If the Canadian Economy is doing so well why is the Dollar doing so po

[Jerry J. Fortin]

Are not all these calculations just a tad screwy? I mean really, comparing a nations GDP to its debt translates into a measure of what? All these questions point to a money supply issue, or monetary system issue in a greater sense. Now when you tie the question to the dollar, is not speculation the name of the game in a currency market? So how the hell is all the calculations relevant to the value of a nations dollar, with them being subject to mere speculation?

The Canadian economy is going down the tubes, whether folks believe it or not. The minute we lose jobs in the manufacturing sector you know what is happening with the local economies. Folks lose their jobs and business start losing the money those folks were spending in the free market and sooner or later the drop in consumer spending starts a ripple effect into a downward spiral. That is where we are now, in a spiral downward. All the politicians will tell you things are getting better, but how many new manufacturing plants are being built? How many good paying jobs are being created, and how many crap wage jobs are created?

Canada needs to realize that things have changed in the real world. America is no longer the big powerhouse it used to be, and we are geared full tilt toward that economy. What can we realistically expect with so much of our trade depends on one single market? WE have been very foolish putting all our eggs in that one basket. Now we begin to see where we are going, and now we know what to expect, so now we have to change. We have to adapt to the new world we find ourselves in. Its all good though, because change is in fact a good thing. Things are always better we you change things around.

So lets change not merely the game we play but why not instead change the rules we play by? Lets have rules that work for us, not against us.

[Saipan]

A high Canadian dollar makes our exports more expensive and imports cheaper so we sell less and buy more.

That's relative. If that was really so then European nations would have very hard time to sell anything. And 'specially UK. And Mexicans would be exporting like crazy. Cubans even more so.

[guyser]

That's relative. If that was really so then European nations would have very hard time to sell anything. And 'specially UK. And Mexicans would be exporting like crazy. Cubans even more so.

You are better served sticking to your "found on the internet " quotes you so adore,because with this post you clearly show you dont know about exports.

Who do we sell , in total dollars , the most to?

Who do we buy from, in total dollars, the most to?

Is it Cuba Mexico and the uk?

No it isnt. When our dollars rises/lowers a penny vs the US dollar, our exports there change.

Edited November 22, 2010 by guyser

[Evening Star]

So why is it good for the US to have a higher dollar? Is it just because their export market is more diversified? (It probably is.) Who does the UK mostly trade with?

I'm openly admitting I don't know much about trade. I'm actually curious.

[guyser]

So why is it good for the US to have a higher dollar? Is it just because their export market is more diversified? (It probably is.) Who does the UK mostly trade with?

I'm openly admitting I don't know much about trade. I'm actually curious.

Say you manufacture Product A and sell at $1 a piece.Your buyer in the US m,akes his order and sends a cheque

The US $ rises, he can now buy Prod A for less money since $1CDN = $.80 He saves 20cents and then can discount his stuff or keep the profit.Likely is he will order more and everyone wins.

On the other hand. When his dollar rises( $US), he has to pony up more to equal $1CDN

[Wilber]

That's relative. If that was really so then European nations would have very hard time to sell anything. And 'specially UK. And Mexicans would be exporting like crazy. Cubans even more so.

The do have a hard time. Look at the European auto industry. The only way they can compete in North America is to go up market. BMW, Mercedes, Audi, Jaguar etc. Even VW is at the top end of its price range and its product has to reflect that reality. They have to build cars in Mexico and Brazil in order to compete in North America with some models. Look at a loaded VW Golf, the only small car they still build in Germany and sell in North America. You will be hard pressed to see much difference between it and an Audi A3. In fact they are built on the same platform and use the same engines and transmissions.

Several US car makers are now building vehicles in Mexico. Ford and Chrysler for sure, probably GM as well.

Edited November 22, 2010 by Wilber

[Evening Star]

I get that. I'm just wondering why a high US$ doesn't seem to hurt their exports or at least why the US seems less concerned about it. Is their economy less export-driven than ours?

[Saipan]

Several US car makers are now building vehicles in Mexico. Ford and Chrysler for sure, probably GM as well.

GM motor parts are made in Mexico for at least 20 years. Nothing to do with currency value.

It has to do with labour cost - in any currency. Canadian dollar was (in 1800's) worth about US$2.60 and we still survived nicely.

[Wilber]

GM motor parts are made in Mexico for at least 20 years. Nothing to do with currency value.

It has to do with labour cost - in any currency. Canadian dollar was (in 1800's) worth about US$2.60 and we still survived nicely.

