Strong dollar

Quote: kenarman

I don't have real strong feelings one way or the other but somehow it seems a country is giving up some of it's sovereignty when it pegs to another currency.

Well it certainly is giving up some of its sovereignty ! But on the other hand, all nations are greatly influenced by the economics of other nations anyway. The sovereign actions are probably minor compared to the changes in tourism patterns from year to year. I bet it's more than sports teams that set up contracts in US dollars instead of Canadian dollars. Besides, if you are working in US dollars you have access to a world of finance that no other nation can match.

Besides Panama, Ecuador and El Salvador have switched to the dollar. For many years Argentina's currency was pegged to the dollar. Many of the smaller nations in the Caribbean have currencies that are fixed in exchange rate to the dollar. They keep enough US treasury bonds to back their currency.

I would have thought by now there would be more discussion about uniting the dollars of Canada, Australia, New Zealand, and the USA.

Quote: Pacomartin

I would have thought by now there would be more discussion about uniting the dollars of Canada, Australia, New Zealand, and the USA.

Why a formal union... dollars are linked electronically.

Today's news: Norway dips into its oil revenues to sustain its budget. Nation worried.

Quote: Pacomartin

If CAD and USD ever get back to parity, Canada could just fix it's currency at parity. It would be by far the largest economy to have a fixed currency, but it would eliminate the wide swings. But the swings help some people and hurt others.

Would you be in favor of a fixed exchange rate?

While a fixed rate may help Canada long term, at parity would probably be a bad rate to fix it at.

Quote: kenarman

I don't have real strong feelings one way or the other but somehow it seems a country is giving up some of it's sovereignty when it pegs to another currency.

This actually raises so many interesting questions!

In whom does sovereignty reside? France held a long series of revolutions concerning that question. How can sovereignty be fixed to a particular holder? Should it be? What about individual sovereignty? How does a massive currency devaluation affect it? How can currencies be manipulated to control the populace (actually the answer is "not very well")?

Quote: AZDuffman

While a fixed rate may help Canada long term, at parity would probably be a bad rate to fix it at.

CAD started at parity with USD. Now most of it's history it was worth less than the USD so parity seems high. But I think at whatever rate it is eventually the economies would even out.

But a lot of the advantageous of a fixed exchange rate wouldn't exist if it wasn't at parity. Parity allows US citizens to freely spend large value banknotes in Canada (they don't have to take anything smaller than a $20).

It's kind of speculative anyway, because politically the loss of sovereignty would kill the idea.

Quote: Pacomartin

CAD started at parity with USD. Now most of it's history it was worth less than the USD so parity seems high.

How did the exchange rate work when specie was the norm?

Quote: Pacomartin

CAD started at parity with USD. Now most of it's history it was worth less than the USD so parity seems high. But I think at whatever rate it is eventually the economies would even out.

But a lot of the advantageous of a fixed exchange rate wouldn't exist if it wasn't at parity. Parity allows US citizens to freely spend large value banknotes in Canada (they don't have to take anything smaller than a $20).

It's kind of speculative anyway, because politically the loss of sovereignty would kill the idea.

It no problem spending large US bills in Canada in the most areas. A lot of the cash never hits the bank/exchange anyway. The tourist traffic to the US sucks up a lot of the cash. It is easy to find a friend going to the US that will give you a better rate for the bills. Many people in Canada that cross the border often also keep Canadian bank accounts that are valued in $US. The snowbirds are looking to gather up US cash all the time.

Although the Canadian dollar has spent more time below parity than above, historically it has been all over the board. When I was a kid in the 60's there was so much US coinage circulating in Canada that the government thought it was inflationary. They pegged the dollar at $1.10 and the merchants started discounting the US coins which cleared them out.

Although our two economies are tied quite tightly together they are not the same. If the huge US debt held by China ever comes home to roost the Canadian dollar could end up being valued a lot higher than the US dollar.

I just returned from a week in the Caribbean on the island of St. Maarten/St. Martin. We stayed mainly on the french side of the island where the local currency is Euro's. Despite the exchange rate of $1.12 equals 1 Euro, everybody was taking Cash dollars at an equal rate as the Euro. Basically a 12% discount for U.S. cash.

Quote: Pacomartin

Besides Panama, Ecuador and El Salvador have switched to the dollar. For many years Argentina's currency was pegged to the dollar.

By swithching to and using the dollar, those country's are then only at the mercy of the federal reserve. Argentina has collapsed at least three times trying to support a dollar peg. But by keeping their own currency they at least had a monetary tool to try and influence their own sovereignty.

China is very wise to what is going on and has until recently kept a peg to the dollar. They loaned us trillions of dollars worth .03 each, and our plan was to pay them back in dollars that were worth .02 each, so they had to float their currency. What they are doing now is buying assets around the globe with all the treasury's they have in reserve. Basically buying the world's resources while the dollar is still accepted. On the flip side, they are settling trade with Russia in Yuan, as well as the other Brics and Iran.

China just entered the ww3 which is started in Syria a few days ago with their first air craft carrier in action. Stuff is getting real. I hope historians get it close to correct?

Quote:

I would have thought by now there would be more discussion about uniting the dollars of Canada, Australia, New Zealand, and the USA.

The US already controls the value of those money's as they are all members of the central bank cartel, the IMF and the BIS. They have to accept freshly printed US dollars for goods, that controls the value of their currency's.

Thanks for all your support Canada and Mexico. We love cheap gas.

Quote: Pacomartin

CAD started at parity with USD. Now most of it's history it was worth less than the USD so parity seems high. But I think at whatever rate it is eventually the economies would even out.

But a lot of the advantageous of a fixed exchange rate wouldn't exist if it wasn't at parity. Parity allows US citizens to freely spend large value banknotes in Canada (they don't have to take anything smaller than a $20).

It's kind of speculative anyway, because politically the loss of sovereignty would kill the idea.

The thing in, go to a store in Canada and the prices are way high compared to the USA. But when you get a fairly strong dollar it usually evens out. One year I did my Christmas shopping in Canada both for savings and selection--people wondered where I found some of the stuff.

As the EU is learning, a peg only makes sense in limited circumstance. Two reasons to peg are if your economy is small or if you just cannot seem to manage monetary policy. Canada has neither problem. From what I see, Canada's biggest issue is that the country is far more dependent than the USA on commodity prices. No peg will help that. Reality is Canada will be a exporter of raw materials for multiple reasons.