Brother Can You Spare a Loonie
See, Mom and Dad: I am putting my business degree to use!
The Canadian dollar coin is known as the “Loonie”, owing to the image of a bird that appears on it. Last week, something “loony” happened with the Canadian Dollar: it became as valuable as its American counterpart. On Thursday, the Canadian Dollar gained virtual parity with the ol’ greenback on the currency market. The last time this happened, Pierre Trudeau and his bushy Quebecois side burns were Prime Minister, The Toronto Blue Jays became the newest expansion Franchise in Major League Baseball and the members of Sum 41 had not yet been born. (It was 1976, to be exact.)
Psychologically, at least, this is an alarming thing. The U. S. dollar has been The Americas’ premier currency for decades. It is the most economically productive nation in the 2 continents, as well. The decline of the Dollar against the historically-weak Canadian Dollar makes it clear that a paradigm shift could occur. The U. S. Dollar is currently getting its ass owned by the New Kid on the Currency Block, the Euro, and has been around half the value of the Pound Sterling for many years. Combined with new troubles in the credit sector, a highly-leveraged debt, a growing trade deficit and the emergence of India and China as new economic powerhouses, it’s just one more thing to make the Buck less attractive to investors. On the other side of the border, Canada is coming into its own, with its plentiful mineral and timber resources driving its currency to new heights.
Queen Elizabeth is looking particularly smug these days.
However, this is not necessarily good news for Canada. The decades-long run of the “cheap” Canadian Dollar was a beacon to value-minded investors and cutthroat capitalists looking to maximize their investment returns or lower their capital labor costs. In the ’70s and ’80s, their metaphorical gums bleeding from their brief showdown with the Germans and Japanese, American auto manufacturers moved a great deal of production to Canadian plants to increase profits, thus saving their dinosaur asses for a coupla extra decades. With a stronger currency, Canada will look less and less attractive to U. S. Companies wishing to make their products cheaply next to, say, Mexico. Furthermore, this means that Canadian companies will likely see the prices of their products rise in the U. S., making them less attractive to American consumers. With 80% of Canada’s imports going to the U. S., this could be disastrous to the health of businesses like Moosehead Breweries (premium lager beer), Bombardier (aircraft/transportation products) and romance/women’s literature publisher Harlequin Enterprises. (According to a December 2005 Tucker Capital Corp. press release, only 4% of Harlequin’s sales were made in Canada.) One could also see the potential decline in American Visitors to popular Canuck tourist destinations like Banff, Niagara Falls, and Victoria Island.
So who’s to blame for this economic time bomb? It’s hard to “blame Canada” (Thanks, South Park!) for having commodities the rest of the world wants, though helping to maintain a level of scarcity (restricting imports) would have kept their economic growth in check. The U. S. Government, particularly under the Bush administration, has a big hand in this, as well, by allowing U. S. companies to make products abroad with little or no tariffs or other considerations, not regulating the credit industry and recklessly printing new money to curb inflation. Allowing the Chinese to “peg” their Currency, the Yuan relative to ours has encouraged artificially-low prices for Chinese consumer goods (with and without lead).
The non-governmental private entity known as the Federal Reserve Bank deserves a lot of blame. For years, they single-mindedly endeavored to break the U.S. housing market by either raising or failing to lower the Prime Lending Rate. When they finally succeeded this summer, it came with a high-risk credit hangover, which played havoc with the stock market. In order to help undo the damage, the Fed cut the Federal Funds Rate by 50 basis points. This actually pushed the currency over the edge on the world market. Finally, we, the American people, can’t walk away from this with clean hands. By buying dirt-cheap Chinese-made products, we have helped to explode the nearly-unfathomable trade deficit and sending American manufacturers abroad. By not questioning our leaders, we have allowed our currency to continue its decline for the last 6 years and by taking sucker “variable-interest” mortgages and credit cards without paying attention to how that has played out in other countries, we have created a significant crisis in the housing and credit sector that further weakened our currency. Next stop: The Third World!
