Quote:
Originally Posted by Claeren
But if that were the case the currency would simply revalue itself. It is not 'bad news', it would simply be represented in a different (in your scenario, lower) currency value.
The fact is, many believe we increasingly DO have other export markets, notably China and India. And that America is so dependent on our stable sources of energy that they HAVE to pay whatever the market demands to offset their own competition from those other countries. In fact one of the fundamental reasons for the current run in the currency is that economists believe increasingly that the Canadian economy HAS de-linked itself from the American economy. We have integrated economies yes, but no longer is Canada dependent on American consumers like we were when it was a matter of selling Ford's. Their cities and economy(s) are built around needing oil and gas and electricity and nickel and copper, etc. One could argue that in terms of our relative currencies, we now have 60% more leverage in that regard than we did ~5 years ago (other advantaging factors aside).
I am, like you, concerned about the competitiveness of some sectors of our economy too but PRODUCTIVITY is a FAR more worrisome problem than the currency valuation. (And thus the currency WILL drop if productivity does not increase, and will rise if we do raise productivity - another example of the currency simply being the valuation of the relative wealth of the national economy.)
The kicker is that it is actually easier to raise productivity with a high dollar than it is with a low dollar. Many economists and such suggest that the chronically low Canadian dollar for the last 30 years has had far more to do with our disinterest in raising productivity (or inversely, our desire to use the exchange rate as a 'productivity crutch') than it ever did with any fundamental reason we should have a lower valued dollar
Claeren.
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i defer to your understanding of delinking from the us economy, however i am challenged by the concept that china or india will pick up the slack. if this were true, we would already be selling to these countries at the level required to pick up the slack. i don't doubt that it could happen, however the costs associated with transporting goods may have an impact. on the other hand, the japanese buy coal from canada and ship it back as high quality steel...so maybe transport isn't that big a deal.
you have actually created an area of interest in my head. i am going to check with my guys tomorrow and ask what they see happening with delinking.
at the end of the day, this is about risk. hmmm...this certainly isn't the topic i expected to be discussing on the mighty CP!