Jobs, dollars, wages- Canada surges forward

[Leafless]

Canada's jobless rate surprisingly fell to a 33-year low of 5.9 per cent last month after employers added 51,100 jobs. Wages are rising at the fastest pace in at least a decade and labour shortages - not tightening credit conditions - are what's most worrying executives.

The reports snuffed the odds of any interest rate cut and sent the Canadian dollar on another flight, ending up 1.59 cents at 101.85 cents (U.S.).

http://www.theglobeandmail.com/servlet/sto...PStory/Business

I fail to see all the fanfare associated with the rise in the Canadian dollar, as we are still Mexico of the North with a badly lagging loonie relating to its purchasing power.

The reason is that the dollar's purchasing power here is equal to only about 84 cents U.S. even though the dollar is trading on foreign exchange markets at a 31-year high of about $1.02 cents U.S.

If you check out on line prices of many products you will see savings are considerably more than 16 cents on the dollar even with shipping tagged on.

On top of this 16 cents if you add the associated GST-PST most of us have to pay, purchasing power in Canada is even less to around 31 cents excluding all those hidden taxes on certain items.

So in reality the purchasing power of a loonie in Canada is minimum 70 cents of a U.S. dollar depending on the item.

By this logic our Canadian dollar would have to be worth $1.30 minimum U.S. to equal U.S purchasing power.

http://www.canada.com/ottawacitizen/news/b...47-15902d0b405e

[shavluk]

Sadly people don't realize its the US dollar that has gone down by and large , not only ours up.

Right now they are teetering on a complete meltdown in the states as they owe china trillions.

and their wall street greed and war mongering is coming home to roost.

Thank god we didnt adopt the US dollar as conservatives tried to get us to do in the 80's.

It is not over by a long shot and things could get much ,much worse before it gets better.

I only need to look down my street where lumbermen have been out of work for months because of the Americans stranglehold on our markets for wood.

The US shot their own foot off by pretending china wasnt ever going to turn the tables, they have.

Maybe if they go to war with china they can right off all their debts to them.hahhaha sadly it may come down to this.

Vote GREEN for a return to sane Canadian policy.

Edited October 6, 2007 by shavluk

[bush_cheney2004]

Sadly people don't realize its the US dollar that has gone down by and large , not only ours up.

Right now they are teetering on a complete meltdown in the states as they owe china trillions.

and their wall street greed and war mongering is coming home to roost.

Actually, the weak-dollar policy is by design...far more positives than negatives when it comes to exports and debt servicing. The USA does not owe China "trillions", having slightly over $1 trillion in all dollar denominated assets (not just Treasuries); Japan still holds a large portion of the foreign held debt as well, but it is less than half of all US public debt.

If the "states" meltdown, the first casualty will be Canada, since 85% of your exports go to the USA, including BC Bud. If an overvalued loonie and record employment rates in 2007 breaks 30 year-old records, one can only wonder what it was like all that time before.

War mongering is alive and well Afghanistan, just ask deployed Canadian Forces.

[geoffrey]

So in reality the purchasing power of a loonie in Canada is minimum 70 cents of a U.S. dollar depending on the item.

By this logic our Canadian dollar would have to be worth $1.30 minimum U.S. to equal U.S purchasing power.

All the economic studies I've seen peg it at about $0.80 to $0.83 in real purchasing power. Our dollar isn't actually worth $1USD in terms of goods and services. And that's exactly why it won't remain at this current level. It's artifical and driven by speculation. There is no economic fundamentals that back a higher-than-USD loonie.

[jdobbin]

Here is an interesting take on PPP.

http://www.reportonbusiness.com/servlet/st...lumnsBlogs/home

decade ago, two U.S. economists published an intriguing Federal Reserve Board study of cross-border consumer prices and concluded that price differences between U.S. and Canadian cities defied rational explanation.

Charles Engel (University of Washington) and John Rogers (Federal Reserve) indeed found that these price differences - equivalent to the cost of shipping goods as much as 75,000 miles (120,700 kilometres) - disproved economic theory. They identified an inexplicable "border effect" that, if it exists, means that Canadians shouldn't hold their breath waiting for exchange-rate parity to reduce the price of goods that sell for much less throughout the United States.

