YOUR MONEY

CANADA – USA  merger

No, I am not talking about a complete union making Canada another US state, but rather a financial union or at least a fixed rate peg.

In the last 3 months or so the Canadian dollar has dropped from par to some $0.90 cents US and the valuation fluctuates daily by a ½% to almost a full 1% - rarely up and overall falling downward.

In fact, I foresee a freefall to that ridiculous range of some $0.65 US as was the case during the late 1990’s and early 2000’s.  The chart below – which ends with 2011 – highlights this fluctuation insanity.

The graph covering 2002 through 2011 found at  http://www.nbforestry.com/issues/the-dollar/   is a wild sea-saw ride    from $0.62 to over $1.10 Canadian and then falling again.

Canada does some 80% of its exporting with and importing from the USA and to allow the exchange rate to radically and uncontrollably fluctuate makes no sense for business, international corporations or individual citizens.

Yes, analysts hype the reduced dollar as ‘giving us an edge’ in exporting to the US but this ignores the equally important importing side: for machinery, goods and especially food that come from south of the border.

A reduced Canadian dollar causes our prices to rise – i.e., inflation – for a wide range of essential and irreplaceable imports.   It hurts the average consumer at the supermarket, Home Depot, Walmart and Target chains let alone more pricy retail.

If this was a government strategy (and one explained to the public) it might be valid, but governments and central banks have not really controlled their currency exchange rates for some 40 years: the last time the gold standard was removed.

Currency traders make these ‘decisions’ and ‘calls’ based on ‘perceived’ future strengths of any given economy, and all central banks can do is waste money to stem a freefall – if they so wish – by buying back their own currency and giving currency exchange companies a ‘handling’ profit.

It does not take a genius to recognize currency volatility is bad for business and individuals.  You cannot plan ahead because what you think makes sense and is a ‘good deal’ at $0.95 USA or $1.00 US exchange rate makes no sense when the bill comes in months later at a different rate – say $0.80 US. or $0.65 US!!   

While Canada’s employment numbers and bank stability have been the envy of the world throughout the Great Recession (2008 onward), and our debt to GDP is far better the US’s,  with ample farmland, forests, mining resources and huge tar sands/oil and natural gas reserves,  Canada’s dollar should be at or near par with the US if not higher.

But that is not what the currency traders say as they manipulate and speculate on their computers destabilizing and harming the overall economy and individual finances of Canadians.

In conclusion, we are too closely connected with America in trade, business, foodstuffs and travel to allow such shenanigans that are really beyond government control.   We should either peg the Loonie to the Greenback as some other countries do, or, like Europe, create a common North American currency – a EURO type GREENLOON.