Strong dollar

Quote: Nareed

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

What would a Mexican silver de liberdad purchase in goods one hundred years ago, compared to what a silver liberdad will buy now?

Is it similar to the saying that in New York,a hundred years ago, a one ounce gold coin would by a good mans suit, while today a one ounce gold coin will buy,,,,a good suit?

Precious metals have been recognized in every society since recorded time. Paper always reverts to the mean.

Quote: DRich

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.

Strictly as speculation maybe 1) they did not record transactions in US dollars (unlikely), or that 2) transactions in USD were exempt from some tax or another (also unlikely, but I've seen that here and there).

Quote: petroglyph

Precious metals have been recognized in every society since recorded time. Paper always reverts to the mean.

Rome showed you can have specie-only and get inflation as well(*). But episodes of governments playing fast and loose with specie are few as compared to monetary policies as usual these days.

I'm not a hardcore specie-only type. For one thing, given what's been learned, good and bad, from paper money, there's no end to the games governments could play with specie and fractional reserves.

(*) By reducing the silver content of silver coins. It nearly felled the Empire a century ahead of schedule.

Quote: Nareed

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

Up until 1873 the US dollar and the Canadian dollar had one-to-one parity with the silver Mexican dollar. I am not sure what the relation was between 1873 and 1928/1935 when both US and Canada issued federal reserve notes. I know that international trade was based on gold standard.

At the outbreak of the Second World War, the exchange rate to the U.S. dollar was fixed at C$1.10 = US$1.00. This was changed to parity in 1946. In 1949, sterling was devalued and Canada followed, returning to a peg of C$1.10 = US$1.00. However, Canada allowed its dollar to float in 1950, whereupon the currency rose to a slight premium over the U.S. dollar for the next decade. But the Canadian dollar fell sharply after 1960 before it was again pegged in 1962 at C$1.00 = US$0.925 (C$1.081=US$1.00) . This peg lasted until 1970, after which the currency's value has floated.The currency hit a record low of 61.98 cents (U.S.) on Jan. 18, 2002 .