When it comes to exports, currency value is a definite factor when it comes to labour costs. Americans buy goods in US dollars. The labour which built that Canadian product is 20% more expensive than it was a few years ago purely because of currency values.

There was no free trade during the 1800's and most of Canada's trade was still with Britain and Europe.

Edited November 24, 2010 by Wilber

[Saipan]

Americans buy goods in US dollars.

And we buy good in Canadian dollar.

Higher our dollar the cheaper our groceries are. The stuff we buy every day.

The labour which built that Canadian product is 20% more expensive than it was a few years ago purely because of currency values.

Same goes for US products. Blame the unions? One is either competitive or one is not. Like EURO we should have one dollar in North America. Which would make even more sense than in Europe.

[Smallc]

Fiat had to rescue Ford.

Huh? Fiat rescued Chrysler. Ford is the most profitable full line automaker in the world right now. Ford was in fact doing BETTER in Europe during their heard times than the were in North America. Now, they're doing better in North America...because Europe is currently the next thing to a basket case.

[August1991]

I don't quite understand the premise of this thread. The Canadian/US exchange is a measure of what exactly? Is it a report card from God on the status of the Canadian economy?

Are not all these calculations just a tad screwy? I mean really, comparing a nations GDP to its debt translates into a measure of what?

Public (government) debt to GDP is an appropriate ratio.

A better comparison than DEBT TO GDP would be DEBT TO TOTAL GOVERNMENT REVENUE. Regardless of what your GDP is debt maintenance has to come from a governments budget.

GDP and total (potential) government revenue are closely correlated.

Governments, by definition, can tax whatever they want under force of imprisonment. Moreover, good government policies can lead private individuals to create more GDP, and higher tax revenues.

----

When it comes to discussions of debt - at the macroeconomic level - it is wise to consider that the world has zero net debt (unless we borrow from Martians). Debt to one person is savings to another; if debt rates are high, then savings rates are also high.

IOW, it is probably good to have a society where young couples can go into debt and buy a house by borrowing from wealtheir older people. (And I say that despite the recent experience in the US.)

In the case of government borrowing, there's similar confusion. The government can cut taxes and borrow more, or raise taxes, reduce the deficit and pay down debt. Which is better? Well, if I pay higher taxes now, my children will inherit less. If I have lower taxes now, my children will inherit more. It appears that government tax levels decide how much that I will leave to my children. And yet, I decide that. Not the government.

Greg Mankiw had a good article indirectly related to this question:

SHOULD the government cut spending or raise taxes to deal with its long-term fiscal imbalance? As President Obama’s deficit commission rolls out its final report in the coming weeks, this issue will most likely divide the political right and left. But, in many ways, the question is the wrong one. The distinction between spending and taxation is often murky and sometimes meaningless.

NYT

----

I'm not sure how this is connected to the OP but anyway...

North American automakers do equally terribly in Europe.... Fiat had to rescue Ford. GM was desperate to sell opel for liquidty as it was the only good asset it had left.

As smallc noted above, Fiat bought Chrysler from Daimler-Benz, not Ford. As to GM's Opel, its popularity in Europe undermines your argument. (Frankly, I don't like Opels.) But Ford has popular cars in Europe and even I like driving them. I think that Ford is about to introduce the Fiesta in North America. It's a fun, cheap car.

The car I would love to see here is the VW Skoda Fabia. Cheap, fun to drive, well-built.

Edited November 25, 2010 by August1991

[Saipan]

Nobody in North America wants to buy the small little vehicles that buzz around the tiny streets of European cities.

People do buy small cars here. Mostly Japanese and domestic.

But where did you see "tiny streets" in Europe?

[Evening Star]

I love my tiny Accent!

[nicky10013]

The do have a hard time. Look at the European auto industry. The only way they can compete in North America is to go up market. BMW, Mercedes, Audi, Jaguar etc. Even VW is at the top end of its price range and its product has to reflect that reality. They have to build cars in Mexico and Brazil in order to compete in North America with some models. Look at a loaded VW Golf, the only small car they still build in Germany and sell in North America. You will be hard pressed to see much difference between it and an Audi A3. In fact they are built on the same platform and use the same engines and transmissions.

Several US car makers are now building vehicles in Mexico. Ford and Chrysler for sure, probably GM as well.

