Canadians Not Happy About US Dollar Fall

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"Canadians Not Happy About US Dollar Fall"

Toonie

Toonie

A cheaper US dollar is almost certainly in the short-term interests of the United States as it will boost employment and help us get out of the recession. But perhaps more importantly, it’s in the medium-term interests of just about everyone, since it would set the stage for a rebalanced global economy. The problem is that it’s very hard to find any examples out there of “matching” countries whose leaders are excited about the prospect of more-expensive currencies and the enhanced consumption possibilities that would be opened up. For example, the Canadian economy has been a good deal stronger than the American over the past 18-24 months so the Loonie has shot up relative to the Greenback. This means Canadian citizens can afford more goods and services than would otherwise be possible, but it has PM Stephen Harper worried:

Some of the Canadian dollar’s sharp climb is justified by fundamentals but too rapid a rise could damage the country’s economic recovery, Prime Minister Stephen Harper said Tuesday.

“Obviously, it is a concern,” Harper told reporters, noting that Bank of Canada Governor Mark Carney had also worried about volatility in the currency.

He’s not wrong, exactly. Unfortunately with employment looking weak in pretty much every country around the world, no leader anywhere seems to believe that his country can withstand a large short-term increase in value. But eventually the shift has to happen, and I don’t really see what the way out is.

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