Canadian Dollar at Parity with the US Dollar

[ScottSA]

Parity is one of those things that looks nice, but in reality means nothing. The difference economically between a .98 and 1.02 exchange rate either way is minor. As we can easily see right now, exchange rate changes of 30 or 40 cents do little to affect prices. And we are to care about a few pennies.

It's mostly symbolic.

Well, it's not symbolic if you live in Canada and get paid in USD, let me tell you. $10,000USD back in the day would buy around $15,000CND worth of goodies, but now it buys about $10,001. It doesn't seem like a few pennies to me...

[jdobbin]

Our food marketing boards cause large subsidies to farmers, and high prices to consumers.

Geoffrey once provided a link to a truly terrifying study showing that consumers, through higher prices, subsidize annually each dairy farm in Canada about $120,000.

The food prices I was referring to are generally for items not grown in Canada.

I have no doubt that milk is higher in Canada because of the system in place. It is a separate issue from imports which are still being charged as if the dollar was 10 to 40% lower. I don't think the pineapple marketing board is responsible for the high price compared to the U.S.

Edited September 20, 2007 by jdobbin

[M.Dancer]

The strong loonie is a winfall for the LCBO and Brewers retail.....their prices for American booze (Ach Spit!) hasn't changed at all. So the bottle of Oregon Duck Pond that was 17.00 CDN 3 years ago is still 17.00...same goes for yankee beer.......

[Guest American Woman]

1.00 CAD=0.998331 USD That would be an even exchange.

WASHINGTON - President Bush on Thursday cited "some unsettling times" in the U.S. housing and credit markets as he sought to assure jittery Americans that the economy basically is in good shape despite worries about a recession. Link

He hasn't assured this American one bit.

Edited September 20, 2007 by American Woman

[mikedavid00]

This is known as Purchasing Power Parity, or what The Economist calls The Big Mac Index.

I know all about that. You are just another self hating Canadian giving excuses of why we should be ripped off. Look in the mirror and ask yourself why you feel this way.

PPP IN OUR CONTEXT has very little to do with why we are paying 50% more for the same product.

Sorry August, time to look in the mirror.

Nine West charging $130 for shoes here, and then $90 in the US.

There aren't excuses. It's a culture. You and Guyser are certainly are part of the problem.

[old_bold&cold]

Since we here in Canada import way more things then we export ( I am talking volume of products not doollar value of products) we should see more things that should now be less in price then we did before. I will agree that many of the manufacturers will be hard hit with the rise in the Canadian dollar, but it will not effect those who manufacture mostly for domestic consumption. In fact the higher dollar should lower the costs for those who mostly sell domestically but have to buy foreign raw materials or machinery. The rise in the dollar will pay doctors more now here in Canada, making the change to USA will now be less attractive then it was before. Since many of the costs of healthcare were spent in USD before, this will also make for times to buy equipment and testing goods, where they are essentially 40% less then just a year or two ago. There are many good sides to the strong dollar, but many only want to look at the down side and it seem those who are in that side are the most vocal and of course grab the news. The snow birds will now have a 40% gain in their living costs. Our national debt will be 40% less as much was in USD. The government will have much more buying and spending power, so we should hopefully start to see some things once again shouldered by the federal government. It should lower taxes if the government does things right. I mean all levels of taxes not just the ones that the manfacturing sector say they want lowered. There are many more good sides to the dollar being worth more. Maybe we need a thread that see this as the glass is half full, rather then half empty.

[mikedavid00]

Parity is one of those things that looks nice, but in reality means nothing.

That's completely false. 100% false.

Products we buy should drop in price which affect everyone. This gives the person coming to Canada and sitting on social assistance more goods at the end of the month.

They have somewhat dropped prices in different areas and different stores. There is a 46 DLP TV now at BestBuy for $999. This is only because of the parity. This is why there have been all the 'Price Dops' that have happened the last 6 months.

On the flip side, Americans now have no reason to shoot their movies here. This will cost 100,000 jobs in that industry.

We are importers from the US and they are our largest trading partner. You bet that an on par dollar directly affects us.

The challenge has been breaking the self hating mindset and getting sellers in Canada to lower prices to what they are.

The Rod Video Mic is $149 US.

At Long And McQuade music..... drum roll.. wow it's $149!

That is one of the few stores in Canada that have lowered their prices down to parity and might explain why it's such a succsful chain and packed all the time.

So some stores are playing fair ball, most others like Ikea are salivating at the fact that they are self hating.

Actually I'm goign to contact the media about Ikea. It's a very easy story to run and Ikea Canada can issue a statement to Canada and explain why their prices are 50% higher which is un excuseable.

We make cars here in Canada for sale in both countries.

