Via Moneytalks; (PDF)
Canadians should be … “standing on guard” … as the currency pushes for a violation of “parity” to the US Dollar, which, in turn, has put downward pressure on Exports relative to Imports, causing the Current Account Balance to collapse into a deepening deficit … in synch with a tightening in monetary conditions and an intensifying erosion in the core of the Canadian labor market. Canadians should be on guard, for more macro-market turbulence.
Indeed, as noted in the chart below, Canada’s Current Account Balance plunged to its DEEPEST DEFICIT EVER during the 3Q.
More Moneytalks.
Lots of charts. Most of them ugly.
Update: Here’s a highly related story.
First! Kate for PM !!!
The current account deficit picture might be brighter if Canadians were using their strong currency to purchase capital goods in the U.S., which could then be used to increase business productivity at home. I suspect that most of the deficit is being racked up with purchases of consumer goods, however, which is the same strategy that got the Americans in so much financial trouble.
The money supply charts are interesting too, in that they show that the Bank of Canada has been pursuing monetary stimulus (i.e. inflation) almost as aggressively as the Federal Reserve. Nothing good can come of this. Buy gold, folks.
It’s a bit of a lesson for all the USA haters out there, as to who will buy your stuff? I haven’t got an answer for that one. Does Iggy & Boob Rae know? not likely, I’d guess it’s part of their plan to have Canada comply with their green agenda. Ontario doesn’t need any new coal burning electrical facilities if consumption is falling… because in Canada, a new nuclear / electrical facility would take about +10 years. (in addition to the regulatory hurdles?)
and with McGuilty wanting to hike those Ontario electrical rates through the back door of green taxes, how exactly does that help?
Yes I know it’s not the main cause of the currency problem.
Not a very nice picture, but easily predictable. Canada has built an economy premised not on productivity, but on a low dollar relative to the US. We see similar problems everytime the dollar rises, so this should not be a surprise to anyone who has paid attention to the nature and structure of the Canadian economy. My students used to argue with me that I was nuts when I pointed this out.
It shouldn’t be a surprise, but it will be to many because they have ignored the structural problems, or they are economically illiterate.
This is a failure of management – we generally are lazy business people compared to others in the world. We will economically reap what we sow…
CRC
It might take a while, but as time goes on we will do more trade with the rest of the world, and less with the US. Then the value of our currency wrt the USD will become less important.
The Canadian elites used to deride us as being hewers of wood and drawers of water. To a great extent we still are and that is what has saved our economy lately. The rest of the world needs our wood and water. Manufacturing will go where the cheap labour is, but you can’t move our mines trees and oil.
Since, in the past, you’ve readily laid the blame for the numerous economic woes in the US on their current president, one wonders why you don’t do the same in Canada with our current prime minister.
(In November) “Private companies shrank their payrolls by 11,500, while public sector employment rose by 21,100.”
Bad news followed by worse news.
I agree with minuteman, these graphs can be interpreted as an economy in transition rather than doomsday. The world needs our resources. Traditional manufacturing industries, OTOH, have little hope of recovering.
IMO, demographics (aging) are going to have a bigger impact on our economy than the dollar. The only thing more predictable than government and government unions wanting more of your tax dollars is boomers wanting new government entitlements tailored to their needs (after all, they know that they aren’t going to be stuck paying the bill) In fact, everything from geriatric care, the travel industry, housing, the stock market, etc. will feel the effects of aging boomers.
LC Bennett says it well. The last issue of MaClean’s has a lengthy article exactly on this issue. The article suggests in a round about way that there will have to be a rollback on entitlements and on the size of government. My thoughts are that the day of government unions getting everything they want should be or will be over.
The sooner this is tackled the less pain there will be in the future.
If I have this right I believe what this blurb is saying is …
Our payroll deductions and taxes are so high that employers must overpay their staff in order for them have enough take home money to pay their rent and buy food not to mention carry the 20% interest charges on their credit cards and pay for their highly tax burdened gasoline, alcohol and smokes for those who still puff.
And what are the heavy taxes for ….. to cover the ever increasing cost of our communist healthcare and educational system and their over paid over populated managements departments, spoiled brat non productive union workers .. and also to fund the following …
Bilingualism
Muslitculturalism
Metric system
Quebec
Refugees galore
Over staffed governments at all levels.
Yes … we have an overhead that can only be managed with a 65 cent dollar.
Here in BC we also have Gordon Campbell’s global warming tax on energy … lovely place to live this Canada, but only if you have a government job.
With the loony reaching all time highs you’d think this is the time to pay off national debt – low interest rate and big dollar = max debt reduction-to-dollar value.
It is unwise to get in some sypathetic currency race to the bottom with the ready to collapse green back. New markets and long term supply deals are the key. We needn’t get into the pending US 2nd world economy to sell our goods.
Davenport
[…….Since, in the past, you’ve readily laid the blame for the numerous economic woes in the US on their current president, one wonders why you don’t do the same in Canada with our current prime minister……..]
Likely because you also realize the same elements are to blame for Canada’s economic woes as the US economic woes.
When our primary market literally goes south….our economy circles the pan.
Only idiots think the relationship between the currencies is like a hockey score……
Davenport: Yup, under Chretien’s cronyism the Canadian dollar was doing well any time it was above 70 cents.
To make your comparison currently valid, how about working to get the Conservatives a strong majority in the next election? Two years later we’ll have a discussion comparing the performance of the Canadian economy to that of the US in 09 and 10.
Kate, I think your gaydar is a bit off…unless the transsexuals in Kathy’s update are somehow manipulating our dollar.
Re: the highly related story…
that ought to help the economy. (every boy in grade 6’s dream? an “all access” pass into the washrooms or is it only for those that “dress the part”)
“It might take a while, but as time goes on we will do more trade with the rest of the world, and less with the US. Then the value of our currency wrt the USD will become less important.”
I’m just wondering how the cost of labor, relative to the rest of the world, mainly China, is going to make this situation any different then what the US is experiencing.
Re: the highly related story…
(From the comments section) … The Bill was opposed by every Conservative MP who voted except five.
The five included cabinet minister James Moore, Sylvie Boucher (Beauport), Gerald Keddy (South Shore), Lawrence Cannon (Pontiac), and Shelley Glover (St. Boniface)
Cabinet ministers who did not vote were Stephen Harper, John Baird, Peter Mackay, Tony Clement, Peter Van Loan, Lisa Rait, and John Duncan.
….. The Liberals who who voted against the bill are: Alan Tonks (York South—Weston), Jim Karygiannis (Scarborough—Agincourt) & Dan McTeague (Pickering—Scarborough East).
There are three Liberal MPs with balls … there is a PM with none.
The loonie has long survived only because of its sad showing against the eagle.As crotchrocketguy said,you run your economy at a level 35-50% lower then your compentition,well,you end up sucking hind tit.
And anybody who thinks(?) Canada could not be leading the world,is just plain stupid.Get rid of the leech unions and parasite Quebec,and bingo…there is billions freed up for the economy
and to think it happened during the minority tenure of a conservatist hero.
The dollar has nothing to do with the economy, Were you richer or poorer when it was 60 cents?.
This is all a distraction from the real issues and causes of the economic downturn.
The real news should be, did we export more goods this year. Not just the ones that came out of the ground that everyone needs?. If not why not.
don’t tell me its the dollar I’m too smart for that one.
I recall back in the day the LIBRANOs were passing out “Diefenbuck”s…….playing polics on peoples’ ignorance about the exchange rate.