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Canadian Dollar Reaches Parity with US$
boxlight writes in to mark the occasion when the Canadian dollar hit parity with the US dollar for the first time in 31 years. The article notes that Canada has run a budget surplus in each of the last 10 years. "This is actually bad for the profits of Canadian corporations that sell their products to the US for US dollars (Canada sells far more to the US that the US sells to Canada); but it means us Canucks will get cheaper Macs as the Canadian prices get closer to US prices with every new release."
Interestingly enough, I listened to an industry expert on the radio who stated that the high Canadian dollar was not the result of the stronger Canadian economy, but rather a weakening American economy. I guess those who are bailing from the greenback are viewing Canada in a different light...
At present it's just below parity (0.9986), but the expectation is for the Canadian dollar to exceed the US dollar in the near future.
The problem is we have no native industry for the vast majority of things Americans desire. We also are a net importer of food and energy.
Someday, countries like Canada with lots of wheat will want something besides debt instruments in exchange for their goods. So too will countries like Saudi Arabia want something of tangible value in exchange for their oil.
Rapidly rising prices of foreign goods may someday bring back American industry, but that is a generation away. We have too few engineers and no manufacturing infrastructure. We will have to train a whole new class of workers and build many new factories. This doesn't happen overnight.
I don't read or respond to AC posts
I still want to know why all the books in the book store, and magazines, have the US price at 2/3 of the Canadian price, when the exchange rate hasn't been that bad in years.
Anthropic principle: We see the universe the way it is because if it were different we would not be here to see it.
Another way of looking at this is that the US dollar is in freefall against the Euro and other major currencies. The shift between the US and Canadian dollars reflects this new reality. That said, I suspect Forex traders are caught up in the euphoria of parity. The Canadian dollar might well dip significantly below $1 American again as the rush of breathless media attention dries up and currency traders take their profits and run. This certainly isn't good news for Canadian manufacturers - I run a little electronics company that sells 90% of our goods in the USA. We have raised some prices by as much as 30% over the past five years, just to maintain margins. However, our customers don't necessarily see it that way - they think we're getting greedy. To keep things from getting out of hand, we've moved some production to China and started to source North American components in the USA, rather than dealing with Canadian distributors. That's not good news for our economy.
Primary resources have been our #1 industry (Oil, Wood, uranium etc..). The increase in dollar values hurt manufacturing most as many of the primary resources we export are constantly in high demand and will not diminish in a linear relationship to price. It's a toss up at how the increased dollar will effect us. It may not be negative uniformly. It is detrimental to the manufacturing industry but that industry has always been secondary and heavily concentrated in Ontario. It might diminish prosperity in Ontario but it will increase prosperity in the west.
"There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy."
We have too few engineers and no manufacturing infrastructure. We will have to train a whole new class of workers and build many new factories. This doesn't happen overnight.
I think you vastly underestimate the existing base. Part of the reason that there are fewer people in manufacturing in the US is because US manufacturing increased in productivity. People that spent a lifetime as high school grads doing rote tasks were obsoleted by robots. Manual machinists were replaced by fewer people that operate faster and more accurate CNC machines, and those CNC machines get more productive every year.
While China's manufacturing output is huge, $3T+/yr, US manufacturing is still a $1.5 trillion dollar/yr industry.
Consumer Electronics is the one big non-native industry, but they can be made in the US. It's moved out primarily due to cost issues, competitors can make them cheaper, but I doubt that will really come back in significant numbers.
As an Albertan in the middle of Canada's oil country one statistic with regards to the Loonie is how much of our provincial Gov't loses in royalties for a given rise in the Canadian dollar. It is estimated that for every One Cent increase, there is a 100 million decrease in royalties/revenue at the provincial level. Now Alberta faces the Oil Industry to claw back some of that money - a potentially dramatic change in royalty structures - that has CEO's of major oil companies fuming mad that we intend to cut into their bottom line. http://www.cbc.ca/money/story/2007/09/19/royalty-reaxn.html
Not at all !
Goods are allways at higher price in Canada.
Look at cars, even if no border tax exist for foreing company to import car in Canada (or in the USA) all car have better price and better warrenty in the USA than in Canada. Go to jeep.ca or toyota.ca and try to build a car and then compare it with jeep.com ou toyota.com for a 30k car in the USA you will buy 36K in Canada (plus taxes).
Samething for everything from Apple, you got 10% to 30% of foreing charge when you buy in Canada.
And don't try to buy it at Amazon.com, they don't send thing like that in Canada, you must buy at Amazon.ca.
Try this Ipod Nano at future shop 219$ (or BestBuy.ca)
Same Ipod nano at BestBuy.com at 149$
Even if the Can$ is higger thant the US$ price a cheapper in USA, That's before taxes, and the overall business etablishment price is lower in Canada.
