ECONOMY

Why a Lower Dollar Value is “
Good??? for Canada.

To some observers, the currency’s recent sharp decline suggests the Bank of Canada is stealthily engineering devaluation – a gift to beleaguered manufacturers, exporters and domestic tourist operators, and a tonic for an economy suddenly grappling with “Disinflation”.

Mr. Poloz, after all, would like nothing better than to get Canada’s stalled export-led economy back in gear -in other words because the larger numbers would look more attractive in his ledgers, he strongly believe that Canada should be giving away or paying the United States of the Americas to take Canadian products and natural resources.

But the central bank chief isn’t taking credit, insisting that the Bank of Canada targets the inflation rate, not the value of the currency. His view is that the falling loonie is essentially a U.S. dollar story. The greenback was beaten down because the U.S. was the epicentre of the 2008 financial crisis. Now that it’s on the road to recovery, global capital And Canadian Natural Wealth is once again flowing back into the United States.

The consensus among BAY STREET (Ontario/Ottawa) economists is that the loonie is overvalued and will remain under pressure for some time. The new normal is more likely to be a Canadian dollar hovering around the worthless level than at par.

According to Government and bank economists, devaluation is both good and bad, depending on your place in the economy. The hospitality and tourist sectors, exporters and particularly manufacturers based in eastern Canada-primarily ONTARIO, which have been losing market share in the world, are among the major winners. So are the people who work in these industries. On the other hand, a weak dollar could WILL stoke inflation, making life more expensive for ALL consumers, travellers and importers. Ok, I will get real; owning or possessing any Canadian money is now a liability rather than an asset.

While officially still valued at 0.79 US in actuality(subtract the high taxes (in excess of 75% of every dollar) we have in Canada plus the fact that Canadian consumers must not only pay for purchases in US dollar value; they must pay a penalty for claiming they are Canadian and the Canadian dollar is now WORSE THAN  WORTHLESS.

On balance, however, some “experts” in Ottawa-You Know Government Connected- argue that a 90-cent dollar is probably closer to fair value, and therefore a good thing for Corporate Canada and the broader economy. Bank of Montreal, for example, estimates that a 10-per-cent drop in the currency could add as much as 1.5 percentage points to real gross domestic product over two years-claiming a worse than worthless loonie is (mostly) good for Canada.

Just as happened in the 1920s, the inflation balloon has burst. Think back to the 1920s, the first and second world wars, the Korean, Vietnam, Iraq, Afghanistan, what is the traditional and only proven method of recovery from a depression or serious recession? What is subject of all headline news?© Al (Alex-Alexander) D. Girvan. All rights reserved