Canadian Dollar at Parity with the US Dollar

[Wilber]

Nonsense...please get an economic clue.

Not nonsense at all. Money is a commodity that follows the law of supply and demand like any other.

[bush_cheney2004]

For now, but you assume you will always remain the golden goose. If you don't stop borrowing from them, eventually they will own the goose anyway and the more of you they own, the more vulnerable you become. Right now it is definitely in their best interest to keep you going but maybe one day they will decide it isn't. Who knows.

The bottom line is, the more you rely on foreign creditors the less control you have over your own destiny. Something that every third world country knows.

Agreed...please tell Higgly!

[bush_cheney2004]

Not nonsense at all. Money is a commodity that follows the law of supply and demand like any other.

Then using such logic, American dollar valuations would ony be impacted by Chinese and Japanese holdings in US treasuries over the past 50 years. We know this isn't the case. It's more complicated than that.

[Wilber]

Then using such logic, American dollar valuations would ony be impacted by Chinese and Japanese holdings in US treasuries over the past 50 years. We know this isn't the case. It's more complicated than that.

Sure that's not all of it but the basic fact remains, a currency is only worth what people are willing to pay for it.

[Higgly]

I think I am beginning to see it Bush_Cheney2004's way. The value of the US dollar is controlled by the sprinkling of pixie dust. Other countries want to make the dollar go up because the US president has a bag of pixie dust and they are hoping he will sprinkle some of that pixie dust on their tail feathers so they can fly too.

Very simple.

[bush_cheney2004]

I think I am beginning to see it Bush_Cheney2004's way. The value of the US dollar is controlled by the sprinkling of pixie dust. Other countries want to make the dollar go up because the US president has a bag of pixie dust and they are hoping he will sprinkle some of that pixie dust on their tail feathers so they can fly too.

Very simple.

As you please...the Americans clearly had more powerful "pixie dust" than Canada. The high flying loonie is sure making people smile about economic growth.

This is a feeble attempt to get back on topic, feeble because the posts will invariably drift back to the American dollar, American economy, American fiscal / monetary policy, etc. etc.

Ironic indeed.

Edited November 4, 2007 by bush_cheney2004

[Higgly]

As you please...the Americans clearly had more powerful "pixie dust" than Canada. The high flying loonie is sure making people smile about economic growth.

I knew you were a pixie dust guy. I think the Fed has a pixie dust department and I hear they're looking for people. Of course you realize that once you've applied for the pixie dust department, you no longer qualify for the mojo department. Just a friendly word of advice.

Edited November 4, 2007 by Higgly

[old_bold&cold]

There is no denying that the USA economy is is trouble and the USD is going to sink much lower before there is any relief. These I think are a given. Bush and company are not doing much of anything to alleviate these things and will definitely leave a very indebted white House to the next guy. Just how far is Bush willing to let this go, will depend on what he sees as the possibility of a republican taking over or a democrat taking over. I think either one will still have large problems but Bush may make it even more so if he feels the democrats will win, and then he will just not even try to shore things up.

Either way he will leave a huge mess behind for others to clean up. The people will feel his footprint on them for many years to come. That is not the kind of thing that makes people feel better about the USA and their money policies. Once enough nations see that this is not going to be a short term thing, they may start dumping USD holdings. If this happens, it will have a snowballing affect on the USD. As we all seem to agree there is not much the USA can do about this, it means that much of the sway in the world will also dimish along with that dollar. I hope that it does not go really far out of control, but with things no happening at the speed they are. I would not surpise me to see $1.10 cnd by early spring. That is kind of the way other money market analyst have seen things, but more have been caught off guard with the speed of things so far.

I think at its worst you may see the two dollars switch roles and if all turns bad you may even see .62 USD, but things will have to have gone wrong in many things for that to happen, but we here in Canada know that it can and does happen, and while it doe not make life in your own country that bad, it will make travel and many other things out of reach for many people. It will be easier to predict things once we see who the next president will be and what policies he feels take priority.

[Guest American Woman]

Fair enough.

The Chinese and Japanese central banks have strengthened their holdings in Euro while reducing them in USD.

Convince yourself what you will, but the USD is losing it's place as the world's currency.

