The Canadian Dollar Makes Its All Time Record

Oh my:

The seemingly unstoppable Canadian dollar surged to its highest level yet Wednesday, topping 106.17 cents (U.S.).

The record came just after 4 p.m., when official trading ended for the day. Officially, the dollar closed at 105.85 cents, up nearly a cent from Tuesday's close, but trading continues virtually around the clock.

By cracking through 106 cents, the dollar topped what most observers believe to be the old record of 106.14 cents set on Aug. 20, 1957.

As a Canadian it looks like I'm going to have to rewrite my own contracts with US customers so I don't lose even more money to this. Funny how your own advice (I was writing about the dollar's inexorable rise years ago) is the hardest to take.

Canada's a petro-economy now. That's a mixed blessing, but it is making consumer goods cheaper and it is fueling a massive boom in Alberta. It's also gutting Canada's manufacturing sector, and is especially hitting southern Ontario hard, since it's caught between Detroit's collapse (which is now so extreme that even cheaper costs due to universal healthcare can't make up the difference) and the dollar's rise.

The dollar's rise is one reason why Quebec, whose economy can be summed up as "power to New York, farm goods to the rest of Canada," is feeling generous towards the conservatives - those export earnings are going far.

Overall I'm not pleased with the dollar's rise. In 7 years it's risen around 50% against our main trade partner. Since Americans have to have oil, natural gas and electrical power no matter what, they've had to pay, but it's devastating our industrial sector. What would you do if, for no reason you have any control over, the majority of your expenses rose 50%? In many cases there'd be nothing you can do, you can't pass on those sort of increases to your customers when China has been spending about 10% of GDP to keep their prices down.

Eventually the oil boom will end. All resource booms do. And when they do Canada's going to have a lot less of an industrial sector than it used to. Resource wealth is, generally, fake wealth. It builds very little permanent prosperity for those who have it. It is, though those getting wealthy in Canada's oilfields won't believe it, a curse.

Once the Maritimes, with their great tall straight trees, were one of the jewels of the British Empire. Today maritimers live on what amounts to federal government aid. When the trees (and later the coal) were no longer needed, none of the money that had poured out of the ground stayed.

That's the future of Alberta, almost certainly. What I fear is that it is the future of Canada.

Comments

[amanda85]

Well, it's good that now, due to the exceptionally high loonie, I'm just a ferry trip from exceptionally cheap consumer goods, but, as an environmentalist and member of the GPC, the oil industry gutting Alberta's natural resources worries me a lot. In a decade, maybe even Banff will become an oil field... :(

[RevMetheus]

Used to joke about Canadian money, now its worth more than ours.

When the peso comes even with the USD, then we've truly become the new banana republic.

[willo]

Well you could say the other currencies are rising but it's actually the dollar is shrinking. It's this idiot war being fought with borrowed money. It's the fascist's that control this place destroying it intentionally.
Foreigners are bailing on the dollar as a reserve currency. They have loaned us so much money they know we can never pay it back. And they are holding trillions of US currency that they see shrinking before their eyes. The quandry for them is to move away from the dollar but it's tricky, one wrong move and they could be holding worthless paper.
Let's all remember who got us into this mess when the shit really hits the fan.

[ajax2]

Philippine peso gained 5% against dollar yesterday. Fed just authorized another 42 billion be printed. M3 is no longer reported. Look away there's nothing wrong here.

[BRUMALIA]

Canadian dollar has become a double edged sword for Canadians.

[olephart]

Holy shit, I've got to find all those Canadian quarters that I got in change and threw in a drawer. It's like having another 401k.

[mamacat]

The effects of Bush's Voodoo economics are very evident.

[emerywood]

While the appreciation of the Canadian dollar may be something to be proud of for Canadians, it is really a two-edged sword for the Canadian economy. American tourists find prices are 25% higher in Canada for almost everything there, including hotels and car rentals. So, you are losing tourists from the States. Canadians are coming across the border to buy cars and other items at a discount. And you are losing business in your car and other markets everyday. I guess one just can't have it both ways.

