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The Canadian dollar


taxme

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Can anyone explain to me as to how our dollar is so low compared to the American dollar. America is in debt close to 20 trillion dollars, and yet their dollar is better than ours. It was just over a year ago when our dollar was above par. I just don't get it anymore. I have tried to figure it out but I cannot.

Anyone? 

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The Canadian dollar is low compared to the U.S. dollar for several reasons, but the two biggest are the big drop in worldwide commodity prices for raw materials and flight to safety (U.S. dollar - world reserve currency) during times of uncertainty (e.g. Brexit, Eurozone collapse, President Trump's trade policies).   Canada's economy has been lagging for several years (recession in 2015), and is less attractive for foreign investment because of provincial and federal policies.

Canada's economy actually suffers more when the dollar is at parity.  

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12 hours ago, taxme said:

Can anyone explain to me as to how our dollar is so low compared to the American dollar. America is in debt close to 20 trillion dollars, and yet their dollar is better than ours. It was just over a year ago when our dollar was above par. I just don't get it anymore. I have tried to figure it out but I cannot.

Anyone? 

As a person who went to business school and took several courses on economics, well that is like 6 chapters of an econ book. 

There are all kinds of factors that can influence the prices from inflation, devaluation, historic trade patterns and balances, real interest rates, spending patterns, imports, exports and the buying of the dollar.

You also have to factor in that America is a reserve currency, it is held by almost all central banks as a hedge against extreme inflation and for purposes of arbitrage.  If you are a person who lives in a country with high inflation and you exports lots of money, you don't want to be exposed to devaluating dollar risk (ie think like someone owning an oilwell in russia or venezuela) so you shift your currency into US currency.  That alone counts for trillions of the US dollars being held.  Then add on the trillions of us government bonds bought up by chinese and japanese with excess money, canada does not even issue bonds in that size, then add up all the money from East Asia and Arabia being dumped into buying up US real estate because these wealthy people are about preserving money.

 

The Saudi Royal family is worth tens of trillions of dollars. They literally have trillions of dollars they want to put into a safer dollar.  It is not practical to just outright buy up huge sums of currency and store them, so they buy securities and assets, real assets, real estate in new york and california, businesses, docks, farmland, refineries, they recently tried to buy facebook for $250 billion.  These guys are pumping out oil that cost 3 cents a liter, it is literally liquid money.  All these transactions are done in us dollar.  And when the saudis or chinese or japanese or nigerians or whatever buy up assets in another developing country, you think they want to be paid in some devalued dollar from Saudi arabia or china or do you think they want American dollars, which tend to not have extreme valuation swings downward?

 

Our dollar being high is not good anyways, it harms our manufacturers and it hurts central Canadian manufacturing industry, we benefit from a low dollar.  Canada could easily increase its dollar value by cutting spending, raising taxes, raising interest rates, decreasing imports, increasing exports or giving incentives for foreigners to buy our dollar in large numbers by issuing huge bonds.  Of course most of these policies are unpopular in an electorate like raising taxes and interest rates while cutting social spending and cutting down imports.  People often think yeah, stop those dirty imports, but when you cut imports that $15 shovel from China is no more, you have to buy the $45 made in Canada one.  That $25,000 car is now a $50,000 car, or that $30 sweater is now a $90 sweater.

Low commodity prices, ie falling oil has weakened the Canadian dollar, because it reduce the export dollar  potential we can earn on oil, also Trudeau promised to massively increase spending so the dollar took a dive when he went into office.

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9 hours ago, bush_cheney2004 said:

The Canadian dollar is low compared to the U.S. dollar for several reasons, but the two biggest are the big drop in worldwide commodity prices for raw materials and flight to safety (U.S. dollar - world reserve currency) during times of uncertainty (e.g. Brexit, Eurozone collapse, President Trump's trade policies).

The real mystery is the flight to the safety of America during times of uncertainty...even while America is the biggest source and cause of it.

Edited by eyeball
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US housing crisis/recession brought Canadian dollar over par.  Then the slow US recovery eventually brought the Canadian dollar down below par to 90 cents by mid-2014.  Then global oil prices starting tanking very fast around at end of 2014 and therefore also the Canadian economy, which went into recession, which very quickly dragged the Can dollar from 90 cents to 80 cents within a month or 2, and then over another year down to 70 cents.  OIl has dragged low while US economy recovers so the dollar has settled now in the mid 70's.

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35 minutes ago, Moonlight Graham said:

US housing crisis/recession brought Canadian dollar over par.  Then the slow US recovery eventually brought the Canadian dollar down below par to 90 cents by mid-2014.  Then global oil prices starting tanking very fast around at end of 2014 and therefore also the Canadian economy, which went into recession, which very quickly dragged the Can dollar from 90 cents to 80 cents within a month or 2, and then over another year down to 70 cents.  OIl has dragged low while US economy recovers so the dollar has settled now in the mid 70's.