The dollar is par. No terrifs.

YET, they still feel they have to nickly and dime us 30-50% on each car.

This is a phsycological issue. It's a deeper issue than price. It's a cultural issue.

Those who defend these people suffer the same cultural problems of being a Canadian.

[mikedavid00]

Since we here in Canada import way more things then we export ( I am talking volume of products not doollar value of products) we should see more things that should now be less in price then we did before.

Yes thank you.

God its frustrating to see how little people know about the economy and dollar value.

It's been proven that a more power dollar is just.. well..more better.

So lets encourage more.

[Wilber]

Certainly it will mean adjustments for many Canadian businesses and some which had no other reason for being than a low Canadian dollar might not make it. For some companies and the country in general the low dollar was a crutch that compensated for lower productivity. It seems to me that the value of a country's currency reflects the value that the rest of the world puts on that country. Too bad many Canadians think they should be worth less.

[mikedavid00]

Too bad many Canadians think they should be worth less.

Exactly.

[Guest American Woman]

Certainly it will mean adjustments for many Canadian businesses and some which had no other reason for being than a low Canadian dollar might not make it. For some companies and the country in general the low dollar was a crutch that compensated for lower productivity. It seems to me that the value of a country's currency reflects the value that the rest of the world puts on that country. Too bad many Canadians think they should be worth less.

Do they think they should be worth less? Not necessarily, since the value of the dollar has good and bad effects either way. But still, I have to admit, I'm one not to like it when our dollar goes down. Of course it doesn't affect me 'at home' (ie: in the States). It does affect me when I go abroad and get less for my dollar. I'll be staying at home more now because of the low dollar value, as will, I'm sure, many Americans. This will have a negative effect on Canada, too, as you lose American business -- and Americans do go there to 'get more for their buck.'

But the upside of our low dollar is that more American money will stay in America, so American businesses will benefit. At the same time, more Canadians will spend more money in America since you'll be getting more for your dollar than you have in the past. So it's not all bad.

[jdobbin]

1.00 CAD=0.998331 USD That would be an even exchange.

WASHINGTON - President Bush on Thursday cited "some unsettling times" in the U.S. housing and credit markets as he sought to assure jittery Americans that the economy basically is in good shape despite worries about a recession. Link

He hasn't assured this American one bit.

The dollar rose over the U.S. currency for the first time this morning.

http://ca.news.yahoo.com/s/reuters/canada_...ollar_bonds_col

The Canadian dollar rose above parity with the U.S. dollar for the first time in 31 years on Thursday as the Canadian currency's commodity-fueled rise was helped by a sharply falling greenback.

Canadian bond prices fell alongside U.S. treasuries.

The Canadian dollar rose as high as C$0.9996 to the U.S. dollar, or US$1.0004, according to Reuters data, before dipping back below the level.

At 11 a.m. (1500 GMT), the currency was at C$1.0003 to the U.S. dollar, or 99.97 U.S. cents, up from C$1.0152 to the U.S. dollar, or 98.50 U.S. cents, at Wednesday's close.

The historic level -- last hit in November 1976 -- follows a 62 percent rise from early 2002, largely fueled by surging oil and metals prices and the broad decline of the U.S. dollar.

The housing market has still got some shaking down to go in the U.S. Hopefully, it won't push the economy into recession.

[Argus]

Nevertheless, if (or rather when) the Cdn dollar goes above parity, it is certain that many, many Canadians will consider that as an indicator that Canada is doing well. It is certain that news reports will refer to November 1976.

Yes, the majority of Canadians are not very well-educated about economics, and have no idea what the actual cause of a high dollar is or what it means.

That's why most Canadians shouldn't be allowed to vote. They're dumb.

[Argus]

1.00 USD=1.00951 CAD

Wouldn't that be considered at par since it would be dollar per dollar?

I suppose this will affect American tourism to Canada to some extent.

It is has been somewhat of a disaster for tourism, esp combined with border controls that now mean you average a 2 hour wait in many locations, and that the new demand for passports is still to come. I think that US tourism is down something like 50% over the last several years.

[Argus]

Yes thank you.

God its frustrating to see how little people know about the economy and dollar value.

Including, apparently, yourself.

It's been proven that a more power dollar is just.. well..more better.

By whom? You? What did you do to test it? Bite a loonie?

A higher Canadian dollar is bad for any number of reasons. Just to start with, our exports earn far less money. As Scott said earlier, only a few years back you could export one dollar of Canadian goods and be paid nearly $1.50 in Canadian money. This was good for exports, good for manufacturing, and good for jobs overall. Even the Western provinces did better for when they sold $1 in oil they got $1.50 cnd. A high dollar is a disaster for manufacturing, and a disaster for tourism - which has plunged since the dollar started rising comparative to the US buck. It encourages Canadians to buy foreign made goods, to shop across the border in the US, and to holiday abroad instead of in Canada. All of this is bad for employment and bad for inflation. If we were a nation which imported necessities like oil this would be good - but we're not.