Sources: Bloomberg.com - The Emonton Journal
Editor’s summary: Finally, all those stupid Canadian coins have a purpose,
other than showing your children what a moose looks like. Quick, go cash ‘em in!
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Canada has money? I thought it traded in Maple Syrup instead….
Seriously Canada kicks ass when you want to compare it against the politics and economics of the US. As long as you can keep that Vancouver lot from breaking away into a cousin of France, Canada will eventually rise like the proverbial moosehead.
I assume the peso is next.
The peso isn’t worth a damn thing. I’m waiting for Mexico to change things up, make the peso their penny, make 100 pesos their standard.
We’ll still be ahead of them, I think.
We’ll always be ahead of them. Their capital was built on garbage. Ours was built on dead natives. We win everytime.
@Soy, not to call you out, but, the Blue Jays. Unless that was a joke, in which case, shame on my raccoon ass.
huh?
@Bagel-Mexico City, built on garbage.
Toronto Maple Leafs, Original Six hockey franchise.
Raccoons: bad parents.
But, blue jays?
Toronto Blue Jays, MLB, American League. Baseball, birds that bother raccoons.
I’m still not following. You aren’t going to make this easy, are you?
First paragraph, last sentence. Can’t make it any easier.
“It was 1976, to be exact” ?
If you’re saying “either Soy has a hockey fact wrong, or he’s joking”, go with joking.
Boy knows his hockey.
I, however, know it’s something to do mullets, ice, and big sticks.
Like fishing, with penalties.
(Here’s betting noone gets the “mullet/fishing” thing)
For the Blue Jays, it was 1976. The Maple Leafs were founded in 1917.
He has a baseball fact wrong. He has hockey on the mind at all times apparently. I wouldn’t question a canuck’s knowledge of the National Sport.
Last time I was in Canada, the Canadian dollar was worth about 70 cents. I thought I’d be rich in Canada, but I had to deal with $8.00 Big Macs. Kind of defeated the purpose of even going there.
You speak of the mullet festival. Bonus points for that.
Cody–where did you find an $8.00 Big Mac?
Our prices are certainly inflated–you have only to look at any book or magazine sold in both markets to see that.
But The Economist (that right/left wing rag, depending on your point of view) uses the Big Mac as a measure of local currencies. From the most recent survey, the US Big Mac costs $3.22. The Canuck-Mac costs $3.63 Canadian–or $3.08 US at the time.
So next time you’re up here, come by the house. Because with your eight bucks you can take us both out for Big Macs! :^D
But best to do it before the $9 trillion US debt (courtesy of Reagan and the Bushes, mostly) sucks both our economies to par with the peso.
I’m free next week.
For those only familiar with the hairstyle: http://www.swansboroncrealestate.com/swansboro-mullet-festival.html
Or the delicious fish…
http://en.wikipedia.org/wiki/Mullet
Or the shorlived sitcom on USA: http://www.imdb.com/title/tt0367371/
I knew I shouldn’t have trusted those ferry terminal prices! Actually, I don’t remember where it was. But it was damn expensive. Amusement park expensive. It was Victoria, after all.
Kw: “I wouldn’t question a canuck’s knowledge of the National Sport.” Soy is a good ol’ southern boy, tho his family did spent a good deal of time in Canadia for his dad’s job.
Metro: The Economist (…) uses the Big Mac as a measure of local currencies <– That’s like brilliant. And unlike milk, there’s no fancy math needed. Your bigmacs don’t come in bags, I’m assuming?
Cody: Maybe it was during the beef scare?
@Soy: didn’t mean to blaspheme.
@Bagel: the baseball thing, did you figure it out? (washes hands)
@ KW: You got me! It’s just a scant few weeks befo’ hockey season and I had the Maple Leafs on the brain. That was uncharacteristically careless of me, but when I think of Toronto sports franchises, The Blue Jays are way down there behind Toronto FC. I don’t care fuck-all about ‘em! (Sorry to get all Canadian on ya there.)