Ceci n'est pas une Signature !
Actually the value of the CAD has as much to do with the fact that Canada is an exporting nation as anything else. The CAD hit bottom against the USD in 2002 and has been climbing ever since almost in lock step with the rise in value of the commodities it exports. The continued fall of the USD will likelly push commodities higher and so companies exporting commodities will not feel a great impact. That, in turn, should prompt more foreign investment in comodity producers which (directly and through a knock on effect) will increase the number of Canadian jobs.
To be sure, the impact on the Canadian economy from the downturn in the US housing and car markets is going to cost jobs but that has less to do with the dollar then it does with the weakness in those markets in the US.
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Anybody else think it's ironic that at a time when people are resisting government run health care because of the expense, the Canadians are running a budget surplus — despite have government run health care?
There was a short blurb in the paper the other day about how you could buy an Audi S4 in Great Falls for around $48,000 USD, and here in Calgary the same car will set you back $72,000 CAD. There were a couple other examples (Nissan Murano $35,000 USD vs. $50,000 CAD, BMW something $58,000 USD vs. $68,000 CAD)
you are an idiot.
The European nations went from having currencies which represented the economic power of small countries to one currency that represents the economic power of the entire European union. Of COURSE it's going to become more valuable compared to the US dollar as it is more widely used.
read a book before you embarrass yourself further...
> You seem to think you'll have a choice. No, the EU won't be able to save you if we decide you belong to us.
From the US? Most of you can't even find Canada on a map ... just ask Miss Carolina.
The last Canadian political party to suggest union with the US died a while back ... it ain't gonna happen. More likely is that one or more US States will secede from the union and either petition to join Canada or be independent rather than stay in JebusLand.
Sure, it might be illegal under the US constitution, but so was the suspension of habeus corpus and posse comitas. The precedent has been set, so look forward to at least someof the US splintering off as it continues its economic decline and people vote to bail out of (as opposed to bailing out) the sinking ship.
Kevin Smith on Prince
You think that's bad? It's the exact same thing with cars, too. When you're looking at buying a $49k car (Subaru WRX STI) and you see it's only $33k in USA, well, that's just pure bullshit. I have yet to read ANY reasonable explanation for this extreme disparity.
I've been looking at buying a car for months (hoping the price would drop on 2008 models but no they are exactly the same) and I WAS going to just buy it in USA and import it to Canada and save myself $5000+, but Honda has just emailed all their US dealership managers stating that if a buyer does this, the warranty is VOID for the vehicle in both US and Canada - your car won't be serviced under warranty even if you drive back down to the US to get it serviced. Obviously they are trying to protect their fucked up excessively-disparate market. Frankly, I don't even want to buy a car at all, now - I'll be paying 30% more than people a mere 20 minute drive from me will be paying for the SAME FUCKING VEHICLE.
On a more fortunate note, Toyota has stated rather loudly that they WILL honor the warranty of a vehicle purchased in the US and imported into Canada. So, obviously I am considering them at this time. Of course that still doesn't make me feel any better about the fucked up price disparity.
You know you are right. The last time this happened was in 1976 - right at the end of a U.S. spending spree called the Vietnam war.
The U.S. borrows to pay for a war, and our currency goes to SH*T.
And now we have tons of middle eastern enemies, just like then, plus we're cresting hubbert's peak. I wonder if we'll have another 1980's stagflation real soon, or if the Feds will be able to keep the ship running smoothly..
We're also going to be selling the T bills we bought to store the Social Security Surplus in in order to pay for retiring Baby Boomers.
What's next? Who knows..
...
It was David Pimental from Cornel and others who first proposed this myth. Its simply not true. In fact the energy return is quite decent.
The thing is that an individual farmer could do quite well running his farm machinery on ethanol that he produces himself. In fact, the average farmer has lots of free time all winter long and could produce all of his required summer fuel and still have lots of time for curling, hunting, fishing and bitching about why there is no money in farming... when in fact there is.
How do I know? I grew up on a farm and brewing and making wine is something I have done since I was in grade 11.
I do know what the input costs are and I can assure you Pimental did not. He made many assumptions that are not supported by facts. Nevertheless one of the things they were doing back then was running coal fired distillation and pushing it past the Aseotrop. To be energy +ve you need high efficiency vacuum distillation.
My point is that its not practical to do this from starch sources which is basically beer making. I think from cellulose it might make sense. The cellulose costs are going to be low, but we are still talking about 1 tonne of dry plant matter is equivalent to 2 barrels of oil once we do the conversion. With oil under $200 per barrel I do not think the economics look good. Next we do not have the technology in place yet.