I'm not convincing myself of anything; just stating facts as I see/understand them. The Chinese and Japanese may have strengthened their holdings in Euro while reducing them in USD, but that's not proof of anything as far as future predictions go. Like I said, the Euro is still new on the market, so there aren't any long term trends to base your prediction that it'll be the world currency on. That's all I'm saying. The dollar has been in decline for several years now, so this sudden further drop may or may not last. Time will tell.

[bush_cheney2004]

...I think at its worst you may see the two dollars switch roles and if all turns bad you may even see .62 USD, but things will have to have gone wrong in many things for that to happen, but we here in Canada know that it can and does happen, and while it doe not make life in your own country that bad, it will make travel and many other things out of reach for many people. It will be easier to predict things once we see who the next president will be and what policies he feels take priority.

That's right...in Canada you know it can happen and has happened to the point of near collapse. Pardon the Americans if they do not share such a panicked experience and pleading for foreign investment. The same sky-is-falling doom sayers were around in the 1980's during the Reagan administration....America (and its dollar) is still standing after all those years.

[Canuck E Stan]

That's right...in Canada you know it can happen and has happened to the point of near collapse. Pardon the Americans if they do not share such a panicked experience and pleading for foreign investment. The same sky-is-falling doom sayers were around in the 1980's during the Reagan administration....America (and its dollar) is still standing after all those years.

....and will for many more.

If the Americans become economically introverted with their buying, not only will Canada be in trouble so will most countries who sell more than they buy from the U.S.

[Wilber]

....and will for many more.

If the Americans become economically introverted with their buying, not only will Canada be in trouble so will most countries who sell more than they buy from the U.S.

True but voids never seem to remain empty for long.

Pardon the Americans if they do not share such a panicked experience and pleading for foreign investment.

It's not a matter of panic or pleading, just one day you find it is the creditors who are calling the shots.

[Guest coot]

America (and its dollar) is still standing after all those years.

America is standing, but its dollar is terribly hobbled. I find it amazing that people would try to rewrite the rules of economics and try to pretend that running record deficits will have no effect on the currency, that turning the American dollar into a peso and the inevitable stagflation that will follow was deliberate. The U.S. economy is suffering from far too much personal and national debt, and because everyone is spent out, there won't be any pent-up demand for better housing or new consumer goods for years to come, thus ending any hope of it being a short-lived recession.

I pity the Democratic president that will have to follow this administration and clean up the mess of its incompetence.

[August1991]

America is standing, but its dollar is terribly hobbled. I find it amazing that people would try to rewrite the rules of economics and try to pretend that running record deficits will have no effect on the currency, that turning the American dollar into a peso and the inevitable stagflation that will follow was deliberate. The U.S. economy is suffering from far too much personal and national debt, and because everyone is spent out, there won't be any pent-up demand for better housing or new consumer goods for years to come, thus ending any hope of it being a short-lived recession.

Utter nonsense.

I suggest that you look at some of the graphs here (in particular the graph showing federal receipts, outlays and debt as a percentage of GDP).

Once upon a time, the national debt was viewed as a measure of the confidence of people in the government. It should still be seen that way.

Ordinary Americans have created a society that is a phenomenal generator of real value. It is a constant and unfortunate refrain of the American left to criticize the accomplishments of Americans. Your post above is a Calvinist variant of this viewpoint: "Americans are profligate, living beyond their means, sinful and wasteful. They will suffer the wrath of the just for their wronful ways". What nonsense.

[Guest coot]

One can pretend, for political purposes, that extreme debt will have no consequence, but time will tell who's the fool.

For now, I'm not the only one predicting the piper (and the lender) will have to be paid.

http://www.macleans.ca/business/economy/ar...8_110106_110106

[bush_cheney2004]

.....I pity the Democratic president that will have to follow this administration and clean up the mess of its incompetence.

Did you pity president Clinton, who along with the prior administration, demonstrated that the Americans can indeed "clean up the mess". Did you pity PM Mulroney after he inherited the "imcompetence" of PM Trudeau. Does it really matter who/what you pity in America at all?

Edited November 5, 2007 by bush_cheney2004

[Guest coot]

Mulroney followed Trudeau with further incompetence. Canada's strong economic position can largely be credited to Paul Martin. Hopefully Harper doesn't turn it into a mess in an attempt to buy votes, but so far so good.

It doesn't matter at all whom I pity, but at least my pity is based on facts. Nothing is more irrelevant than someone who loses sight of reality (and the potential collapse of the world's greatest economy) in pursuit of petty, malicious political games. Ultimately they wind up on the side of the road, forgotten.