@ Cody: I once paid $2.75 CDN for one of those piddly 250 ml cans of Coke at a bus station in Ontario. I was about to pass out–had to get the blood sugar up. Vending machines in Canadian airports, depots, hospitals, etc… used to be notorious rip-offs, not that they aren’t here. This was more than 15 years ago. That was one fucking expensive soda!
@ Metro: We finally got Coffee Crisp down here. F–king boss, eh?!
KW, Soy: Fixed the error. WordPress has been down tonight, so it took a while to get in to fix it. Also, comments have been fux0red. Should be ok now.
Check the lolfeeds for this.
Yeah, I fucked Pierre Trudeau.
LK
This post will be too long. I do apologize.
Soylent Ape wrote: > In the ’70s and ’80s, their metaphorical gums bleeding from their brief showdown with the Germans and Japanese, American auto manufacturers moved a great deal of production to Canadian plants to increase profits, thus saving their dinosaur asses for a coupla extra decades.
With respect, Soylent Ape, you’re forgetting, it seems, several crucial factors motivating this move — for starters, the exact thing you advocate in your next paragraph: namely, mercantilism (i.e. tariffs and trade restrictions).
Starting in 1890, antitrust legislation, which is mercantilism writ large, has been destroying American businesses piecemeal — or if not destroying them outright, causing them to spend millions and millions and millions of dollars in fatuous lawsuits. From Alcoa, to the Brown Shoe Company, to IBM (the Microsoft of 1969), to RCA, to Pan Am, to hundreds more (see Dominick Armentano’s landmark book on the subject), antitrust legislation, has, for over a century now, made American businesses more and more afraid of doing business in their own country. Why? These companies are statedly afraid of “arbitrary governmental decree.”
GM’s official policy, from 1937 until 1956, was never to let its market share top 45 percent. Thus, division managers were instructed to make sure that GM cars were not too high quality or too low priced. “This fear of antitrust prosecution made GM a less competitive company, and it was therefore incapable of effectively competing when Japanese and German automakers began dominating the U.S. auto market in the 1970s” (Doctor Thomas Dilorenzo).
That, continues Doctor Dilorenzo, is only part of the story: virtually every American industry was financially strangulated by protectionist laws (thousands on the books since the 1970’s), in addition to the threat of bureaucratic legislation and the very real fear of antitrust lawsuits (this, mind you, is not just the car industry we’re talking about but American industry in general, all of which industries are interdependent) — so much so that it’s become unprofitable and risky to mass manufacture in this country. But you, sir, make it sound as if the American consumer is suddenly to blame for not wanting to spend a lot more hard-earned money on goods (”Finally, we, the American people, can’t walk away from this with clean hands. By buying dirt-cheap Chinese-made products, we have helped to explode the nearly-unfathomable trade deficit and sending American manufacturers abroad”). The antisocialist, for one, cannot always afford the more expensive products you now tell us we must buy (or be culpable), but in fact you are dangerously over-simplifying the economic factors at work here. If you doubt it, ask yourself this: what as a businessman would you yourself do in such a dicey scenario? Would you want to risk, day in and day out, being sued for millions and millions? Would you not want to cut your manufacturing costs? Could you afford not to? As a consumer yourself, do you really expect all of us who are struggling, to varying degrees, to make ends meet, suddenly now to start spending $20,000.00 on our cars instead of $7,000.00, simply because you say we don’t have enough restrictions in place? The antisocialists believes that you do greatly misrepresent the scenario when you do not mention at all the glut of government regulations and restrictions already in place, all of which, almost without exception, have only served to make it very difficult to produce inexpensively in the United States.
In virtually the same breath, then, you call for still more government regulation as the solution to our problems. To wit, you say that Canada is partly to blame for not “helping to maintain a level of scarcity (restricting imports) which would have kept their economic growth in check. The U. S. Government, particularly under the Bush administration, has a big hand in this, as well, by allowing U. S. companies to make products abroad with little or no tariffs or other considerations, not regulating the credit industry …”
Markets, in other words, aren’t capable of regulating themselves; rather, government bureaucrats, with their attendent army of lobby groups and pressure groups, must do it for us.