[madprophet]

So sad, so accurate. Our country is reverting back to a hewer of wood, drawer of water, like 100 years ago.

I suggest we are too far gone. Another 1000 jobs gone at the Brampton Chrysler assembly plant today. When the commodity market does cool (though I doubt it will crash), you are absolutely correct Canada will be doomed.

I am trying to maximize my wealth right now by investing heavily in the commodity based stocks, but sooner or later I will get burned unless I time it right.

Make you money now in the commodity sector, because you will have to live off that wealth 10 years from now.

[starboymikey]

When my wife and I were in B.C. just this past July, the CD was at .99 ... more or less at "par." You'd walk into any store or restaurant and pay the same amount for something, whether it was in Canadian or American dollars. Since then, in just three months, the "greenback" and dropped a full 6% against the "loonie." Looks like we went to Canada just in time. If we wanted to go today, we couldn't afford it.

[Mormondude]

Now you know how it feels for Americans to have China peg their currency to the dollar at a favorable exchange ratio for them. We've been hemorrhaging jobs and money to China for decades now, and without the exchange rate being able to float there was no market force acting to right the ship.

[TTigerX2]

Here in Canada the rising dollar is trumpeted as being something Canadians have finally done right about their staggering economy, based largely on natural resources. However, the rising dollar has caught the federal government and the far more powerful provincial governments off-guard. The CDN dollar has been a commodity dollar since the 80s, due in large part to the failure to establish a market economy based on manufacturing and exporting. Now with the CDN dollar on the rise, there is no way to take advantage of it for most businesses. American companies -- which dominate the landscape -- are moving back to the states, taking a half-million jobs out of Ontario and another 200,000 jobs out of British Columbia, mostly jobs in the entertainment sector. Even after the adjustment of the new CDN dollar retail prices in Canada are 25% higher than in the US for the same products, causing a dramatic increase in cross-border shopping before Christmas. Not all is well above the 49th parallel. The taxes are at an all-time high as well and inflation continues unabated. Only the banks are happy.

[kensp]

Times are good in Alberta now. People who purchased a modest home in Calgary for $150,000.00 or so five years ago are now living in a home worth close to half a million dollars. Those of us who are 40 or over however remember the early 1980s when the first oil boom went bust. Almost overnight property values plummeted and home owners were left holding mortgages for much more than their homes were worth. Many of these people simply walked away from their mortgages and let the banks foreclose. Because the homes were worth less than what was owed several smaller banks folded and interest rates skyrocketed. Predatory "dollar dealers" took advantage of a loophole in Alberta foreclosure law to turn this to their advantage. They would buy houses in foreclosure for a dollar and then rent them out and pocket the money during the time it took the foreclosure to wind its way through the courts.

Nowadays we are told that the Alberta economy is more diverse with a vigorous high tech sector. In the 1970s the government did one far sighted thing. They used oil money to vigorously subsidize the province's universities so that tuition was practically free. My first semester at the University of Lethbridge cost me a paltry $275.00. There is a highly educated work force here as a result, but will this prevent another bust? I don't know and I hope I don't have to find out.

[NChooseK]

Good post, but if I could recommend an edit. Talking about "the dollar's rise" is ambiguous. You might want to use "loonie" and "greenback" as terms to distinguish the Canadian and U.S. dollars, respectively.

I know right now it's the Canadian dollar that's rising overall, but things change, as your post explains very nicely.

[wiltmellow]

Psst: The earth is not a commodity for your exploitation.

Oops. Too soon with that heresy. Go ahead and extract resources and fret about the long-term economic implications. After all, the symbolic trumps the real. Forget about global warming. Maybe Canada can open a toll-booth on the Northwest Passage and the tundra will become the world's breadbasket.

You have a bright future Canada!