US dollar about to be passed by Canadian dollar

[Josef]

Wow, I didn't realize it had gotten this bad.

Canadian Dollar Reaches Parity With U.S.

By ROB GILLIES – 2 days ago

TORONTO (AP) — The Canadian dollar reached parity with the U.S. dollar on Thursday for the first time since November 1976.

Known as the loonie because of the bird pictured on the one-dollar coin, the Canadian dollar has been gaining ground on its American counterpart since hitting an all-time low of 61.79 U.S. cents on Jan. 21, 2002.

This week the loonie rose sharply against its U.S. counterpart after the Federal Reserve announced a dramatic half-point cut in its benchmark interest rates. The Bank of Canada, meanwhile, has kept its equivalent rates stable.

As a result, the spread between U.S. and Canadian interest rates widened, making Canada a more attractive place for German, Japanese, American and other foreign investors to put their money.

The soaring loonie also reflects the strong fundamentals of the Canadian economy, which has benefited from record world crude oil prices and strong demand for metals, coal, chemicals and grain.

At the same time, the United States has been squeezed by a collapse of a big chunk of its housing market and a worsening credit crunch.

"Canadians are getting a lot richer relative to Americans. The parity exchange rate is just one example of that," said Jeff Rubin, Chief Economist and Strategist at CIBC World Markets.

"It really reflects the rise of the resource economy in Canada and the rise of western Canada and the decline of the manufacturing sector and the manufacturing heartland of Canada in Ontario," Rubin said.

The western Canadian province of Alberta is home to vast reserves of oil sands, a tar-like bitumen that is extracted using mining techniques. Industry officials estimate the oil sands will yield as much as 175 billion barrels of oil, making Canada second only to Saudi Arabia in crude oil reserves.

"The Canadian economy that once use to be the sleepy little resource backwater of the North American economy, is certainly turning the tables on its big brother in a hurry," Rubin said.

The high Canadian dollar will increase the number of cross-border shopping trips as Canadian consumers come to the U.S. to buy clothes, shoes and electronic gear. Many goods in Canada haven't been reduced yet to reflect the rising Canadian dollar.

"It's going to take some time before it trickles down to us," said Linda An, who calls herself a shopaholic. "Shopping, especially for big ticket items is great now in the U.S."

The high dollar will hurt Canadian manufacturers who sell goods in the U.S. Canadian Auto Workers economist Jim Stanford warned that the sector, largely based in Ontario, will lose hundreds of thousands more jobs if the dollar remains at current levels.

http://ap.google.com/article/ALeqM5j6DO-M306r3uR6wYuld4DI8fUeXw

 

[bigdaddy]

Who cares?! You just have to love the loonie!

 

[Paco]

Possibly, but who the wants bottles of maple syrup and canadian bacon as legal tender? But seriously. They'll still pay premiums for every good compared to us even if they exceed our currency simply because there's far less consumers over there then the US.

 

[mykevermin]

What is important is that this means NOT that the CDN is more powerful, but that the USD is *weaker*, especially abroad. There's going to be a diminished incentive to invest in the dollar, given the trend in which it's moving. It has less spending power internationally. It may even lead to more expensive products globally.

There's nothing positive about it, unless you think on a short-term and selfish level: finding items that cost the same in CDN as they do in USD, buy the CDN, since it's cheaper.

 

[bigdaddy]

[quote name='The Crotch']...

What?

Does not compute. Please reword previous sentences.[/quote]

Nothing he says ever makes sense.

I don't think he even read the article.


The Canadian Dollar is MORE than the US Dollar.

 

[mykevermin]

As the price gap narrows, the relative cost of buying goods in Canadian dollars is narrowing as well. As the USD weakens, other currencies gain strength relative to it. You're not going to see the price of milk fluctuate, certainly, but the economic impact of a weakening dollar serves to benefit Canada and harm the US in the long run. Not the short.

So, sure, CDN is numerically weaker than USD, but in terms of trends, that previous advantage of the USD is dwindling. This ain't Bourdieu's concept of "habitus," kids. It's simple economic trends.

As for nothing I say making sense, I'm sure if you gave a copy of W.E.B. DuBois "The Souls of Black Folk" to a third grader, they may be able to read the words, but they'll never have a deep conversation on what he meant by "double consciousness." I don't think I need to explain myself any further to you, bigdaddy. You're just, simply put, rather daft.

 

[Cheese]

Bigdaddy,

 

[Ikohn4ever]

i remember when i was a kid and the dollar was worth like 1.30 Canadian, I thought i was rich with all the extra money I got in the conversion. This just shows the pretty sorry shape of our dollar. Lets hope that China and Japan don't move their money out of US bonds to the Euro or that would royally FuCk us

 

[ryan838]

I'm sort of fine with it since I'm in Canada on business right now and I get $50 canadian per diem. So at least its worth more now.

