The loonies rise again

[William Ashley]

This quote was substantial to mention

And that is because Alberta's exports including natural gas and oil are based on the American dollar, and every penny the Loonie rises, it costs the province $221 million

So say if the cad goes to 1.05 then that is one billion the climb from 80 cents would have cost 5 billion --- this is voodoo economics though.... -- since the price of oil goes up too.. oil prices go up.. so how is alberta loosing $221million per cent?

It would have Albertans really question why harper and flahrety are so consumed with keeping the dollar strong if it is costing dear little alberta Billions of dollar.

I tend not to beleive this.

http://edmonton.ctv.ca/servlet/an/local/CTVNews/20101228/edm_dollar_101228/20101228/?hub=EdmontonHome

Someone with more info on how the strength of the Cad effects Alberta.

I think if anything it would mean less profit for those large comapnies actually needing to pay Albertans - and then they are forced to raise prices.. so everything except for the oil industry (that earns more because the price of oil will increase on a loss on comparative USD value)

maybe I'm wrong.

Still a far climb from oils (wonderfully entertaining and genious) rise to $150 a barrel. -- although a 120 barrel doesn't seem out of the question -- 110 may be possible .. although winter crude is probably all done already.

Edited December 29, 2010 by William Ashley

[Saipan]

It's great to have a real dollar again.

Unlike Chretien's 62 cent Peso.

[William Ashley]

It's great to have a real dollar again.

Unlike Chretien's 62 cent Peso.

Prices are just as high or higher though.. figure that?

[scribblet]

Saw the title and thought - yikes, it's the end of MLW, the loonies really are on the rise.

[APC]

This quote was substantial to mention

So say if the cad goes to 1.05 then that is one billion the climb from 80 cents would have cost 5 billion --- this is voodoo economics though.... -- since the price of oil goes up too.. oil prices go up.. so how is alberta loosing $221million per cent?

It would have Albertans really question why harper and flahrety are so consumed with keeping the dollar strong if it is costing dear little alberta Billions of dollar.

I tend not to beleive this.

http://edmonton.ctv.ca/servlet/an/local/CTVNews/20101228/edm_dollar_101228/20101228/?hub=EdmontonHome

Someone with more info on how the strength of the Cad effects Alberta.

I think if anything it would mean less profit for those large comapnies actually needing to pay Albertans - and then they are forced to raise prices.. so everything except for the oil industry (that earns more because the price of oil will increase on a loss on comparative USD value)

maybe I'm wrong.

Still a far climb from oils (wonderfully entertaining and genious) rise to $150 a barrel. -- although a 120 barrel doesn't seem out of the question -- 110 may be possible .. although winter crude is probably all done already.

You are right OP, that is quack economics. The concept that Alberta is getting less because oil is purchased in USD - and when the CAD goes up, they will be getting less USD for the same quantity of oil - is wrong, because the difference is completely offset by the fact that the CAD only is going up in response to higher oil prices.

If the CAD was going up at the same time that oil was going down, or stagnating, then that would cost Alberta money....but since the nLoonie is at it's heart a petro-currency, that's not going to happen anytime soon.

The Loonie is only going up BECAUSE oil is gone up.

I'm assuming that $221 million loss per pennyn (which is a foreign exchange rate loss) means per year. At the current rate of 1.8 million bbl/day, every dollar oil goes up give oil sands about $650 million in extra revenue. Obviously, that is not Albertaa take, but their royalty structure, which varies depending on different factors, is generally around 45%, whcih comes out to about $245 million.

So the decrease in FX is more then offset by the increase in price.

Edited December 29, 2010 by APC

[Scotty]

It's great to have a real dollar again.

Unlike Chretien's 62 cent Peso.

It's VERY, VERY bad for exports. And for the entire manufacturing sector.

Edited December 29, 2010 by Scotty

[William Ashley]

I thought the opposite was true. A lower Canadian dollar makes it easier to export.

Where are you getting this from? Your statement that a higher dollar makes i easier to export is nonsense.

Edited December 29, 2010 by William Ashley

[guyser]

Where are you getting this from?

Common sense.

None under the christmas tree again?

[William Ashley]

Common sense.

None under the christmas tree again?

Your common sense is nonsense.

It is a known fact a lower dollar makes easier exports.

A higher dollar means higher production costs. this means higher product cost. This means that competition may have an advantage if they have lower production and shipping costs.

This means less exports.

This is not 100% always the case, but it is a major modifier on export viability.

The only expection here is employment contracts paid out in USD as part of the contract. this would create a much more stable gauge for the oil industry since it is usually bought in USD anyway. It means Cad isn't locked in. Of course oil workers may not like to be paid in USD.. also I'm not sure if it is legal to pay in a foreing currency, or how taxation would be effected.

What exchange rate does Canada use for income tax purposes on foreign currency?

Edited December 29, 2010 by William Ashley

[Saipan]

Prices are just as high or higher though.. figure that?

No, imported vegetable, fruits, groceries are cheaper - while bread doubled.

[Saipan]

It's VERY, VERY bad for exports. And for the entire manufacturing sector.

How does the US export survive?

How did Canada survive when our dollar was US$2.65?

[bush_cheney2004]

How does the US export survive?