Mr. Engel and Mr. Rogers examined the prices of 14 categories of goods in 14 U.S. cities and 10 Canadian cities, using prices from 1990 and from 1995 (before and after the North American free-trade agreement came into effect). They made the necessary adjustments for fluctuating exchange rates, for transportation costs, for labour costs, for tariffs and taxes. They controlled, in other words, for all the usual barriers to trade that influence retail prices.

"With few impediments to trade, goods should flow freely between countries, cities and provinces," they observed. "[Further], a fundamental proposition of economic theory is that identical goods should sell for the same price." They found, instead, that The Law of One Price did not apply across the U.S.-Canada border. They determined that price differences were "much greater" between a given U.S. city and a given Canadian city than they were between two U.S. cities or two Canadian cities equidistant apart. Using the most conservative assumptions, the divergence was equal to an extra 2,500 miles of transportation costs; using the least conservative assumptions, the divergence was equal to an extra 75,000 miles.

[bush_cheney2004]

All the economic studies I've seen peg it at about $0.80 to $0.83 in real purchasing power. Our dollar isn't actually worth $1USD in terms of goods and services. And that's exactly why it won't remain at this current level. It's artifical and driven by speculation. There is no economic fundamentals that back a higher-than-USD loonie.

It's not very complicated.....the Canadian market is beset by several disadvantages including market size, distribution, supply management, protective surcharges, higher consumption taxes (as they impact demand), etc. Adding insult to injury, Americans have long accepted the curious price differences for US and CAN on published materials as problems for Canadian consumers, and it still is.

That's why many drove across the border for the past 30 years....just like they are doing now in record numbers:

http://www.ctv.ca/servlet/ArticleNews/stor...?hub=TopStories

Edited October 6, 2007 by bush_cheney2004

[Leafless]

There is no doubt about it that our dollar is unstable as far as purchasing power goes.

In 2002 when the Canadian dollar was worth 62 cents U.S. a 567 gram loaf of bread in B.C. sold for $1.38.

In 2007 despite the Canadian dollar being at par with the U.S dollar, ( 38 cents more that 2002 levels), which anyone can attest to, bread averages across the country at about $2.40, when actually because of the increase of the loonie, bread should have dropped to around $1.00 rather than increase $1.02 to $2.40.

http://www.gordallan.com/ImmigratingBudget.php

On top of this and just recently (unrelated) flour has gone up another $250.00 a pallet because of poor growing conditions and reduced supplied.

Strange indeed when only a few years ago Western Canada had grain rotting in silos, because they could not get rid of it.

http://web02.nm.cbc.ca/consumer/story/2007...ead-rising.html

Edited October 7, 2007 by Leafless

[August1991]

All the economic studies I've seen peg it at about $0.80 to $0.83 in real purchasing power. Our dollar isn't actually worth $1USD in terms of goods and services. And that's exactly why it won't remain at this current level. It's artifical and driven by speculation. There is no economic fundamentals that back a higher-than-USD loonie.

The latest news reports showed that while inflation was under 2%, wages rose by over 4%. IOW, the Bank of Canada is not about to cut interest rates any time soon.

As a result, the Canadian dollar rose against the US dollar.

Is this speculation? Nominal interest rate differentials are an exact predictor of exchange rates. It's a little harder to predict what real interest rates will be or, in effect, what a central bank will do. So, I guess speculation is an accurate description. The Bank of Canada has a (desired) reputation for being thick and a hard-ass.

I suspect too that the Fed is comfortable with a cut in US rates. They kinda had to apply a loose policy in the wake of the sub-prime mortgage market problems and a potential spillover into the (I love the term) "real" economy. At the same time, I reckon that the Fed feared that the US $ was a little too popular for its own good. Finally, inflation isn't a major worry in the US. The Fed killed two birds with one stone - and wasn't aiming near any windows.

Sadly people don't realize its the US dollar that has gone down by and large , not only ours up.

Right now they are teetering on a complete meltdown in the states as they owe china trillions.

and their wall street greed and war mongering is coming home to roost.

When foreigners buy and hold claims on assets in the US, I wouldn't describe that as evidence of an impending collapse of the US economy. On the contrary, these foreigners see the US as a place where real assets are likely best to perform. Indeed, they apparently prefer to buy a piece of future US profits rather than invest in their own country.