 

[mykevermin]

[quote name='Ikohn4ever']that would royally FuCk us[/QUOTE]

Quite the understatement.

http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999-2002)#The_crisis

 

[Trancendental]

[quote name='mykevermin']There's nothing positive about it, unless you think on a short-term and selfish level: finding items that cost the same in CDN as they do in USD, buy the CDN, since it's cheaper.[/quote]

Well, American goods become cheaper, allowing America to sell more stuff overseas.

Some American industries will benefit, such as steel (especially when you add to that fact that people are starting to wake up to the fact that China generally makes poor quality steel)

 

[pittpizza]

[quote name='camoor']Well, American goods become cheaper, allowing America to sell more stuff overseas.

Some American industries will benefit, such as steel (especially when you add to that fact that people are starting to wake up to the fact that China generally makes poor quality steel)[/quote]

Take it from somebody in Pittsburgh, the only reason American corporations are even ABLE to produce steel domestically is because of government subsidies. Without them it would not be possible to produce steel for profit domestically. We subsidize the steel industry due to military and national security concerns.

 

[Trancendental]

[quote name='pittpizza']Take it from somebody in Pittsburgh, the only reason American corporations are even ABLE to produce steel domestically is because of government subsidies. Without them it would not be possible to produce steel for profit domestically. We subsidize the steel industry due to military and national security concerns.[/quote]

Fair enough - I suppose, being that it's a commodity, people are not as concerned with steel quality (compared to toys for example)

However as the dollar weakens, American exports will definately become more attractive to overseas countries.

 

[Reality's Fringe]

I'm confused as to why people seem to think that a weakened dollar makes foreign investment less attractive, unless you're referring specifically to interest bearing accounts such as Bonds. You want the dollar to become stronger, then you need to narrow the huge trade-deficit. Have fun with that one.

 

[jaykrue]

I'm confused as to why people seem to think that a weakened dollar makes foreign investment less attractive, unless you're referring specifically to interest bearing accounts such as Bonds. You want the dollar to become stronger, then you need to narrow the huge trade-deficit. Have fun with that one.

I suppose it depends on what you mean by foreign investment. If you're talking about Americans investing outside the US, then it's bad since the weak dollar means less buying power to invest so their ROI won't be a lot. If you're talking about foreigners investing in the US then it can be both good and bad. Good because you've got more frequent money migration from strong currencies such as the euro to the US which will help revitalize the economy by providing jobs which in turn provide money to pay for goods/services. It can be bad, since, due to the weak dollar, companies will be looking to find people who will worker cheaper (which usually means US-educated foreigners). It can also be bad to some people because they will see it as an 'invasion' of sorts by foreign companies (which is logically stupid if you really think about it).

 

[Reality's Fringe]

[quote name='jaykrue']I suppose it depends on what you mean by foreign investment. If you're talking about Americans investing outside the US, then it's bad since the weak dollar means less buying power to invest so their ROI won't be a lot. If you're talking about foreigners investing in the US then it can be both good and bad. Good because you've got more frequent money migration from strong currencies such as the euro to the US which will help revitalize the economy by providing jobs which in turn provide money to pay for goods/services. It can be bad, since, due to the weak dollar, companies will be looking to find people who will worker cheaper (which usually means US-educated foreigners). It can also be bad to some people because they will see it as an 'invasion' of sorts by foreign companies (which is logically stupid if you really think about it).[/QUOTE]

That's kind of my point. A weaker dollar makes non-interest yielding capital acquisition much more attractive to foreign investors. Eventually, exports will begin to catch up (well, relatively speaking) and the dollar will regain some of its strength. Most people don't have much grasp on currency fluctuations, but usually the good and bad tend to equalize themselves (again, relatively speaking) over the medium-run. Additionally, if China finds itself ina position to no longer use the USD as a currency peg for the Yuan, it may finally force them to stop devaluing their currency to a certain extent and we'll see more demand for American made products in the US.

Again, the huge trade deficit is part of the reason why the dollar has weakened, in addition to global shifts in demand (especially agricultural demand). Honestly, though, I'd be way more concerned about the severe overextension of credit right now. That's recipe for recession, no doubts.

 

[jaykrue]

That's kind of my point. A weaker dollar makes non-interest yielding capital acquisition much more attractive to foreign investors. Eventually, exports will begin to catch up (well, relatively speaking) and the dollar will regain some of its strength. Most people don't have much grasp on currency fluctuations, but usually the good and bad tend to equalize themselves (again, relatively speaking) over the medium-run. Additionally, if China finds itself ina position to no longer use the USD as a currency peg for the Yuan, it may finally force them to stop devaluing their currency to a certain extent and we'll see more demand for American made products in the US.

Well, if you think about the American mindset, it's usually all about the short-term; for example, how they can get something now instead of later. Which is why you have a lot of people pissing and moaning because they don't have the patience to think about future growth (and by which I mean beyond 2-3 years). In contrast, the very reason why investors such as Warren Buffett have been so consistently profitable is that they look at long term value and run with it.