[Argus]

Well, it's not symbolic if you live in Canada and get paid in USD, let me tell you. $10,000USD back in the day would buy around $15,000CND worth of goodies, but now it buys about $10,001. It doesn't seem like a few pennies to me...

Nor to me. I deposited a US dollar cheque for about $2,000 today. A few years back that would have brought me close to $3,000. Today, for the first time since I've been getting USD cheques, the cheque was actually worth LESS than face value. Since I get these cheques every month you can imagine how happy I am.

[Wilber]

But the upside of our low dollar is that more American money will stay in America, so American businesses will benefit. At the same time, more Canadians will spend more money in America since you'll be getting more for your dollar than you have in the past. So it's not all bad.

The downside is that you will be paying more for a lot of things (anything imported or anything that includes imported components or commodities) because your money is worth less. You will even pay more for American produced commodities because they will be sold at world prices. The biggest reason for your low dollar is deficit spending. While more money held by individual Americans may end up staying in the country, too much has been leaving the country to finance debt. That money must come from somewhere, either by printing more cash or bonds. The more there is, the less it is worth unless it is backed up by a corresponding increase in GDP. Canada has been there and I never saw it as an upside.

[Wilber]

It is has been somewhat of a disaster for tourism, esp combined with border controls that now mean you average a 2 hour wait in many locations, and that the new demand for passports is still to come. I think that US tourism is down something like 50% over the last several years.

Tourism from the US is down but has been steadily increasing from Europe, Mexico and Asia.

[White Doors]

The downside is that you will be paying more for a lot of things (anything imported or anything that includes imported components or commodities) because your money is worth less. You will even pay more for American produced commodities because they will be sold at world prices. The biggest reason for your low dollar is deficit spending. While more money held by individual Americans may end up staying in the country, too much has been leaving the country to finance debt. That money must come from somewhere, either by printing more cash or bonds. The more there is, the less it is worth unless it is backed up by a corresponding increase in GDP. Canada has been there and I never saw it as an upside.

Well it made it easier to pay off our debt. that was an upside. Ironic aint' it?

a lower American dollar is good for them right now.

[ScottSA]

Tourism from the US is down but has been steadily increasing from Europe, Mexico and Asia.

Mexico? Oh, you must mean the fruit pickers.

[Wilber]

Well it made it easier to pay off our debt. that was an upside. Ironic aint' it?

a lower American dollar is good for them right now.

You can only pay off debt if you stop borrowing and start paying. Not happening. What would have been the upside if we still had a $.62 Canadian dollar with $83 USD oil prices? If we weren't an energy exporter our dollar wouldn't look nearly as good.

People will finally stop lending if they don't see a decent return on their money. They won't be interested in buying debt in a currency that is continually declining unless there is a big premium paid in interest. The Fed can't do that right now for fear of aggravating a recession. Any good in it will come from it forcing government to confront their spending and deal with it.

It was low interest rates that really made the difference in paying down our debt.

[Riverwind]

The Fed can't do that right now for fear of aggravating a recession.

Eventually the Fed will be force to raise rates to shore up the currency because a rapidly falling currency will trigger inflation.

[Michael Bluth]

Eventually the Fed will be force to raise rates to shore up the currency because a rapidly falling currency will trigger inflation.

OMG seems like a recipe for staglation.

The Feds can't raise rates now. A big chunk of the issues in the US economy are due to sub-prime mortgage holders bailing on properties when forced to re-negotiate. Raising rates only causes more defaults in the housing market.

[Wilber]

Eventually the Fed will be force to raise rates to shore up the currency because a rapidly falling currency will trigger inflation.

It's a fine line because raising the cost of borrowing is also inflationary. If government doesn't stop borrowing, it will just have to borrow even more to pay the increased interest on its new debt. Remember the eighties with 18+% interest rates, 10+% inflation and runaway deficits. Also it doesn't address the causes for the currency falling in the first place.

Kind of reminds me of the first time I went to Brazil in the early nineties. They were changing currency at the time and were using both old and new bills. I was told to remove three zeros from the old bills to establish their value in the new currency. Scary.

[gc1765]

The challenge has been breaking the self hating mindset and getting sellers in Canada to lower prices to what they are...

So some stores are playing fair ball, most others like Ikea are salivating at the fact that they are self hating.

I've never understood why people complain about high prices. If a store is charging too much money for a product, the solution is simple - Don't buy that product.