want to work, but were not actively seeking a job. Wage increases are usually a big component of inflation – but how can wages surge when there’s so much unemployment?

Most of the people who lost jobs as a result of the pandemic have been temporarily laid off. But the plan to gradually phase out physical distancing suggests people won’t be called back to work en masse. Expect some to never return as their employers look to cut costs.

Have you noticed price hikes in stores? “ … No one should make the mistake of extrapolating price increases for a few items, such as toilet paper or sanitary wipes, for broader inflation,” investing blogger and money manager Barry Ritholtz wrote in a column for Bloomberg News.

Mr. Ritholtz also addresses concerns about government spending. It “doesn't make up for the earnings power that's been destroyed,” he writes.

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In theory, inflation is a worry when governments pour money into the economy like they’re doing now. In the COVID-19 world, inflation is like your family car. For the time being, it’s parked.

Subscribe to Carrick on Money

Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.

Rob’s personal finance reading list…

Exit from password hell

Consumer Reports looks at password managers, an app the securely holds all your online passwords so you don’t have to remember each one. The full report is available to subscribers only, but there’s enough free content to make this a worthwhile read.

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The post-pandemic future of travel

Budget travel blogger Barry Choi makes predictions about Airbnb, airport lineups (they’ll be worse – kill me now) and seat sales.

Nightmare in Bedford Mills

An account of a Toronto couple’s decision to buy a dream home in a small eastern Ontario town. Many things go wrong. A must read for anyone who has ever contemplated doing this.

The CRA never texts

How not to get sucked in by scammers who use threats and intimidation to scare you into paying a bill. CRA does not send you text messages, and it does not send e-mails asking you to divulge personal information.

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Ask Rob

Q: Regarding the one-time, tax-free $300 federal government payment to seniors eligible to collect Old Age Security, can you qualify if you have chosen to defer OAS past age 65 in order to receive a higher monthly amount?

A: Here’s the official word from the federal government:

“The Old Age Security (OAS) pension is paid to all persons aged 65 or over who meet the residence requirements. In order to receive the pension, a senior must have applied to receive it, or been automatically enrolled for the pension at age 65. Once approved, a person’s pension entitlement cannot increase by additional periods of residence or by the deferral provisions of the Old Age Security Act.

As a result, when an individual wishes to defer receipt of their OAS pension in exchange for a higher monthly amount, they delay their benefit application until they wish to begin their payments. This means that these individuals are not yet eligible to receive the pension, and will therefore not be eligible to receive this one-time tax-free payment.”

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.

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Today’s financial tool

Best budget and personal finance apps, as chosen by the Savvy New Canadians blog

In case you missed these Globe and Mail personal finance-related stories

  • Parents in financial limbo after spending thousands on sports, arts and summer camps derailed by COVID-19
  • As the pandemic makes delivery work more dangerous, should you tip more?
  • Wondering why the stock markets are rising when the economy is tanking? (for Globe Unlimited subscribers)

More Carrick and money coverage

For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group. Send us an e-mail to let us know what you think of my newsletter. Want to subscribe? Click here to sign up.

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