Canadian Dollar At $0.9639 USD

[BlackArcher101]

Originally Posted by Claeren

Even when used to support positions like "the dollar is killing our manufcturing sector" it is not true.

I work in the manufacturing industy... in Oil&Gas to be a bit more specific. For my company, what you say here is not true at all and the 3 reasons you give aren't even a factor for us. What is killing us and going to kill us is the fact that we export product and sell in USD. Already we have seen our profit margin drop because of the dollar.

[Claeren]

Yeah, but you are talking about one company.

The Canadian economy as a whole is valued in a way that disadvantages your single company but that properly values the larger whole.

IF what you said was true of all companies in the economy Canada would have a large trade deficit. We do not.


More specifically, the HUGE amount of our natural resource exports mean that the TINY value comparatively of our manufactured goods is not important to the larger whole of the economy from a strict valuation perspective. Long term, IF our resources lost value and we came to depend more on higher value exports like your own, our dollar would fall to reflect that fact. In a perfect economy your company would use the high value of the dollar to import productivity enhancing technology or fund importnat R&D that would further improve the value of your exported product base. Germany has an incrediably high dollar yet still manages to be a major exporter of important manufactured goods.

Diversifying the export options or rising domestic consumption would be further options of offsetting sagging American-market profit margins. Remember that this has as much to do with Americans being poorer as it does Canadians richer. That is another way of looking at the reduced profitability found in American-bound exports.


Claeren.

[Juventus3]

Originally Posted by BlackArcher101

I work in the manufacturing industy... in Oil&Gas to be a bit more specific. For my company, what you say here is not true at all and the 3 reasons you give aren't even a factor for us. What is killing us and going to kill us is the fact that we export product and sell in USD. Already we have seen our profit margin drop because of the dollar.

That's interesting. I'm not an expert nor am I contending what you say...but I have a question. This is not just a result of the canadian dollar going up, but also a result of the USD going down, if compared against various currencies. How would it benefit the US to buy from another market instead of Canada if their dollar is not worth as much no matter where they turn?

I think that makes sense...

[BlackArcher101]

Originally Posted by Juventus3

That's interesting. I'm not an expert nor am I contending what you say...but I have a question. This is not just a result of the canadian dollar going up, but also a result of the USD going down, if compared against various currencies. How would it benefit the US to buy from another market instead of Canada if their dollar is not worth as much no matter where they turn?

I think that makes sense...

I don't think it would benefit them. If the USD compared to other currencies goes down at the same rate versus the CDN dollar, then I can see this not affecting their purchase price options to an extent. Of course their price may go up in order for the exporters to cover their extra losses, but in my industry they are very reluctant to buy when costs go higher, instead they hold tight.

Unfortunately, if we don't raise costs and the industry won't accept higher costs, then we can't make up for the loss in income that comes with the currency conversion. But Claeren makes a good point. This is just how my company is affected and perhaps my industry as well, but doesn't give a picture on what's happening overall. Oil&Gas is very cyclical and susceptible to cost changes and in this way it probably differs from other exporting industries.

[GoinAllTheWay]

Good posts.

I had always wondered why a high dollar value was bad for Canada. If it's bad for us, why wouldn't it be bad for the US? What possible reason could you have for wanting your dollar to be worth less? For as long as I can remeber, the Canadian dollar has always been worth less than a US dollar and for the life of me, I could never understand why that would be a good thing.

Can't say I fully understand it yet but if someone could dumb it down a bit for me that would be awesome.

[HOOT]

Originally Posted by GoinAllTheWay

Good posts.

I had always wondered why a high dollar value was bad for Canada. If it's bad for us, why wouldn't it be bad for the US? What possible reason could you have for wanting your dollar to be worth less? For as long as I can remeber, the Canadian dollar has always been worth less than a US dollar and for the life of me, I could never understand why that would be a good thing.

Can't say I fully understand it yet but if someone could dumb it down a bit for that would be awesome.