Shavluk, rather than apply your anti-Americanism in a field where you are probably often confused, I suggest that you take a course or two in economics. There is much that is wrong in the world today but you should approach this question with some basic knowledge.

Edited October 7, 2007 by August1991

[shavluk]

Oh grand poooobah did i step on a toe or three?

Think me unqualified to speculate about my own opinion towards american policy , investment and general direction?

I guess it doesn't bother you to be driving Fungs instead of Fords.

We cant all be creating nonexistent wealth and throwing it away on wall street I guess.

I have a clue or two about money and what creates it and what happens when you hold the reins of a countries debt.

Influence is an American speciality and invention

Sadly seems like walmart now sets more American foreign policy than does the white house these days as there is no more evil communist world when they hold all your stock ,eh?

I am allowed an opinion and happen to have one on everything including and especially on self absorbed windbags

and I don't see a whole lot of industry growing in the states outside of making prosthetic parts as manufacturing for Americans.

I wouldn't be calling myself ef hutton or what ever that was ,

but my point was the lack of leadership and poor choices ,

poor leadership or investment

and a complete waste of trillions of dollars with this war mentality

or "revenge" as its called ,,

the current crusade under the current regime's practises.

Most Americans think Iraq actually had something to do with 911 as I remember.

I only deal with tangible goods , with real value.

I made others millions ,was a millionaire ,a bank manager ,a revenue Canada manager , I built and managed many businesses and am doing so again , so what do I know ?

Much more than just besides what is happening in the states is poor management.

You can disagree with me ,

that and 25 cents and I can almost make a phone call.

How old were you when you made your first million?

[mikedavid00]

All the economic studies I've seen peg it at about $0.80 to $0.83 in real purchasing power. Our dollar isn't actually worth $1USD in terms of goods and services. And that's exactly why it won't remain at this current level. It's artifical and driven by speculation. There is no economic fundamentals that back a higher-than-USD loonie.

I agree. We have a dollar bubble.

I stil feel that prices are too high in Canada regardless.

At this point i'm just looking for stuff to buy off ebay...

I bought a violin for $9.99 with $40 shipping... umm.. also got a cool drum..

Actually maybe I'll get my fiance a cool salon quality blow dryer..

To bad I have to keep spending outside of Canada.. but that is our own fault.

You should attest to the self hatred that we hold for one another and our 'must lose' attitude.

[geoffrey]

I bought a violin for $9.99 with $40 shipping... umm.. also got a cool drum..

Just for the hell of it, or do you play violin?

You should attest to the self hatred that we hold for one another and our 'must lose' attitude.

I don't hate anyone and have an enourmously positive attitude. I think your holding the "must-lose" attitude. Why would I attest to that?

[jdobbin]

Latest on the dollar as it hits $1.04 to the U.S.

http://www.ctv.ca/servlet/ArticleNews/stor...1026?hub=Canada

The Canadian dollar briefly pushed above 104 cents US Friday, the highest it has been since mid-1974.

By 10 a.m., the loonie settled at 103.8 cents US, up 0.27 of a cent from Thursday's close.

The dollar dropped last Monday, closing at US$1.02, after Bank of Canada Governor David Dodge said last weekend the currency's recent surge was "abnormally quick."

But since then, the loonie has managed to rebound strongly.

"There will be a deadening effect by a higher dollar," BNN's Michael Kane said Friday.

"That does put pressure on the Bank of Canada to cut rates to keep the economy going and that would pull the dollar down."

Camilla Sutton, currency strategist at Scotia Capital, told The Canadian Press the U.S. greenback should weaken further next week as the U.S. Federal Reserve is expected to cut interest rates.

Traders and markets are expecting the bank to cut its benchmark rate from 4.75 per cent next week.

BNN's Michael Hainsworth said the soaring loonie is also the result of the U.S. housing sector, which is "in tatters."

"The largest mortgage company, (Countrywide Financial Corp.), has just reported a $1.2 billion loss because more Americans are defaulting on their loans," Hainsworth told CTV Toronto's Tim Weber over the noon hour.

We could see an even higher dollar next week if U.S. interest rates drop.