[BobTheCat]

As I look the CAD, it is at 0.94. As someone with USD, I am investing
in Canada and the CAD. The slide has been going on for years now.
Why just from the beginning of 2007 when it was ~0.84 to now is 10.6%
I've made on the USD I converted to CAD. CIBC is also paying me interest
while I hold my CAD.

 

[afransen]

TrickyRicky,

It does have a 'deflationary' impact to some extent. For instance, fuel prices haven't risen nearly as much as they would have if we still had a 65 cent dollar. For other things, many product sold in Canada are sold at prices the market will bear. For instance, Canadians are willing to pay more for books than Americans are, which is obviously reflected in the cover prices (the CDN prices greatly exceeding the USD prices even when considering the exchange). Same goes with many other imported goods, such as cars and electronics.

Bob: I wouldn't count on the CDN staying at this level over the long term. As has been mentioned in this thread, many economists think that the natural exchange is around 85 cents US to the Canadian dollar. This is what few people (even our enlightened newsmedia and politicians) realised when the hysteria surrounding the low dollar in the mid 90s lead to a strong push to adopt the USD because our currency supposedly was headed to the same territory as the Peso. Anyone with any sense knew that was rubbish and have been proven correct.

Over the short term, the economic situation (with Canada outperforming the US economy over the next 12 months perhaps) will see continued strength in the CDN, but I would count on a return to the mid 80s in the long term. That is, provided there isn't some drastic change in the underlying fundamentals of the US economy, such as foreign lenders balking at the astronomical US current account deficit.

 

[adma]

Ah, the Taft Hotel, the drag queen bars on Times Square, the ungentrified artist district ...

Yup, the Taft Hotel. Had Tommy James looked the other way, *that* would have been the title of "Mony Mony"...

 

[isaidso]

Give me a loonie worth $1.10 please. I wish the strength of our economy stemmed from a globally dominant high tech and/or financial services industry and not from resource wealth, but we probably have 50 years to make the transition before the resources are depleted.

Hopefully, we won't wait till 2040 before we attempt to diversify away from resource reliance.

 

[Admiral Beez]

A higher Cdn dollar will cause problems for our exports and for our (already struggling) tourist industry. Not good news!

I've been in international sales for over ten years now, and this argument always annoys me. A higher Cdn dollar will only (or DOES) cause problems for our exports IF (or SINCE) we are using a low dollar as the primary sales feature of our products, which generally applies to commodity items, but also to Canadian manufactured goods.

Anyway, once Bush is trimmed in Nov 2008 and the USA is out of Iraq (will happen quickly if a Dem wins) the USD will bounce back. Then, Canadian exporters will continue to lazily depend on a cheap currency to attract buyers to their products instead of adding value and/or making top demand items (ie. less forex sensitive) for export.

 

[afransen]

I hardly think that the weakness in the USD has all that much to do with Bush rather than the underlying weakness of the US economy and their monetary policy. The low Canadian dollar of the mid 90s had a lot to do with the US monetary policy of the day artificially boosting the value of their currency.

 

[simply Dan]

Canadian manufactured products should not be attractive to foreign buyers because they are cheap – they should be attractive internationally because of their high quality and innovation. "Made in Canada" should be seen in the same light as Made in Switzerland, Germany, Norway, Sweden, Denmark, etc. If our Dollar continues to rise, more manufacturers will have to wake up and realize that nobody will want expensive crap. Markets will, however, pay a premium for the best.

 

[unimaginative2]

Yeah, but will that ever happen? Many American manufacturers have been priced out of the market for ages, but their managements' only solution has been to press for lower wages. They don't seem to be able to do anything about the perception of low quality, particularly in the automotive sector.

 

[yin_yang]

Yeah, but will that ever happen? Many American manufacturers have been priced out of the market for ages, but their managements' only solution has been to press for lower wages. They don't seem to be able to do anything about the perception of low quality, particularly in the automotive sector.

yeah but the world is slowly getting smarter, at least outside of the United States. the average consumer is now educated and doesn't even pay one lick of attention to commercials, let alone watch TV much (real life is way better than a screen). purchases are now more impulsive than before, but not as many people just pick out something just because of the packaging. i like to look at where a product is made (obviously has a LOT to do with quality), the type of language used to sell it, ect...if the wording makes it seem like a gimmick or uses really vague words, bam...no sale. if there are claims made that are scientifically impossible or seem unresearched, it doesn't deserve to be sold. then the product itself has to be compared to the ones right next to it. probably the best and quickest way to analyze the quality, usefulness and longevity of a product...hopefully the rest of the world follows suit.