[bush_cheney2004]

...It's not a matter of panic or pleading, just one day you find it is the creditors who are calling the shots.

Yes, Canada faced this possibility, eh? Has the best balance sheet in the G-8, but still has a lot of debt. Advice from those who were closer to the abyss can be taken two ways.

[August1991]

One can pretend, for political purposes, that extreme debt will have no consequence, but time will tell who's the fool.

For now, I'm not the only one predicting the piper (and the lender) will have to be paid.

Macleans magazine is in the business of selling advertising copy and nothing sells it more than a large print run critical of the US. I'm not surprised to read that article.

First, the US federal government has been in much deeper debt in real terms and as a percentage of GDP than it is now.

Second, what matters in an economy is how well it generates real income. In this, the US economy has been clipping along at a steady pace for roughly 15 years now.

Third, if foreigners lend to Americans it's because Americans offer good profit opportunities. This fact underlies the US trade deficit. The Japanese, for example, prefer to invest in America rather than in Japan - and for good reason.

One of the most grave misunderstandings in macroeconomics is to assume that a whole economy should be judged by the same standards that you would use to judge one individual. If the US economy were an individual, it would be a strange one. "Mr. USA" will never stop working and never retire. It has no reason to pay off its debts because it has no reason to save for retirement. If you knew you were going to live forever, and you were never going to stop working - indeed, your salary was going to increase over time, no doubt you too would arrange your finances differently.

In fact, the behaviour of Mr. USA is the collective results of millions of individuals. But that aggregate behaviour cannot be understood by any benchmark that you or I would use in our own individual lives. We want to pay down our debts and accumulate savings for our retirement years if not for emergencies.

Now then, with all that said, I'll agree that Bush is spending far too much on military toys, all levels of government in the US have far too much pork barrel and Bush is not enough of a free-trader for my taste.

The US faces problems but debt isn't one of them.

Edited November 5, 2007 by August1991

[bush_cheney2004]

Mulroney followed Trudeau with further incompetence. Canada's strong economic position can largely be credited to Paul Martin. Hopefully Harper doesn't turn it into a mess in an attempt to buy votes, but so far so good.

No, I expect that PM Chretien would take issue with that, along with PM Mulroney, FTA, NAFTA, and numerous American capital injections.

It doesn't matter at all whom I pity, but at least my pity is based on facts. Nothing is more irrelevant than someone who loses sight of reality (and the potential collapse of the world's greatest economy) in pursuit of petty, malicious political games. Ultimately they wind up on the side of the road, forgotten.

If this be their fate, it is by choice to do so. Canada would just go down the toilet with us. Tis' better to have been an economic goliath and lost, than never to have been one at all.

[Guest coot]

I'm not saying the U.S. will surely go down. There's plenty of room for them to right the course they're on and return to manageable, sustainable growth. They just need competent leadership to make the correct decisions. I agree that Keynesian economics are not the quagmire they were made out to be in the 1990s, but there is debt and there is unmanageable debt. Individual American (and Canadian) consumers are not going to live forever, and in the next few years they will be forced to restrain their spending in order to get on top of their personal debt. This situation will be exacerbated if interest rates are forced to rise in response to inflation (which will inevitably result when Americans try to buy $100-a-barrel Alberta oil with their 85-cent dollar). This is the perfect breeding ground for a harsh, extended recession, no matter what you think of Maclean's.

[bush_cheney2004]

I'm not saying the U.S. will surely go down. There's plenty of room for them to right the course they're on and return to manageable, sustainable growth. They just need competent leadership to make the correct decisions.

The Americans have more economic growth than Canada...right now...with all that debt to service. Worshipping balanced budgets means tougher/fewer choices.

Edited November 5, 2007 by bush_cheney2004

[Michael Bluth]

Mulroney followed Trudeau with further incompetence.

Trudeau created a heck of a Titanic with the huge operating deficits he ran. Basically he was spending more than he was taking in before you took debt payments into consideration.

Mulroney ran the first operating surplus we had seen in decades.

Martin did a good job, but couldn't have done so without the fiscal and regulatory framework built up in the Mulroney years.

[geoffrey]

Martin did a good job, but couldn't have done so without the fiscal and regulatory framework built up in the Mulroney years.

Nor without the GST.

[capricorn]

Nor without the GST.

Much to the delight of the Liberals, even though they were elected on a platform that included doing away with it.