Meh. I remember when the Canadian dollar was worth less than 60 cents. I hope it comes again soon!

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2 hours ago, eyeball said:

The real mystery is the flight to the safety of America during times of uncertainty...even while America is the biggest source and cause of it.

 

This is not the first time the Canadian dollar has crashed against the U.S. dollar....the world has seen the Canadian "peso" before, especially in the mid 1990's.

Instead of worrying about why the American dollar is so much stronger, maybe start thinking about why the Canadian dollar is lower and what if anything to do about it.

 

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2 hours ago, eyeball said:

The real mystery is the flight to the safety of America during times of uncertainty...even while America is the biggest source and cause of it.

America runs a low inflation regime, it is the only major country who has such a stable dollar that can absorb trillions of dollars of wealth.  Canada cannot absorb that.

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18 minutes ago, hernanday said:

America runs a low inflation regime, it is the only major country who has such a stable dollar that can absorb trillions of dollars of wealth.  Canada cannot absorb that.

Trillions of dollars of wealth spread over 300+ million people should go a long way to helping all "those-left-behind"....

Providing it was actually spread across 300+ million people.

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12 minutes ago, Icebound said:

Trillions of dollars of wealth spread over 300+ million people should go a long way to helping all "those-left-behind"....

Providing it was actually spread across 300+ million people.

 

If wealth is spread more fairly for the Canadian people, CAD/USD currency pair does not seem to benefit.  Must be something else at play, eh ?

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1 hour ago, bush_cheney2004 said:

 

This is not the first time the Canadian dollar has crashed against the U.S. dollar....the world has seen the Canadian "peso" before, especially in the mid 1990's.

Instead of worrying about why the American dollar is so much stronger, maybe start thinking about why the Canadian dollar is lower and what if anything to do about it.

 

I was commenting on the strangeness of the greenback which I wouldn't be surprised to learn has a lot to do with where our dollar stands in the scheme of things.

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4 minutes ago, eyeball said:

I was commenting on the strangeness of the greenback which I wouldn't be surprised to learn has a lot to do with where our dollar stands in the scheme of things.

 

I know...and I was pointing out that currency markets and dollar valuations don't care about such things.

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2 hours ago, Icebound said:

Trillions of dollars of wealth spread over 300+ million people should go a long way to helping all "those-left-behind"....

Providing it was actually spread across 300+ million people.

I'm not saying I don't think the money could be better distributed, but the American government is an arm of the corporations who own the politicians.  The real problem is that Hilary rigged an election with 8 senior dnc officials, starting in 2014, which made it impossible for any democratic challenger to defeat her (which is why biden was advised to run in 2020).  Clinton was suppose to "be in line".  She blew it against Trump by being unlikeable and chasing republican votes when she should have chased progressive voters.

The democratic party is corrupt to the core.  If they ever want to win again, they need to make sure all the corporate candidates never get near a nomination and let elison become the dnc chair and let sanders or another liberal progressive run in 2020.  A centrist democrat can not win. 

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3 minutes ago, hernanday said:

I'm not saying I don't think the money could be better distributed, but the American government is an arm of the corporations who own the politicians.  The real problem is that Hilary rigged an election with 8 senior dnc officials, starting in 2014, which made it impossible for any democratic challenger to defeat her (which is why biden was advised to run in 2020).  Clinton was suppose to "be in line".  She blew it against Trump by being unlikeable and chasing republican votes when she should have chased progressive voters.

 

Yep...all true...the "United States" is a corporation....without apologies.  

Hillary Clinton was such a bad candidate and her DNC so corrupt she couldn't even beat Donald Trump.   

Edited by bush_cheney2004
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6 minutes ago, JamesHackerMP said:

When your currency is higher-valued, it makes it more expensive for people to buy Canadian goods.  So they won't.  What do you think that high dollar does to your economy then?

There are pros/cons

Being a resource exporting economy, exports benefit. ...   but purchasing power of Canadians go down.

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Canada's purchasing power is limited by other domestic factors as well.....energy costs, taxes, distribution, language law labeling, protectionism (e.g. dairy products), and lack of domestic production for certain consumer goods and agricultural products.   Canada has higher prices and less selection.

 

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1 hour ago, bush_cheney2004 said:

Canada's purchasing power is limited by other domestic factors as well.....energy costs, taxes, distribution, language law labeling, protectionism (e.g. dairy products), and lack of domestic production for certain consumer goods and agricultural products.   Canada has higher prices and less selection.

 

And when the dollar is higher or at par one can cross the line and buy American products.  Buying machinery or vehicles sucks right now.  As does taking trips down south.

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