 

[AnarchoSocialist]

the average consumer is now educated and doesn't even pay one lick of attention to commercials, let alone watch TV much (real life is way better than a screen).

I would like to think that is true, and to some extent it is, but people are now so saturated with advertising from so many different sources in so many aspects of their daily life that you could never watch a single commercial and still be influenced in any other number of ways. And the same is true with tv. People may not watch as much television, but they are also using the internet more which has become the same sort of commercial medium that television is, so I would question if things have actually improved, and think it is more likely that things are getting somewhat worse.

As for manufacturing changing, it will probably be a split. There will be some manufacturers who either lack the innovation to adapt or because of other economic factors find themselves with no possible way to survive. But I am sure many will also find ways to capitalize on the opportunity and create higher quality products that don't require huge volume or low wages. And it will also depend on what part of the country you are in too. Ontario will probably be ok because it has a fairly stable and advanced manufacturing industry. Even the automobile industry is not in too much danger yet and so long as they are forward thinking and adapt to the market there is no reason they should not do fine. Quebec on the other hand is not in an enviable position.

 

[simply Dan]

http://www.cbc.ca/money/story/2007/06/12/consumerdollar.html

Canadian consumers missing out on benefits of higher dollar: report

Canadian consumers haven't reaped any of the benefits of the rapid increase in the Canadian dollar rate, leading to higher inflation and growing pressure to raise interest rates in this country, a bank economist says.

The costs of a high Canadian dollar — more expensive exports and fewer manufacturing jobs — are well-known.

But what about the benefits?

In the past five years, the loonie has risen 50 per cent against the U.S. dollar. But Canadian prices for many goods sold in both countries haven't been adjusted to reflect the narrowing gap between the two currencies, according to a report by BMO Capital Markets deputy chief economist Douglas Porter.

"Retail prices in Canada have responded to the loonie's moon shot with all the speed and alacrity of a three-toed sloth on a hot summer's day," Porter said.

The most obvious example is the wide discrepancy in the prices of books and magazines. Paperbacks that sell for $9.95 in the U.S. are routinely priced at $12.95 in Canada — a 30 per cent premium that is far greater than the current seven per cent difference in the currency.

"The spread on book prices only stands out because of the ease of comparison," Porter says. "Many, many other products are at least as far out of whack."

Porter compared a number of products selling on both sides of the border. In a few cases, Canadians were not being overcharged. For example, Apple iTunes charges 99 cents for a song download in each country, so Canadian buyers actually get a break.

But in most cases, the Canadian buyer paid heavily for buying the product in Canada.

He cites the cost of a Honda Accord. It lists for $26,500 in Canada, but only $20,475 in the U.S. After taking the exchange rate into account, the U.S. Accord is 14 per cent cheaper.

A BlackBerry 8100 wireless device lists for $499 in Canada. Assuming an 88-cent US Canadian dollar, one would expect the BlackBerry to list for $439 US in the United States. But it actually lists for $399 US.

The study's comparisons were based on an 88-cent US dollar, even though the current exchange rate is closer to 94 cents US. But Porter acknowledges that prices can't be adjusted instantly to reflect the latest exchange rate.

Given the higher Canadian dollar these days, he says the price gaps between the two countries are even wider, meaning that prices in Canada should be even lower.

The price gap has serious policy and economic implications for Canada, Porter argues.

He says that higher prices have helped to boost Canada's core inflation rate to 2.5 per cent — the highest among the G7 countries. That inflation has, in turn, increased the pressure to boost interest rates.

"If consumer prices had reacted even a little more forcefully to the loonie's steep ascent, core inflation would be considerably closer to the [Bank of Canada's] two per cent target, and officials would not be openly warning that rates need to go higher," Porter said.

He also warns Canadian retailers that if the price gap remains as wide as it is, Canadians may take up cross-border shopping again.

 

[Brandon716]

President Bush has focused on a weak USD policy for many years now, so the parity of the two currencies isn't surprising.