Lower US dollar means more US exports, and its export market is far more diversified than Canada's

How did Canada survive when our dollar was US$2.65?

It almost didn't.

[Saipan]

Yes, during the referendum.

[APC]

There are many variables at play, but generally a higher dollar is bad for exports/manufacturers.

The reason is simple....your goods become more expensive for foreigners, and thus demand for them will go down. Simple supply and demand. It is good for importers however, because now the same goods they always bought are now cheaper.

Generally, because the US is, by far, our biggest importer of goods, a high loonies is a bad thing for Canadian exporters.

But remember, when we talk about a "higher dollar" we mean higher, relative to the USD. The CAD is also traded against all other major currencies, so the efects may be different with other areas. The loonie has been strong against the Euro, for example, but not as strong as against the greenback. Right now, the Euro is trading for about $1.32 CAD, but it has been as low as $1.20-ish as recently as July, so the effect won't be as pronounced with European goods.

[Saipan]

The reason is simple....your goods become more expensive for foreigners, and thus demand for them will go down.

Not really. Depends how you price them.

High EURO or British pound doesn't put them out of business.

[dre]

It's VERY, VERY bad for exports. And for the entire manufacturing sector.

Its bad for tourism as well, and bad for anyone that has large debts denominated in canadian dollars.

Its great for NHL teams though! The rising loonie over the last few years probably saved the Calgary Flames, and Edmonton Oilers from bankruptcy, and it might put cities like Quebec and Winnipeg back in the game.

[APC]

Not really. Depends how you price them.

High EURO or British pound doesn't put them out of business.

Absolute value of a currency isn't as important as recent activity. If the CAD goes to $1.15 in the next 6 months, exporters will be hit hard....it will be very painful. But let's say it stays at $1.15 for the next 5 years, eventually an equilbrium will be reached in which case exporters/manufacturers will learn to deal...either by slashing prices, or cutting quality, or by producing less.

But a high currency is not good for exporters. I'm kind of surprised we're even having this debate, that is pretty common knowledge. I mean, here's a link I found with a 2 second google search, there are many, many others

http://www.gocurrency.com/articles/stronger-dollar.htm

An excerpt:

"Along the same lines, a stronger dollar reduces the competitiveness of US goods that are sold outside of the US. When the US dollar strengthens, foreign trade partners will have to pay more euros and pounds in order to make up for the appreciated dollar when they import from the US. Subsequently, the increase will lead to a decline in demand as American made goods become less attractive to buy at the consumer level. This slump in demand will ultimately translate into thinner profit margins of manufacturers and producers in the US, depleting expansion potential in the country. The result in the longer term will be slower growth even as US consumers up their near term standard of living"

It's talking about the US dollar, but the same market forces are at work and applicable to all countries.

[Scotty]

How does the US export survive?

How did Canada survive when our dollar was US$2.65?

The US has been deliberately encouraging its dollar to fall in order to help its exports and protect its home market from imports. It has fallen something like 50% in value against other major currencies over the past 10 years. The Chinese do the same.

How did Canada survive? I imagine that was so long ago that there were differen world circumstances. It was before the Chinese and other third world manufacturers were priced so much lower than us, and I suppose most of our exports were raw materials - where again we had less competition from abroad than we do now.

Edited December 29, 2010 by Scotty

[Saipan]

Its bad for tourism as well

Not really. Thailand return cost me just $1400. Same 12 years ago $2600.

Retired snowbirds are very happy. Extatic!

[Scotty]

Not really. Depends how you price them.

Presumably you are pricing them at cost plus a reasonable profit. If your dollar apreciates in value by 25% against your market you must either somehow cut costs by the same increment, lose money, or raise your prices in order to make the same profit.

Meanwhile, your competitors in that market, in this case the US, have no such difficulties. Their costs or production remain unchanged, and so their prices remain unchanged.

[Scotty]

Not really. Thailand return cost me just $1400. Same 12 years ago $2600.

Retired snowbirds are very happy. Extatic!

It's good for US tourism, bad for Canadian tourism. American and world tourists find it more expensive to come here now, and so some go elsehwere.

[Saipan]

It's good for US tourism, bad for Canadian tourism.

Should be exactly even. Unless some businesses here are gouging.

But many Americans are turn off by liberal hoplophobes and their paranoia.

[APC]

The US has been deliberately encouraging its dollar to fall in order to help its exports and protect its home market from imports. It has fallen something like 50% in value against other major currencies over the past 10 years. The Chinese do the same.

How did Canada survive? I imagine that was so long ago that there were differen world circumstances. It was before the Chinese and other third world manufacturers were priced so much lower than us, and I suppose most of our exports were raw materials - where again we had less competition from abroad than we do now.

Very painfully

The fact is, business will always find a way to survive.....but that is a far from thrive. Doesn't matter the exchange rate, there will always be somebody somewhere doing something....however, that doesn't mean that everything is hunky dory.

higher dollar is bad for exporters. This is fact. There be someexceptions, but they are just that. That doesn't mean manufacturers are wiped out, just they will be suffereing.

[M.Dancer]

How does the US export survive?

How did Canada survive when our dollar was US$2.65?

Q.When was the dollar ever that high?

A. Never

[Saipan]

Q.When was the dollar ever that high?

A. Never

Did you check back to 1800's ?