The current ethanol industry alone, I would think, would be enough to sour you on these tariffs you call for. Corn syrup, for example, is used in about every soft drink and candy imaginable. It’s also used in over fifty percent of food products. Thus, right now corn that’s normally used for other things, such as tortillas or Coca-Cola, is going into ethanol manufacturing. Therefore, any products containing corn are increasing in price. And since the corn normally used for these things is being diverted, via government subsidies (which you and I are also paying for), we’re having in addition to pay more for our food products.
Corn farmers, corn producers, and ethanol engineers all, of course, want the ethanol bandwagon to keep on rolling, rolling, rolling. Which is understandable since they’re all getting fat off our subsidies, which environmentalism is also in large part responsible for. Not coincidentally, these same ethanol producers are also demanding — and getting — high tariffs placed on ethanol imports, despite the fact that home-grown ethanol is rife with ramifications, and despite the fact that ethanol can be produced much more efficiently from sugarcane, which we can import from South America far cheaper than we can produce ethanol at home. Do you begin to see? The problem is the usual problem: lobby groups, political pandering, and big bureaucracy, which you seem to advocate. There is a very simple solution: ax all import tariffs on ethanol including, most importantly, Brazilian sugarcane import tariffs; simultaneously do away with all subsidization of all ethanol production.
Let free markets be.
The whole history of tariffs and trade restrictions has been pure poison to every economy that implements them. Indeed, this was the whole impetus behind the American Revolution, and the framers of the Constitution specifically addressed the unconstitutionality of tariffs and protectionism by swearing into law the Commerce Clause, which “outlaws protectionist tariffs,” thereby making the United States a “free-trade zone.” The Constitution also specifically prohibits export taxes “to encourage international commerce.” The Due Process Clause of the Fifth Amendment was also put into place as a safeguard against “arbitrary government usurpations of property.” One could easily argue, in other words — and I’m prepared to do it — that these tarrifs and restrictions you want are entirely unconstitutional.
You are, however, correct in impying that this big (leftwing) governmental monster The Federal Reserve, printing money not backed by anything of actual value, is very much to blame. Indeed, The Fed should be done away with as soon as humanly possible.
Thank you very, very much for your indulgence.
it was a lot easier to compete while the aborigines in the third world were still throwing shit at each other and starving to death.
amazing what a little education and $1.35 a day wage scale will do for a company isn’t it?
In a nutshell, our government stuck a dick in us, and we continue to consent to the ravaging.
@ antisocialist: You’re always welcome here! A fresh perspective is nice.
A decade ago, you and I would be fellows. I was a starch-collared, Young Republican, business major who learned about the glories of the free market. I took to heart the concept of the market as a self-regulating organism of supply and demand forces. It was all dreamily ideal.
Then, I had a revelation: I’ve never lived in a free-market economy. In my life, the trend has been overwhelmingly toward deregulation, and “antitrust” has become less and less a problem. (The last real smackdown seemed to be the Internet Explorer case, in which MS prevailed. This would seem to bring things closer to equilibrium, but the other factors did not remain stagnant. Over time, government has provided more and more incentives to the supply side of the trade equation. This goes far beyond laissez-faire. Smith’s “invisible hand” would seem to be handing GM and Google a check. If making a bet on capital vs. demand power in this environment, the smart money is on capital. Which side will prevail in the GM/UAW strike? Whichever can afford to hold out longer.
I would like to see a viable, truly free market model in action. Unfortunately, there are none to be found. Anarcho-capitalism would be a free market to the Nth Degree. No boundaries, restrictions or counterbalances. In fact, Everything would be a function of the market. However, I am not aware of such a model on a significantly large scale. For that matter, show me a decent-sized economy that has a truly neutral government sector. Having the government incentivize market suppliers is but a few steps away from a centrally-planned economy–and we know how disastrous they can be. I think we’re both on the same page about free markets, only I know that we’ll never be able to overcome the influence of large companies over the state’s purse strings. Tariffs offset the corporate welfare without getting in its way. Unions support them, and their influence somewhat offsets that of companies and their lobbyists, so that seems like a logical way ’round.