I'm probably wrong but I think it has to do with other countries less likely to buy/trade for our goods such as wood, oil and so on because it will cost them more than going with a country with a low dollar. Some please correct me if that is not the case...

[BlackArcher101]

Originally Posted by GoinAllTheWay

Good posts.

I had always wondered why a high dollar value was bad for Canada. If it's bad for us, why wouldn't it be bad for the US? What possible reason could you have for wanting your dollar to be worth less? For as long as I can remeber, the Canadian dollar has always been worth less than a US dollar and for the life of me, I could never understand why that would be a good thing.

Can't say I fully understand it yet but if someone could dumb it down a bit for that would be awesome.

The USA has more imports than exports. The cost to buy these imports is usually done in the foreign currency (majority I think). With a high USD, they have more purchasing power (more foreign dollars when converted) and are able to import the product cheaper. Compare this to a high USD and now they are unable to buy the same amount of product for the same amount of USD.

For an exporting country like Canada, when our dollar is low, foreign countries are likely to spend money and buy our products. This leaves an industry with large demand and good incomes. Switch this around, and you are left with a drop in exports and a slow down in industry.

It can be a lot more complicated than that, but should be a good brief explanation.

[jammies]

Originally Posted by octothorp

Not at all true. In most cases, it's the distributors who are making the obscene profits in the book industry, while most retailers are forced to buy books at the same prices that they bought books in the past.

Is there something stopping these retailers from buying books at the US prices from US distributors? Are you saying that if I call up some American distributor, and say I want to buy 2000 copies of Harry Potter, then I am forced to pay a different price because I am in Canada? Or are they all forced to buy from the Canadian divisions of these US distributors, who set different (higher prices)?

I find it difficult to believe someone like, say, Chapters, could not set up an American division to purchase all their books, and then ship them over the border. Surely if the gap is as wide as it seems (still paying around a 30% premium over American prices), their own profits could be substantially increased even after discounting the books well below what other Canadian book chains could afford to set their prices at. Something doesn't seem right here - the small retailers have little clout, but I just don't see the big players standing for that.

I find it much more likely that both distributors and retailers are making more money, and that neither is willing to disturb the status quo. Or that there is some stupid Canadian law intended to promote "culture" in Canada that prevents foreignly produced books to enter the country without paying stiff tariffs, thus allowing the domestic market to be all about making copies of American stuff at greater expense for no discernable benefit.

[GoinAllTheWay]

Originally Posted by BlackArcher101

The USA has more imports than exports. The cost to buy these imports is usually done in the foreign currency (majority I think). With a high USD, they have more purchasing power (more foreign dollars when converted) and are able to import the product cheaper. Compare this to a high USD and now they are unable to buy the same amount of product for the same amount of USD.

For an exporting country like Canada, when our dollar is low, foreign countries are likely to spend money and buy our products. This leaves an industry with large demand and good incomes. Switch this around, and you are left with a drop in exports and a slow down in industry.

It can be a lot more complicated than that, but should be a good brief explanation.

So does that mean that the US buys more then it sells? I don't get how a country could keep running if that's the case.

[McG]

Originally Posted by Claeren

I am getting tired of these types of comments from certain corners.

The dollars value is the result of various conditions of the economy being valuated in the open market versus other world economies. It is by definition the valuation of our output. It can't be "too high"or ""too low" because if it were either it would simply move to where it should be over time.

Even when used to support positions like "the dollar is killing our manufcturing sector" it is not true. Our manufacturing sector is dying because (off the top of my head) (1) increased competition from 3rd world countries (2) low Canadian productivity and (3) the higher relative output dollar from natural resource extraction versus manufacturing for every input dollar invested. The current rise of the dollar is the sum reflection of all of those factors. No one mentions that manufacturing has been in decline since its peak (as a percentage of total output) in like 1946! ALl they talk about is how the "dollar is too high".

