Loonie's rise may give reason to affix it to U.S. buck
By Jason Buckland, Sympatico / MSN Finance
“Business loves stability and we don’t have any right now.” – Rick Jamieson, Canadian businessman, to the Globe and Mail
Yesterday in this space, we opened a hearty debate about what is to be done with the soaring loonie. As the Canadian dollar skyrockets compared to its U.S. counterpart, should we simply hop across the border in search of cheaper retail prices or feel the obligation to spend inside the country, pumping much-needed money into a domestic economy being sapped of millions in tourist cash?
It was a moral question as much as one of opportunity, yet today it’s certainly important to take a look at some of the more vital, long-term consequences of our rising currency.
In what the Bank of Canada called an “unprecedentedly rapid rise,” the loonie has climbed almost 20 per cent from its level in March. Depending on what happens today, the Canadian buck is likely to close the weekend somewhere around 91 cents (U.S.).
The growth obviously has Finance Minister Jim Flaherty spooked while, outside Parliament Hill, manufacturers are surely feeling the pinch. Canadian exporters are finding now their rising prices aren’t too attractive to U.S. trading partners trying to fight off their own stinking economy.
Yet among signs the loonie’s rise will only offset any positive growth our economy can show, the Globe’s Konrad Yakabuski makes an intriguing proposal.
Citing an economy “running at two speeds,” Yakabuski wonders if hitching the loonie to the U.S. dollar at a fixed rate might be the kind of patch to offer the best long-term solution to the disparity in oil and manufacturing exports.
(Oil prices, says the Globe, are set to rise extensively by 2010. At the same time, manufacturing business is contracting and, according to a B.C. economics professor, would be better suited at an 80-cent dollar, not one 11 cents higher.)
“There is no assurance that the volatility won’t continue in coming years,” says the newspaper, noting the big swoons in the loonie’s value over the past year-and-a-half. As a result, Yakabuski argues policy makers might be better to consider attaching the Canadian dollar to the USD at a fixed rate as was done with great success in the ‘60s and ‘70s.
Under Diefenbaker in 1962, the loonie was pegged to the U.S. dollar at 92.5-cents. Similarly attached under Pearson in the ‘70s, it’s argued, the manufacturing boom in the auto industry soon followed.
There are sure to be detractors from the proposal (like, say, Albertan oil interests), but it is at least a fresh take on the issue. Whatever happens with the current loonie’s wild fluctuations, it's probably best if something changes quick.
“The exchange rate is generating such a high degree of uncertainty,” says Queen’s University professor Thomas Courchene, “that capital is just not going to locate here.”
Posted by: Frank | Jun 5, 2021 9:17:17 AM
NO!!! With Comrade Obama at the helm he'll drive the USD into the ground! I don't want my CAD to go down with it.
To all the whiners complaining about exports/tourism, LEARN TO ADAPT! That's the way of the world. Create something worthwhile to buy/visit rather than just using "it's cheaper" as a selling point.
Posted by: Rob | Jun 9, 2021 11:18:06 AM
Here’s an idea. Perhaps it’s time we stopped just cutting down, digging up and pumping out our mostly unprocessed resources across the US border. This of course, is usually followed by selling the company to a US conglomerate. The Canadian dollar is still very competitive with many world currencies, including the Euro. And they all need wood products, minerals, oil, agricultural and manufactured goods. What say we finally go after a few of these markets and get off this roller coaster of subservience to the vagaries of the US economy, instead of reinforcing it?
Posted by: Chris | Jun 9, 2021 12:40:48 PM
Dam right! Why does Canada not invest in its refining industry,instead fo exporting oil and buying back gas at an inflated price.We should be like other countrys that have cheap domestic gas and this would also support the car industry here.
Posted by: Paul S | Jun 9, 2021 5:29:49 PM
Apparently in Venezuela gas sells for $ 0.25 per gallon.but sells it at world prices for export.That would boost any industry except alt energies.....
Posted by: DrPhreak | Jun 21, 2021 11:26:15 AM
Perhaps you have bever heard about the North American Union? Do some research it's coming...planned entry date of the 'Amero' 2010. I suggest we do everything we can fight it!!! Of course the Amercians would love it if they had resources to back their dollar...then their dollar would have some value again. Look at it carefully...America had oil now, they don't...now their dollar slides. Canada has oil and other resources so hey OUR DOLLAR IS WORTH MORE. Suddenly Harper, Chavez and Bush sign a deal eneacting the North American Union without any approval from anybody else and wham...The North Amercian Union is born. All it amounts to is a passive agressive takeover of Mexico and Canada by the States. I hear part of the deal includes an act that allows The US to station American troops on Canadain soil all under the guise of "security". This is the biggest hoax of the 21st century...Al Queda is the name of a security database not a terrorist group...WAKE UP PEOPLE!!!