The DiLorenzo claim seems a bit dubious. Not on his part but on the part of GM when, years later, they had the luxury of saying “we didn’t want our product to be too well-made or too inexpensive, or else the Big, Bad FTC would come and break us up.” Face it, Japanese cars were not so high-quality upon their initial introduction into the U. S. market. (For instance, how many ‘76 Toyota Coronas or Datsun 200 pickups do see on the road these days? Probably fewer than ‘76 Chevy Caprices or Chevy Silverado trucks.) Also, thanks to tariffs, the price gap was not as huge as might have been. The popularity of Japanese cars in the 60s-80s was a benevolent accident when a looming energy crunch and infationary market forces made having a light, fuel-efficient car a desirable thing. Today, Toyotas and Hondas are just as big and comfy as American gas guzzlers. I have not seen (though my research is far from exhaustive) an official documentation of GM’s market share policy dated from that time.
I’m glad you agree that the Fed is completely wack. Ricardo tells us that inflation is foremost a function of how much money and credit is available. The Reserve has been printing money like coked-up Romanian counterfeiters and the cut last week was the last straw for many foreign investors, confidence-wise. Bernanke put us in a position where he couldn’t raise the interest rate without having hari-kiri in the streets and couldn’t drop ‘em (adequately) without causing a market bloodbath. It almost seems like the Reserve wanted to destroy the dollar, in order to replace it with a new currency. A precious metal standard is crucial, Keynes be damned! That being said, there are other factors involved in inflation, as you know. Hence, my advocacy of tariffs.
Thanx again for coming by. I love me some economics!
Thank you, Soylent Ape, for your excellent manners and your courtesy. It means a great deal. And thank you also for your response.
Just for the record, the antisocialist is no Republican — young, starch-collared, or otherwise — and in fact loathes the right almost as much as he loathes the left. Actually, the term “classic liberal” is probably best-suited to the antisocialist’s politics, in tradition of, for example, Bastiat or Ludwig von Mises.
The last thing we want to do here is stomp all over Bagel’s box (and, Bagel, I never thought I’d live long enough to see the day I’d be saying that) with yet another boring economic dithyrambic. You did, however, say one thing that warrents a quick response.
Soylent Ape wrote: > For that matter, show me a decent-sized economy that has a truly neutral government sector.
Hong Kong, until fairly recently, was for many years a stupendous example of the inherent harmony of free-markets. Also, Elizabeth’s England. Norway and Sweden both have long histories of phenomenally successful economies that were, by and large, free. But of course, no country has seen such economic prosperity in such a short amount of time as the United States of America in its early days, when, based upon the primacy of individual rights, including property rights, it was the most liberty-drunk country the world has ever known.
That fact in and of itself is, in the antisocialist’s opinion, all the argument one needs for getting government out of business, just as they should stay out of religion, and for the exact same reasons.
Thank you again.
Thanx, Antisocialist. Please know that you are always welcome to enlighten us here at Ration Reality. I didn’t mean to pigeonhole you as a Republican. I was illustrating my own affiliation at the time and how it put me in a certain camp with regard to my view on markets. To ascribe that to you would have been presumptuous of me. My apologies.
Hong Kong will be interesting to watch over time. Even in the free-wheeling British daya, they still had a bit of interference from the Crown. Norway & Sweden may be pretty lax with tariffs and such, but anytime you have state-run industries (utilities, media, energy), that is enough government interference for me. Same with Britain and Germany, though the EU has cut back on many of the tariff/trade issues among member states.
I think we’ve both established that we agree on the feasibility of a truly free market, and that’s a lot of common ground.
Thanks again!
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