That dollar simply cannot be "too high" or "not be a good thing for Canada". It IS Canada (for better or worse) - that is what it represents, the sum of all Canadian economic value.


The only thing it can do is move too quickly up or down, but moderation of currency valuation is an entirely different thing...



Claeren.

Ignoring the fact that i didn't mention "manufacturing" once...

your analysis is fine in a 2 country model, however when you consider that competitive advantage must be modeled across multiple countries, currencies, and commodities, then things change.

The value of foreign exchange is a reflection of the demand for that currency...just as in any other commodity. you are right...the dollar or yen or whatever has no opinion nor any intrinsic "good or bad" or "industry saving versus industry killing" value. even when modeled on a simple 3 country model, competitive advantages in each country, including the size and value of the goods created and subsequently sold, generate different competitive advantages for cost of goods produced and sold. in other words, if it costs us an absolute fortune to make widgets, and another country can make them cheaper, Canada would be at a competitive disadvantage and frankly should find a better use for the commodities that make up the widgets.

the problem here for Canada is that on a sheer size basis, we are extremely dependent upon exports of goods to the United States, in the West that is primarily raw materials. When our largest trading partner can buy say 25% less of our raw materials because of the exchange rate change, that means that somewhere in Canada businesses will sell 25% less, cut back production by 25%, reduce the work force by 25%, and stop investing in new processes or technologies. the exchange rate is arbitrary, however the impact from sheer numbers is significant for the man in the street. i don't think that there is too much that can be disagreed with in a 2 country model in this paragraph.

the next logical step would be that, with the canadian dollar reflecting the strength of our economy, and hopefully the demand for canadian dollars and canadian goods, we would be in demand and one country's or currency's issues wouldn't affect us that much. the problem is that, relatively speaking, the canadian dollar has remained relatively close to other major currencies worldwide...in other words, Canada hasn't suddenly had some major positive swing worldwide. so what. well, we know that the impact has actually been in america...the high canadian dollar is not because of Canada's strength worldwide...it is because of the us dollar's weakness against the canadian dollar and more particularly worldwide. this means that the us dollar is being viewed negatively around the world, not just cad v usd.

to be clear, we are not saying that canada is super great versus the US, we are saying that the US is super weak versus Canada. it has the same apparent effect, but it is quite different. the problem is that there are no countries out there that, for canada as an exporting nation, will be able to pick up the potential lost production of our export based industries.

i am actually pretty tired of debating this already, but i will end with this.

one of the ways for demand for canadian dollars to increase is to have an interest rate that is higher than the us interest rate. monetary policy guides this because it not only removes money from our economy by canadians (save versus spend), but it causes global investors to accept the currency risk in canada for a premium interest rate return. yes, the underlying strength of the economy also affects this, however the concept is that with a higher interest rate, there is less inflation but also less business and consumer borrowing and spending and more saving.

here is the crux of my point. the canadian economy cannot afford to lose any significant percentage of our export based sales without replacing those sales. there does not appear to be any other country that is able to become a bigger trading partner than the US is with us.

and that is bad news for canada. only of course if you think that unemployment and all that this brings to canada is bad news.

[Claeren]

Originally Posted by GoinAllTheWay

So does that mean that the US buys more then it sells? I don't get how a country could keep running if that's the case.

Government debt/deficits, consumer debt and foreign investment.



But yes, what you are getting at i think is true, long term it all has to equal out. You cannot borrow forever and ever.

Of course you could do what America does and literally and shocking simply print more money but that SHOULD increase inflation and eventually drive foreign investment (and confidence) away - thus reducing the value of the dollar. If any other country printed money like America they would have long ago pulled an 'Argentina' in terms of foreign valuations of their currency.

Lucky for them global trade is primarily done in USD, as are the largest stock/bond markets. Even this advantage is being eroded over time though, with booming markets in London and Hong Kong (among a number) and efforts by countries like Iran to price oil in Euro's. SOME suggest that when Iraq started pricing in Euro's it was the last straw for war....