North American automakers do equally terribly in Europe. It's not because of operating costs but because of design. Nobody in North America wants to buy the small little vehicles that buzz around the tiny streets of European cities. On the other side of things, no one in Europe wants gigantic cars due to high fuel taxes and congestion fees. It's a completely different culture. What I do know is for the most part, the European car companies are better off fiscally. Fiat had to rescue Ford. GM was desperate to sell opel for liquidty as it was the only good asset it had left.

[Saipan]

The car I would love to see here is the VW Skoda Fabia. Cheap, fun to drive, well-built.

The Skoda Fabia (as well as Skoda Octavia in your link and others) are Czech cars, not VW.

[Wilber]

The Skoda Fabia (as well as Skoda Octavia in your link and others) are Czech cars, not VW.

Skoda is a wholly owned subsidiary of VW. Both the Octavia and the Fabia are based on VW platforms. They were intended to be VW's entry level cars in Europe but have earned a reputation as very good cars on their own.

[Wilber]

And we buy good in Canadian dollar.

Higher our dollar the cheaper our groceries are. The stuff we buy every day.

Same goes for US products. Blame the unions? One is either competitive or one is not. Like EURO we should have one dollar in North America. Which would make even more sense than in Europe.

The higher the value of your currency, the harder it is to be competitive in world markets. Canadians trying to sell to the US have had their labour costs rise 20% purely because of currency valuation. You can really see it in the leisure market. Several of the largest Canadian RV manufacturers have gone out of business in the past two years because of the rise in the dollar.

When you look at what a Canadian dollar will buy in Canada compared to what a US dollar will buy in the US, the Canadian dollar is over valued. That is a real problem for Canadian exporters.

[Wilber]

The car I would love to see here is the VW Skoda Fabia. Cheap, fun to drive, well-built.

Be interesting to see what the Fiat 500 Abarth will be like when it arrives in Chrysler trim.

Fiat 500 USA

Edited November 25, 2010 by Wilber

[Evening Star]

So is it just that the production/manufacturing base is less fragile in the US and that's why a high $US doesn't seem to pose problems for them?

The higher the value of your currency, the harder it is to be competitive in world markets. Canadians trying to sell to the US have had their labour costs rise 20% purely because of currency valuation. You can really see it in the leisure market. Several of the largest Canadian RV manufacturers have gone out of business in the past two years because of the rise in the dollar.

When you look at what a Canadian dollar will buy in Canada compared to what a US dollar will buy in the US, the Canadian dollar is over valued. That is a real problem for Canadian exporters.

Ah, so this is the problem then? The relationship between nominal value and purchasing power?

[Wilber]

So is it just that the production/manufacturing base is less fragile in the US and that's why a high $US doesn't seem to pose problems for them?

Of course it is a problem for them. Look at their trade deficits. Look at the amount of their manufacturing that has moved off shore. Look at their budget deficits.

Ah, so this is the problem then? The relationship between nominal value and purchasing power?

It's certainly a problem. A big bone of contention between the US (and others) and China is China's pegging the value of the Yuan to the US dollar at an artificially low rate. If the Yuan was allowed to float and rise to its real market value, Chinese products would be much less competitive on the world market.

[Evening Star]

That was helpful, thanks.

[nicky10013]

Huh? Fiat rescued Chrysler. Ford is the most profitable full line automaker in the world right now. Ford was in fact doing BETTER in Europe during their heard times than the were in North America. Now, they're doing better in North America...because Europe is currently the next thing to a basket case.

Was it Fiat and Chrysler? I originally had it as Chrysler but second guessed myself. I googled fiat and Ford popped up so I figured that's who they took over and why there has been such a turn around. My mistake.

As for Europe being a basketcase, the economic situation isn't anywhere near as bad as everyone thinks it is. Furthermore, chances it's going be horrible also isn't going to happen. With Greece, everyone predicted the demise of the Euro but alas those projections are way off. The Euro lost some value, a little ripple if you will, and has appreciated in value since. There's been another ripple with Ireland but it won't be nearly as bad as everyone thinks. The EU will never allow it to come to waht people are predicting. Everyone was predicting doom but I was telling my friends if I had cash on hand I'd be buying Greek bonds. They were forcing to give out big interest rates because no one wanted them as everyone was thinking Greece was going to default on it's debt. But of course, the EU to the rescu with billions of euros.

[nicky10013]

But where did you see "tiny streets" in Europe?

Paris, London, Amsterdam, Berlin, Krakow, Warsaw.

[Saipan]

Paris, London, Amsterdam, Berlin, Krakow, Warsaw.

Only in the small parts of old town. Many of which are reserved now for pedestrians.