The best ideas seem to involve enzymes derived from Trichoderma reeshi. This is a fungus isolated in Gaum during the 1940's. It is used for Stone Washer blue jeans since it does digest cellulose and it loves it in fact. The thing is most of the plant matter we have as feedstocks are not pure cellulose. They also contain pentosans and liganins and T. reeshi doesn't like these. There are other fungii which do like them. I work with some of these but not in the area of fuel production.
My point is that we are facing a bad bad problem and we do not at this time have in place technology which will do for us what we need. I for instance will not invest in an ethanol plant other than as a trade into the hype - and I have made quite a lot of money doing this.
Russia is the number 3 (or so) oil exporter in the world. As oil reserves go down and the price rises, Russia will have no problem getting what it needs or wants. A very different scenario will play out in the US.
That is all.
Actually, oil has approached a level in cost where drilling the Gulf of Mexico is now profitable. Chevron holds a lot of drilling rights to this area.
This reserve is thought to be the largest oil reserve in the world. It's the USA's wild card. These reserves have been known about for years but it wasn't profitable to drill them. Now they're finding there is more there than they ever thought.
Expect to be able to walk to Cuba on the tops of derricks in a few years.
"If you are a dreamer, a wisher, a liar, A hope-er, a pray-er, a magic bean buyer
Rumours of its demise are not terribly well substantiated at this point. But, hey, why let that stop a good rant? Maybe the world doesn't end, much like it didn't end due to Y2K. No matter what peakers like Kunstler predicted:
"we are in for a serious event. Systems will fail, crash, seize up, cease to function....Y2K is real. Y2K is going to rock our world."
So forgive me if I'm a little skeptical of your more apocalyptic assertions. Especially when the US could be 90% of the way towards being an oil exporter by simply reducing petrol consumption to European levels.
http://www.oanda.com/convert/fxhistory
At 5 year intervals, Jan 1, beginning 1976. US$1 =
British Pounds
1976 = 0.4943
1981 = 0.4186
1986 = 0.6923
1991 = 0.5165
1996 = 0.6445
2001 = 0.6696
2006 = 0.5781
curr = 0.4980
Canadian dollars
1976 = 1.0168
1981 = 1.1945
1986 = 1.3985
1991 = 1.1604
1996 = 1.3645
2001 = 1.4988
2006 = 1.1641
curr = 1.0134
Japanese Yen
1976 = 305
1981 = 203
1986 = 200
1991 = 135
1996 = 103
2001 = 114
2006 = 117
curr = 116
German Mark / Euro (1 Euro = 1.95583 Marks)
1976 = 1.3398 Euro equiv (2.6205 German Marks)
1981 = 1.0021 Euro equiv (1.9600 German Marks)
1986 = 1.2510 Euro equiv (2.4468 German Marks)
1991 = 0.7627 Euro equiv (1.4917 German Marks, post-reunification)
1996 = 0.7348 Euro equiv (1.4371 German Marks)
2001 = 1.0620 Euros (2.0771 German Marks)
2006 = 0.8446 Euros
curr = 0.7100 Euros
So if you look at just the last 6 years, yes it looks like the US dollar is crashing. But compare over 30 years and you see that the British Pound and Canadian dollar first dropped against the US dollar, and are now returning to levels seen in 1976.
The Yen rose during the 1980s when Japan became an economic powerhouse, and has held pretty steady during the dollar's recent drop. In other words, the Yen is dropping right along with the dollar relative to the Euro, Pound, and CAD.
The German Mark and Euro have been up and down in 30 years, but the current rate is really not that far off from historical rates against the Mark.
Claiming that the US dollar is dropping into obscurity like some have been saying is like looking at a sports team's last 6 games and seeing that they're 0-6 and claiming they're dying; all the while ignoring that in the previous 24 games they were 15-9. Yes there are serious problems, but it's probably better characterized as "coming back down to earth" rather than crashing.
As for your stagflation fears, there has never been much evidence that small deficits (as a percentage of GDP) have a large effect on inflation (though I admit, these kind of things are very hard to test empirically). Moreover, unemployment has been persistently low for the last decade; I do not see how that will change in the near term without a rather severe supply shock. Of course, I am assuming that we have a rational Fed, something the last couple of days has shaken my faith in.
The real reason Canada's currency has achieved parity is the same reason as 1976; Canada produces a massive amount of commodities. In 76 Canada rode a speculative run on copper, and oil prices were still very high. Today, oil is at an all-time high, and commodities have surged.
Wake me up when we achieve parity with the Yen.
And here I thought that they dropped rates so low in order to decrease unemployment and shake off a recession. Silly me.