As for the Chinese, I don't see them giving up their peg any time soon since they can use it as political leverage on the US especially in light of the recent string of quality scandals about Chinese goods. Since they own about $250-something billion plus in US debt held by T-bonds, were they to reduce those dollar assets, I could see them easily crippling the US economy which would take a lifetime of recovery.

Again, the huge trade deficit is part of the reason why the dollar has weakened, in addition to global shifts in demand (especially agricultural demand). Honestly, though, I'd be way more concerned about the severe overextension of credit right now. That's recipe for recession, no doubts.

Man, that's an understatement. I'd say the credit overextension is merely an ingredient for recession. You've got the subprime mess (which is also a result of the credit overextension)#-o, the debt Dubya's run up to fund his 'War on Terra' , the dollar's weakness as a reserve currency :???:, the China problem above, and a host of other things it'd take me too long to write up all contribute to that recipe. If the stars unluckily line up, the US is going to be anally violated and take the rest of the world with it. It really is a house of cards.

 

[Reality's Fringe]

[quote name='jaykrue']Well, if you think about the American mindset, it's usually all about the short-term; for example, how they can get something now instead of later. Which is why you have a lot of people pissing and moaning because they don't have the patience to think about future growth (and by which I mean beyond 2-3 years). In contrast, the very reason why investors such as Warren Buffett have been so consistently profitable is that they look at long term value and run with it.

As for the Chinese, I don't see them giving up their peg any time soon since they can use it as political leverage on the US especially in light of the recent string of quality scandals about Chinese goods. Since they own about $250-something billion plus in US debt held by T-bonds, were they to reduce those dollar assets, I could see them easily crippling the US economy which would take a lifetime of recovery.


Man, that's an understatement. I'd say the credit overextension is merely an ingredient for recession. You've got the subprime mess (which is also a result of the credit overextension)#-o, the debt Dubya's run up to fund his 'War on Terra' , the dollar's weakness as a reserve currency :???:, the China problem above, and a host of other things it'd take me too long to write up all contribute to that recipe. If the stars unluckily line up, the US is going to be anally violated and take the rest of the world with it. It really is a house of cards.[/QUOTE]

Most of the reinvestment in domestic assets would come from outside sources with significantly stronger currencies. My take on demand increases for domestic goods is not from a consumer standpoint, but from a producer standpoint once you factor in the reduced purchasing power and rising transportation costs.

The subprime fiasco isn't merely a result of credit overextension, it's one of it's primary causes. I've been telling people around campus that low national savings can only support rising investments for so long before people realize that there's nothing left to back it up (and I could go into some long-winded speech about the Cobb-Douglass function and endogenous/exogenous growth models, but no one cares), and repeatedly lending multiple thousands to people without any collateral is a terrible idea. I guess I'ma little frustrated because, even as an undergrad Econ student, I could see where this was heading. I can't imagine what it's like for someone with their doctorate to watch these bad decisions.

Actually, I can:
[media]http://youtube.com/watch?v=SWksEJQEYVU[/media]

 

[jaykrue]

Most of the reinvestment in domestic assets would come from outside sources with significantly stronger currencies. My take on demand increases for domestic goods is not from a consumer standpoint, but from a producer standpoint once you factor in the reduced purchasing power and rising transportation costs.

Ok, I see where you're coming from. I thought you were talking about the American consumer perspective. But you're right of course. It's the perfect time for outside investors (particularly European) to invest in the US. Even now (I deal in real estate primarily), most of the people I deal with are Euros. In Chicago (for me), it's predominantly rich Irish and Russian investors while Florida (particularly South Beach) is seeing a surge of Russian, English, and Scandanavian rich socialites looking for a good deal on a summer vacation home. If you notice, I didn't mention any Mediterranean Euros like Spaniards or Portuguese. Pertaining to the topic of this post, I can't necessarily lump Canadians in just yet. The loonie's gotta grow a bit more beyond parity before the average Canadian investor will see significant ROI in US investments.

The subprime fiasco isn't merely a result of credit overextension, it's one of it's primary causes. I've been telling people around campus that low national savings can only support rising investments for so long before people realize that there's nothing left to back it up (and I could go into some long-winded speech about the Cobb-Douglass function and endogenous/exogenous growth models, but no one cares), and repeatedly lending multiple thousands to people without any collateral is a terrible idea. I guess I'ma little frustrated because, even as an undergrad Econ student, I could see where this was heading. I can't imagine what it's like for someone with their doctorate to watch these bad decisions.

Really? Are you sure this isn't a 'chicken-or-egg-first' scenario? I think credit has been a much bigger deal for a longer time than the subprime issue. It has been a relatively recent phenomenon (read: last 10 years) to lend to less-than-qualified clients for weird loan arrangements. I do agree about what you say about the low national savings. And I think anyone who could understand freshman algebra could see the that as well.

Actually, I can:
http://youtube.com/watch?v=SWksEJQEYVU

:lol: