Harper anxious about loonie's 'rapid' surge

[geoffrey]

Anyone paying 8% exchange is not financialy aware that their is a way to pay a lot less ; even no exchange fee.

Well, technically you can find a person that holds alot of US cash and trade it for your Canadian cash, but I don't know many such people or people that would subject themselves to such risk. Besides, the largest transaction then could be $10,000, and I'm not sure about custom laws so it might even be lower if someone has to cross the border to conduct such a trade.

Your credit cards give you a very competitive exchange, I make all my foreign purchases on my VISA and then pay it in canuck bucks. Like msj, I average about 2.5% fee on the exchange. I found Paypal to be reasonable too when I used it.

[msj]

You forget I also pointed out that there comesa time when the exchange rate becomes a percentage of the higher currency and yes it does matter to many and you may be able to keep this in mind, but mentioning it and doing so in a way that all should understand is not messing up the issue, as you put it. I find your take is very wrong as it does not take into affects these other charges, and fees. So if you want to know just what a dollar really buys, you need all things included. If as you say the .63 USD is exchanged but using 8% of the higher currency value is adds almost .11 cents off that figure, where if it was to stay to the lower figure it would be .045 cents. That is quite the difference, and it will be the banks who decide to do this, not the government of the posted dollar value. We have already seen this and know that it happens. So why not make sure of things are clear on the matter. Unless you want to hide the fact of life from people.

Fair enough.

I really don't think the difference is big enough given the context of these discussions to really matter.

Once again, it is a given that fees will be charged at a variety of rates and that if we all just stuck to the official rates excluding fees then we are all using an easily agreeable base to have these discussions.

I don't see the point of piling on the relatively small effects of fees over the course of changing exchange rates when the larger issue is the rapid rise of the dollar -- IOW, a 40%+ change in the currency beats out a fractional change in the relative effects on the fees.

If we go there then we might as well bring into the discussion to what extent retailers/wholesalers/manufacturers are not adjusting their prices fast enough to deal with the change in the currency.

And then someone can chime in with duty rate effects on this and that and its impact on all this etc...

Sure, all of that is relevant to any discussion of exchange rates (given their impact on purchasing power parity, for example) but we are discussing the "rapid" surge of the loonie and how and why it got here and where it could go -- IOW, macroeconomic stuff.

As such, a common base is being used which is the official exchange rate excluding fees since fees not only vary from credit cards to banks to stores but also from a general consumer who gets a worse rate than a large international company that gets a discount.

Edited November 10, 2007 by msj

[old_bold&cold]

It was just something I had thought to point out, as I know whenI came upon it during the low CDN, I was taken back a bit until I finally figured thru it. This will happen to the USD if it drops to the predicted .80 by June 2008. But yes if we just stick to the rates it does give us a comparable direction of things, but as I said no one should think it is what they will see when trying to convert the currency. For the most part the American had the advantage that ppretty any where in the world tourist travels prices were in USD and there fore did not need to echange their currency. It now looks like that will be about to change and the exchanging of currency will be new to most of them and all its little nibbles from what seems to be everywhere.

I do agree though that we will see some interesting times to come. I do not agree that the USA can do much of anything to shore up this dollar, even with the levers it has had in the past. With several countries divesting USD holding and some of the big ones like China and Japan, also switching to Euro holdings, I do nt see any high level interest rate turning this around. Any new debt sought by the USA will be in Euros and not USD and that will hurt more then anything else. The tables stakes have gone way up, and while I do see that some of the gains of the CDN are based on our strengths, there is a lot of it also based on weakness of the USD. If what the bankers have already predicted and set their sites for comes true and we do have a $1.20 CDN by June 2008, then we will all be wondering where it will go from there. It has also been said by those in the know, that this is not going to be a short term things but it will be several years of the USD being low. Maybe they are wrong, but I would not bet against it.

[ScottSA]

I said a long time ago we may all be driving Fung's over Ford's someday soon and working in China as serfs opening American food restaurants across the plains of china as we help built their bullet train tracks so I don't need the lecture of forced shrink-ages and strategic bullshit ,,please.

Harper's timing and wilful neglect over ignoring infrastructure , health and or any other investment in this country just to brow beat and bait Dion and stupefy voters ,,,well some of us have maybe smoked more than others and still can connect the dots.

Sadly some don't/wont/cant even or ever see the dots

I sadly have an opinion on everything.

Stick to mumbling about the virtues of being stoned all day dude. You're completely incoherent on this subject...do you imagine that Harper somehow had some impact on the sub-prime loan crisis, the monetary crisis, and the markets? Do you even know the difference between those three? What does "infrastructure" have to do with anything? I'm willing to bet you don't have a clue...not a clue.

[shavluk]

You would lose.

I don't care how stupid you chose to remain.

I say what I say dont like that ,,,,who cares?

[ScottSA]

The US is in a bit of a bind at the moment. The subprime crisis (along with associated class action suits) is hitting the banks' sharevalues, and the only way to mitigate the subprime crisis is for the Fed to lower interest rates, which in turn devalues the USD. That in itself has a spiral effect, as we're seeing with Chinese threats, further devaluing the dollar. The spiral effect is worsened at the same time by inflationary pressure (mostly energy). Yet the US can't start raising interest rates again or it'll wreck the banks; maybe even some of the major banks, and it can't do that or we'll revisit 1929, and not long after that, 1933. If small banks and mortgage institutions fall, as many already have, it's no big deal, but if the majors start tumbling, they'll drag down every valuation in sight across all sectors, making 2001-02 look tame. The DOW will drop to 8000, and the smaller indexes will crash around our ears. The US export economy won't benefit that much, really, because it has long since shed its manufacturing sectors and turned to service.

The effect on the Canadian dollar is just a mirror effect, and there's not really much Harper can do about it, short of dropping interest rates and running into the same problems as the US. He'll eventually have to do that, just to keep from wrecking the Canadian manufacturing and exported goods sector, but hopefully he can manage to bring on an election before that happens. Given, he doesn't directly have the subprime crisis to worry about, but he certainly has the aftershocks to deal with, and they'll be substantial.

If the US gets hit with a major terrorist attack right now...

Edited November 10, 2007 by ScottSA

[daniel]

Since Harper doesn't really know what to do with the $14billion in surplus, he should just buy $15billion USD. All that CAD into the currency market should prop up the USD.

[old_bold&cold]

Since Harper doesn't really know what to do with the $14billion in surplus, he should just buy $15billion USD. All that CAD into the currency market should prop up the USD.

That mighr work if the problem was so small, but what we are looking at here are trillions of USD being exchanged for Euros, so 15 billion would not do anything at all. Plus buying USD at this point in time would mean you are looking to lose 20 % of this by June of next year. Not something that a smart investor migh do.

[capricorn]

Since Harper doesn't really know what to do with the $14billion in surplus,

I'm hoping he'll save some of that for more tax cuts in the Feb. 08 budget.

[ScottSA]

That mighr work if the problem was so small, but what we are looking at here are trillions of USD being exchanged for Euros, so 15 billion would not do anything at all. Plus buying USD at this point in time would mean you are looking to lose 20 % of this by June of next year. Not something that a smart investor migh do.

Then I'm not a smart investor, because I moved a lot of CND into USD between 1.05 and 1.09, and I'm keeping much of my USD pay in USD. 1.10 is in all probability the ceiling before it recedes and settles at .90 again. This is a temporary state of affairs, even though the hopeful left will be yowling that this is, again, the "inevitable crisis of capitalism," yada yada.

[Guest American Woman]

I would be investing in the U.S. dollar while it's low. It's not as if it hasn't been lower than CND in the past-- and then risen to over $1.50 within the past few years. Anyone who thinks this is a permanent state of affairs really knows less about it than I do, and that's not saying much.

I read all of these predictions, and that's all they are is predictions. Even 'this country is thinking about investing more in euros' becomes that country IS investing all its money in Euros in some people's minds. Like I said, the U.S. market is too important in the world. If we suffer, the world market suffers. It's not as if these countries can find another market to replace Americans.

And again, the Euro is new to the economy and has no history like the US$. I'm wagering over time the Euro will also have its ups and downs.

Treasury Secretary Henry Paulson said on Friday that he was not worried that the US dollar might at some point lose its position as the currency of choice for investors.

"The dollar has been the world's reserve currency since World War II and there is a reason. We are the biggest economy in the world. We are as open as any economy to investment," Paulson said, speaking to reporters at Treasury.

Paulson predicted that despite the current troubles in housing and the credit markets, the US economy would continue to expand because "you are going to see our strong economic fundamentals... shine through."

Link

[M.Dancer]

We bought our holiday Pesos last week with the assumption that the US peso will rise and we will have saved 75-150 Loons......I am also working under the assumption that we will holiday in the UK....but I think that might be the losing assumption.

[old_bold&cold]

I would be investing in the U.S. dollar while it's low. It's not as if it hasn't been lower than CND in the past-- and then risen to over $1.50 within the past few years. Anyone who thinks this is a permanent state of affairs really knows less about it than I do, and that's not saying much.

I read all of these predictions, and that's all they are is predictions. Even 'this country is thinking about investing more in euros' becomes that country IS investing all its money in Euros in some people's minds. Like I said, the U.S. market is too important in the world. If we suffer, the world market suffers. It's not as if these countries can find another market to replace Americans.

And again, the Euro is new to the economy and has no history like the US$. I'm wagering over time the Euro will also have its ups and downs.

Treasury Secretary Henry Paulson said on Friday that he was not worried that the US dollar might at some point lose its position as the currency of choice for investors.

"The dollar has been the world's reserve currency since World War II and there is a reason. We are the biggest economy in the world. We are as open as any economy to investment," Paulson said, speaking to reporters at Treasury.

Paulson predicted that despite the current troubles in housing and the credit markets, the US economy would continue to expand because "you are going to see our strong economic fundamentals... shine through."

Link

I must admit that I am not a worldly financial genius. But where I do get my advice and news from is my brother who was just until recently a retired CEO of a major Canadian Bank, where these and other bank CEO from both Canada and the USA meet often as much as once a month, to discuss things in general. What I have been told here are the quick versions that have been dumbed down for me by my brother. Now, are they written in stone? No, these are just what the banks have decided will happen and they then make their long term plans based on this. Would I bet against them being wrong? the answer is no, as most will have already seen the banks seem to always make money even when things go bad for countries.

Just so I make myself clear, the USA is in trouble like it has never seen before. If they do not soon take better issues of things they will be deeper in trouble for decades of time. Bush has no real plan and will ride out his last year in office still being the way he has always been. The high CDN will be for well over two years, and is not a flash in the pan as some have said. It will continue to climb for all of 2008. The USD therefore will be down, and if you are already being paid in USD and in the USA, it will not be seen much for now, but in the next couple of months you will see what I do not want, but will happen, and that is instead of Canadian prices going down the USA prices will be going up to meet and even surpass the Canadian prices. Shortly the people in the US will see everything climb on a daily rise and fall type basis, and it will always seem that it rises more then it falls. Get used to it as it is coming. I will say that it will be obvious by early spring. Remember I said that, and also that for the most part no one has said much about this before. Then just remember it is not me who is a genius predictor, but it is just where I get my info from that are very wise in these things.

Edited November 11, 2007 by old_bold&cold

[msj]

I must admit that I am not a worldly financial genius. But where I do get my advice and news from is my brother who was just until recently a retired CEO of a major Canadian Bank, where these and other bank CEO from both Canada and the USA meet often as much as once a month, to discuss things in general. What I have been told here are the quick versions that have been dumbed down for me by my brother. Now, are they written in stone? No, these are just what the banks have decided will happen and they then make their long term plans based on this. Would I bet against them being wrong? the answer is no, as most will have already seen the banks seem to always make money even when things go bad for countries.

Just so I make myself clear, the USA is in trouble like it has never seen before. If they do not soon take better issues of things they will be deeper in trouble for decades of time. Bush has no real plan and will ride out his last year in office still being the way he has always been. The high CDN will be for well over two years, and is not a flash in the pan as some have said. It will continue to climb for all of 2008. The USD therefore will be down, and if you are already being paid in USD and in the USA, it will not be seen much for now, but in the next couple of months you will see what I do not want, but will happen, and that is instead of Canadian prices going down the USA prices will be going up to meet and even surpass the Canadian prices. Shortly the people in the US will see everything climb on a daily rise and fall type basis, and it will always seem that it rises more then it falls. Get used to it as it is coming. I will say that it will be obvious by early spring. Remember I said that, and also that for the most part no one has said much about this before. Then just remember it is not me who is a genius predictor, but it is just where I get my info from that are very wise in these things.

Just to play devil's advocate, there are many smart people saying just the opposite.

Marc Chandler is an economist with an interesting view of USD:

FPA Media - Video

[Smallc]

Just to play devil's advocate, there are many smart people saying just the opposite.

Marc Chandler is an economist with an interesting view of USD:

FPA Media - Video

No one rally knows what will happen, they can only guess. I suppose we'll have to wait to find out who, if anyone, is right.

[Higgly]

Just so I make myself clear, the USA is in trouble like it has never seen before. If they do not soon take better issues of things they will be deeper in trouble for decades of time.

Yes it is.

The US right is now starting to finally ackowledge its true motives in Iraq. This morning on PBS, panelists from the right wing hard talk forum, "McLaughlin Group" admitted by a majority that Iraq is all about oil. They've confessed to their adultery, but still haven't owned up to robbing the likker store. The markets are not amused.

The title of this thread made me chuckle. If Harper were really concerned about the value of the loonie, he'd actually do something. He's only kissing a$$ for votes.

Edited November 11, 2007 by Higgly

[bush_cheney2004]

Just so I make myself clear, the USA is in trouble like it has never seen before. If they do not soon take better issues of things they will be deeper in trouble for decades of time. Bush has no real plan and will ride out his last year in office still being the way he has always been.

This does not make any sense...perhaps you have never heard of the Great Depression.

The high CDN will be for well over two years, and is not a flash in the pan as some have said. It will continue to climb for all of 2008. The USD therefore will be down, and if you are already being paid in USD and in the USA, it will not be seen much for now, but in the next couple of months you will see what I do not want, but will happen, and that is instead of Canadian prices going down the USA prices will be going up to meet and even surpass the Canadian prices.

Oh, you mean like it was in Canada for over 30 years? It seems that Canada has survived....and so will the USA.

Shortly the people in the US will see everything climb on a daily rise and fall type basis, and it will always seem that it rises more then it falls. Get used to it as it is coming. I will say that it will be obvious by early spring. Remember I said that, and also that for the most part no one has said much about this before. Then just remember it is not me who is a genius predictor, but it is just where I get my info from that are very wise in these things.

It does not take a genius at all to explain the obvious, or reflect on what has happened before under similar circumstances. let the chips fall where they may.

[old_bold&cold]

This does not make any sense...perhaps you have never heard of the Great Depression.

Yeah I heard of it and yes my parents lived through it. What is happening now while it will not be like the depression with soup kitchens feeding the nation, it will be worse in most respects. The social network of todays countries make it so the worst family affects of such things are not so devastating. But yes you got the right idea of how bad it will be.

Oh, you mean like it was in Canada for over 30 years? It seems that Canada has survived....and so will the USA.

What hapened to the CDN was something that in part is what will happen to the USA, and yes we survived and yes again so will the USA. It just will not be as strong and will never be seen as a world dominating nation ever again, after things take the USA economy to task. As I said earlier the people in the USA will have to get used to $4.00 / gallon gas, very high prices for food and exceptionally high prices for everything they have to import, which is a very very large number of things.

Here in Canada when things looked bad for our dollar, the CDN was not doing so bad against the Euro, and the USD was almost 2.5 times what the euro was. So yes we here in Canada had import options to keep prices down. We got a lot of our winter vegetables from Brazil and Argentina, at very good prices. Today all those places have made vast gains in their currencies, so there no longer can hep cushion the affects. The sad part is that while the worlds currencies are all gaining on the USD, the USD is also dropping against these and it is like getting hit twice as hard. The fact that you have countries dumping the USD for the Euro, should tell you that this is no flash in the pan things and it is very long term. Otherwise they would not exchange them for short term values. Those who want to be stubborn can sit and wait for the times to turn, but that will be a very long time in coming. As you said our dollar played around moving up and down for 30 years And for at least half of that time it was very low. Well the USD is falling much faster then the CDN ever did and it will probably take longer to grow back up. So 25 years can be a long time to wait to see investments in USD pay off.

Non of what I said is hocaust pocus, and if people look and follow the money markets and those who speak for the international funds, and you will see that all of what I am saying is there and in the open. I have only brought together things so they follow what the banking industry have already said would happen. I would assume they used mush the same data for their thinking. The USD can slow things down a bit, but I do not think Bush has any plans to do so, as it will all hurt his war efforts, and he would let all the USA go down before he does that. Just my opinion, and those of a many others might I say.

It does not take a genius at all to explain the obvious, or reflect on what has happened before under similar circumstances. let the chips fall where they may.

I said I am not a financial genius, and I said where I get my info from. it all makes sense to me and that is why I have chosen to believe it. I have also said why this time it will be much harder to handle a failling currency then it was before. I am open for any arguments that would show it to be otherwise. As you said let the chips fall as they may, but I wonder if the USA government can not reel in some of Bush's policies that are hurting their cause and also making the rest of the world not worry about kicking the USD when it is down. I would like to see some thing, that would slow this down and even make it lessen the damage it will cause. But I just do not see that white horse on the horizon.

[bush_cheney2004]

Yeah I heard of it and yes my parents lived through it. What is happening now while it will not be like the depression with soup kitchens feeding the nation, it will be worse in most respects. The social network of todays countries make it so the worst family affects of such things are not so devastating. But yes you got the right idea of how bad it will be.

Well, if you know Canada's history during and after the Great Depression, you would know that Canada suffered far longer and deeper. It does not have the capacity or market size to solve such problems on its own. Even much later in the century, Canada came far closer to the abyss (government default) than the US ever has. The "Misery Index" of the 1970's came years before record American debt, so it is not directly related at all. Indeed, America's greatest deficits as a percentage of GDP came during WW2, and we all know what happened after that.

What hapened to the CDN was something that in part is what will happen to the USA, and yes we survived and yes again so will the USA. It just will not be as strong and will never be seen as a world dominating nation ever again, after things take the USA economy to task. As I said earlier the people in the USA will have to get used to $4.00 / gallon gas, very high prices for food and exceptionally high prices for everything they have to import, which is a very very large number of things.

Americans are quite prepared to pay $4/gallon.....what is unacceptable is a shortage of supply at any price. Europe has paid such prices for many years. Foodstuffs will not be an issue at all...California alone produces enough for export to Canada.

The sad part is that while the worlds currencies are all gaining on the USD, the USD is also dropping against these and it is like getting hit twice as hard. The fact that you have countries dumping the USD for the Euro, should tell you that this is no flash in the pan things and it is very long term. Otherwise they would not exchange them for short term values. Those who want to be stubborn can sit and wait for the times to turn, but that will be a very long time in coming. As you said our dollar played around moving up and down for 30 years And for at least half of that time it was very low. Well the USD is falling much faster then the CDN ever did and it will probably take longer to grow back up. So 25 years can be a long time to wait to see investments in USD pay off.

No...this is not the case at all. The American dollar has been devalued from levels far exceeding what we have known in our lifetimes. It was taken off the gold standard to become fiat currency. Many times this weak dollar policy is by design. The CDN dollar is insignificant to such valuations. As AW has pointed out, average Americans don't really care what the Canadian dollar does. Enjoy the ride at the top after having been so low all those years.

As you said let the chips fall as they may, but I wonder if the USA government can not reel in some of Bush's policies that are hurting their cause and also making the rest of the world not worry about kicking the USD when it is down. I would like to see some thing, that would slow this down and even make it lessen the damage it will cause. But I just do not see that white horse on the horizon.

Global currency markets are do not kick the USA when it is down. The market reacts to risks and opportunities, same as before. It's not personal. George Bush would have a balanced budget except for any combination of spending choices, not just the wars in Iraq or Afghanistan. It is the same as it ever was.

[jdobbin]

I'm hoping he'll save some of that for more tax cuts in the Feb. 08 budget.

Flaherty has already said that he will let the present cuts work their way through the system rather than making another huge round of cuts in February.

I don't know that the government will make it to February. If confidence measures come fast and furious, the Liberals will have no choice but to respond. They weren't going to vote down tax cuts but they probably could down something the Senate proposal by saying that Harper should go the provinces first. In Quebec, abolishing or reforming the Senate is simply not on according to the polls.

Edited November 12, 2007 by jdobbin

[ScottSA]

Just so I make myself clear, the USA is in trouble like it has never seen before. If they do not soon take better issues of things they will be deeper in trouble for decades of time. Bush has no real plan and will ride out his last year in office still being the way he has always been. The high CDN will be for well over two years, and is not a flash in the pan as some have said. It will continue to climb for all of 2008. The USD therefore will be down, and if you are already being paid in USD and in the USA, it will not be seen much for now, but in the next couple of months you will see what I do not want, but will happen, and that is instead of Canadian prices going down the USA prices will be going up to meet and even surpass the Canadian prices. Shortly the people in the US will see everything climb on a daily rise and fall type basis, and it will always seem that it rises more then it falls. Get used to it as it is coming. I will say that it will be obvious by early spring. Remember I said that, and also that for the most part no one has said much about this before. Then just remember it is not me who is a genius predictor, but it is just where I get my info from that are very wise in these things.

I don't know who your brother is, but I suspect he's wrong. Especially since you prefaced it with "the USA is in trouble like it has never seen before..." No it's not. It's in a bind, but a temporary one. Any ex-CEO of a bank knows very well that both China an the EU, and anyone else that sold off great quantities of USD would completely destroy their own economies. That leaves one, and only one option: prop it back up by buying while there's a fire sale. China simply doesn't have the capacity to outride a collapse or even a significant decline in the USD, so all they're doing is making noise so the US takes inflationary pressure more seriously than the sub-prime crisis. The USD certainly isn't going to continue declining very much more than 1.10, if it even gets that far. All things being equal and remaining the same, that is...

[msj]

Although I, too, disagree with OB&C's conclusion about the US I will defend him in that it is still possible for the US to have problems that will create conditions like those of the Great Depression.

It will likely come down to how well US and Chinese politicians can deal with the situation should the worst case scenario begin to assert itself.

If US politicians ramp up the protectionism again (like they have been doing off and on for a few years now) and if China responds in kind, then we could have something worse than the Great Depression.

People forget that prior to the "Great Depression" of the 1930's that there was a "Long Depression" in the late 1800's, iirc about 1873 - 1896, albeit more of a European event than a North American one.

People around 1929-1932 would probably have similar reactions to those above about comparing this period to the earlier period. Of course, by the time 1934 or 1935 came around it became painfully obvious that things can be worse and we won't know it until it happens.

So, I hope OB&C is seriously wrong but I recognize that there is a chance he is right.