I find it amazing to watch the media reaction, as though the dollar is a symbol of national pride. Beaming smiles from the newscasts, "a proud currency", our insecurity on full display, so desperate to be "on par" with the Americans. "How high can it go?", "Loonie on a roll", etc, etc. The dollar's rise is Canada's rise, we are as good as the Americans.
Reading between the lines, "ugly cousin" syndrome aside, I'm not quite as ecstatic about the abrupt rise of the loonie. In a rare move, it would appear Mr. Flaherty isn't all that proud either. The fact of the matter, stability is a pre-requisite for sound economics. The rapid rise has changed the dynamics so fast, that beleaguered industries can't adapt. The manufacturing sector is getting hammered, and no investment in new techonology or productivity can keep pace with a 16% rise in one year. Slow and steady, people can adapt, meteroic, a death sentence.
The illusion of lower prices on imported goods is a longer term reality. Today, I heard a retail representative say that prices wouldn't be lowered, because the price of rent and other fixed costs has increased, all the dollar has done is mitigate any increases- translation, a great time to gouge and maximize profits. Ditto for the auto industry, books.... The savings will not be passed on to the consumer, in the way first blush would suggest, at least not anytime soon.
You know who is ecstatic, downright delirious? American border towns. I can't even describe the shit kicking grin on the auto dealer's face today in Bellingham, Washington. I swear his eyes turned green, so kind he offered to fill out the border papers for the purchase. Take a stroll down to the border, watch the traffic flow, south in the morning, north at night- it tells a story.
I'm not saying the story is entirely negative, but I am decidedly miffed at the loonie hysteria, as though Team Canada is "soaring". The loonie isn't a muscular penis, that tells the world, look at us, pretty impressive isn't it? I just wish we could seperate our national insecurity from economic realities, because the balance sheet is a mixed bag.
Certainly it has both its positives and negatives. Although I should note it is not just the loonie that has done well against the greeback, the Euro also surpassed the 1.40 mark for the first term and the British Pound and Japanese Yen have both gone up against the US dollar. If anything it seems more a case of the US dollar doing poorly than others doing well.
What is ironic is our low point against the US dollar was very close to when the Euro was at its low point.
The speed at which the dollar is moving up has been really tough on companies, all over Canada — especially those exporting their goods to the US.
Experts had predicted we'd reach parity with the US dollar by Christmas -but- we're already there.
It say a lot about how (un)predictable the money market has become...
Well it's better than Chretien's peso!
"Well it's better than Chretien's peso"
Ya, remember that recession, the food lines. LOL.
So nice for our Finance Minister to come out of his hole -- where's Wireton Willie when you need him? -- to try to calm the hysteria and offer advice. Guess he had to scratch the 'Buy Income Trusts, they're safe' line from his script.
Everyone's so hopped up that this is just icing on the cake, our economy's bubbling along.
In fact, this is another boiling point to the pot getting burnt. Quebec and Ontario manufacturers are reeling, and our lumber industry, fresh off of having been forced to take a give-away deal from Harper, is virtually locking the doors.
The strange disconnect between all the shops that can't find workers and now a prescient wave of economic turgidity isn't going to be pretty. That's why my money is on a pretty hardline budget, plenty of giveaway (hence the gov't cuts to wildlife control and refurbishing the coastal air patrol planes, among others) and a putsch for a fall election. Harper won't be able to claim 'economic stewardship as never before!' when the American shoe drops on our glass ankle...
Burlivespipe - The rise in our dollar is a combination of many things and in many ways is more a reflection of bad policy in the US than anything here when you consider the Euro, Yen, and Pound have also all gone up as well against the US dollar. Their trade deficit, deficit, and out of control spending as well as the possible speculation of the real estate bubble bursting is the main thing that has made the US currency less attractive to investors thus causing it to depreciate.
In addition, I am dead set against the government setting monetary policy. This should be done by the Bank of Canada. In my first year economics, it was shown that countries where politicians play a strong role in deciding monetary policy tend to have higher inflation (i.e. Spain pre-Euro) while those that have an independent central bank tend to have low inflation (i.e. Germany pre-Euro). In fact the ECB is more a less of mere copy of the Bundesbank since Germany had by far the most successful monetary policy of the countries that joined the Euro.
Post a Comment