OT: Parity between US and Canadian $? - Xtratime Community
 
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post #1 of 5 (permalink) Old October 19th, 2004, 03:32 Thread Starter
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OT: Parity between US and Canadian $?

I read the other day that experts were predicting that the Canadian dollar would reach a parity with the US $ within the next 3-5 years.

What do you people think of this? Would you be for such a thing?

I personally wouldn't mind to have a strong Canadian $ as it would be good for us when travelling abroad however, it could have some negative impacts on our exports and commercial balances overall.

Comments? Views fellow Canucks?

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post #2 of 5 (permalink) Old October 19th, 2004, 03:46
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Well, those people that complain that a stronger dollar is bad for their business...well they just have a flawed business model then. Maybe they should think about making their businesses more efficient and innovative rather than basing everything on CAN$ - US$ disparity. You know, I read that in the 50s at some point the CAN$ was US$1.04! I wouldn't mind parity, it'd give our currency more respect p

But 3-5 years? C'mon, that's just too far ahead. 3-4 years ago when the CAN$ was at like US$0.62, most people were saying we'd be at US$0.50 in 3-5 years p
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post #3 of 5 (permalink) Old October 19th, 2004, 05:18
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OK...THese are my thoughts about our economy in general...

I think our whole economy is flawed because we're neither fully capitalist, nor are we something else... We have a ton of government subsidies and grants encouraging businesses to stay here or develop...A capitalist country doesn't do that...But then again, we don't have the population mass to sustain a fully capitalist economy, especially when we're neighbours to the biggest economy on earth!

Without the checks and balances we have, it wouldn't take much for usto get sucked up and turned into another US State (both economically and culturally, though culturally we're almost there...)

Think about it...How many Canadian owned businesses can compete with mega corporations ready to flood markets with advertisements, Low prices and vast amounts of selections?

Imagine the amount of small businesses that close down everytime a Wal-mart moves into a region...There's no way to compete against the capitalist centre of the universe unless you structure your economy around protecting local companies, corporations and investments...

And one way to do that is by ensuring disparity between the two currencies...At least this way, SOME canadian businesses get a chance to sell their products for cheaper in the US market, and we attract SOME foreign investment...

I don't know how else we'd be able to manage. Think about it...

If a Canadian product hits the shelves, it can only reach a population of 25-30million ppl max...
An American brand has the opportunity of growing at home (with a consumer base in excess of 250mil ppl), developing into a brand name, and THEn exporting that image/brand to us...

So they're at an advantage. I've often times thought about this...
It just makes more sense to keep the currency disparity, or we'll loose alot of business...

We're already loosing a considerable percentage of our workforce to the US because you can make more money doing the same job down south.
I've thought about moving too, but in the end, I'm, too comfortable here and I don't want to leave my family.

And that's my rant for the day...
Tomorrow I'd like to bitch about our messed up welfare system and our non-functioning healthcare system

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Last edited by D-lite; October 19th, 2004 at 05:25.
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post #4 of 5 (permalink) Old October 19th, 2004, 20:14
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Well for the moment its good for me. I am buying a car soon and the same car in the USA will be much cheaper to bring up here even after the taxes and import cost. I will save about $2000-4000 at least.

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post #5 of 5 (permalink) Old October 19th, 2004, 23:44
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First of all, the official exchange rate between the dollars is set entirely by currency speculators. It bears no relationship to the actual value (which can only mean purchasing power) of either currency. The speculators will buy up or sell off currencies as soon as they see a chance to make a profit. Speculators are often influenced by interest rates; if Canadian interest rates go up and American rates don't, the speculators sell US dollars and buy Canadian dollars. It has nothing directly to do with the nuts-and-bolts reality of the economy or the commodity marketplace. As a result, you get a situation, for example, like today, where the British pound is exchanged at over $2.50 Canadian, but in actual purchasing power a pound will buy you about $1.60 (Can.) worth of goods in Britain.

Second, any personal advantage or disadvantage in the exchange rates depends entirely on whether you are (a) buying foreign goods and services or (b) selling goods or services to foreigners. In case (a) you are happier with a high dollar and in case (b) you are happier with a low dollar. If you are buying or selling exclusively Canadian goods and services exclusively from/to Canadians, the exchange rate with the US dollar or the rupee makes absolutely no difference to you. If you are (more likely) a Canadian who is not exporting goods and services, but who is buying goods and services that are both domestic and foreign, a higher dollar will make the foreign goods perhaps cheaper than a lower dollar would. So it all depends on your own economic circumstances whether a high dollar is good or bad.

Third, a 25% higher dollar (100/80) would not necessarily translate into a corresponding reduction in the price of foreign goods, because of other factors. Sure, if you go to the US your Canadian dollar will go 25% further. Same if you buy direct by mail from the US. But most of our consumption of foreign goods is via Canadian intermediaries. So you don't buy gasoline from Saudi Arabia; you buy it from Shell Canada. You don't buy a Volkswagen from Germany; you buy it from your local VW dealer. You don't buy lettuce from California; you buy it from the supermarket. All kinds of other factors determine what you pay besides the official exchange rate - windfall profiteering by the importers, supply and demand within the Canadian marketplace, the costs of transportation and other costs of doing business in Canada, etc.

Fourth, it could be argued that an increase in purchasing power would result in a depressing effect on Canadian wage rates; thus, over time, inflation could take away a portion of the benefit of higher purchasing power.

Fifth, jobs would be lost in industries where American and other foreign imports undercut the price of Canadian goods.

In short, a higher Canadian dollar is neither all good nor all bad. It has a multitude of different effects on our economy, some big, some small; some good, some bad.
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