Claeren.


PS - The explanations were not 100% correct IMO but i don't have time to add to them...

[Claeren]

Originally Posted by McG

here is the crux of my point. the canadian economy cannot afford to lose any significant percentage of our export based sales without replacing those sales. there does not appear to be any other country that is able to become a bigger trading partner than the US is with us.

and that is bad news for canada. only of course if you think that unemployment and all that this brings to canada is bad news.

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.

[Hack&Lube]

Now if all Canadians go out and start buying USD and buying goods in USD, then the dollar won't be at par anymore! Just a word of warning!

[McG]

Originally Posted by Claeren

Government debt/deficits, consumer debt and foreign investment.



But yes, what you are getting at i think it true, long term it all has to equal out. You cannot borrow forever and ever.

Of course you could do what America does and literally and shocking simply print more money but that SHOULD increase inflation and eventually drive foreign investment (and confidence) away - thus reducing the value of the dollar. If any other country printed money like America they would have long ago pulled an 'Argentina' in terms of foreign valuations of their currency.

Lucky for them global trade is primarily done in USD, as are the largest stick markets priced in USD. Even this is being eroded over time though with booming markets in London and Hong Kong (among a number) and efforts by countries like Iran to price oil in Euro's. SOME suggest that when Iraq started pricing in Euro's it was the last straw for war....




Claeren.


PS - The explanations were not 100% correct IMO but i don't have time to add to them...

yah this is a toughie to explain. eventually, you would think that things would need to balance out...but there are mitigating things here.

Claeren does a good job, so i will simply add to this. the concept is that the trade balance or deficit is part of an exchange. so as goods enter, dollars leave. if you import more than you export, you are in a deficit. i just did a quick search on the net about this as i read a good article about this a couple of months ago, but i couldn't find it. there seems to be a consensus that foreign governments and banks are financing this debt through the purchase of us government stocks and bonds. the theory would be that any interest payments due would be less than the us government is "making" as a whole. i use quotes there because the us government is only the people and the finances (including taxes) raised by america. that's it. nothing else. the big deal is when investors don't think that the us can pay for those bonds or interest payments, or get a better/safer rate of return elsewhere...ie canada.

the underlying strength of the american dollar is that it is the defacto standard for many financial transactions around the world today. things are valued in usd even when they have nothing to do with either the evaluation or the countries. the us dollar is seen to have some intrinsic value. so, when you are in mexico, they like usd. asia? usd. in fact, anywhere that the currency value is a concern, the usd is seen as having strength against other currencies.

its a tricky one. smarter people can probably explain it better than i.

[McG]

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.

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!

[604flames]

Originally Posted by Hack&Lube

Now if all Canadians go out and start buying USD and buying goods in USD, then the dollar won't be at par anymore! Just a word of warning!

I'm sure the $75 I just dropped for an authentic John Stockton Jazz jersey won't drag us down that much.. Hopefully

[Lanny_MacDonald]

The Canadian buck is now officially worth more than the USD.

Universal Currency Converter™ Results Using live mid-market rates.
Using live mid-market rates. More currencies...
Printed from the XE Universal Currency Converter at: www.xe.com/ucc

Memo: .................................................. .................................................. .................................................. .................

.................................................. .................................................. .................................................. .................


Live rates at 2007.09.21 04:18:16 UTC 1.00 CAD

=

1.00164 USD

Canada Dollars United States Dollars 1 CAD = 1.00164 USD 1 USD = 0.998365 CAD
Wow.

[octothorp]

Originally Posted by jammies

Is there something stopping these retailers from buying books at the US prices from US distributors? Are you saying that if I call up some American distributor, and say I want to buy 2000 copies of Harry Potter, then I am forced to pay a different price because I am in Canada? Or are they all forced to buy from the Canadian divisions of these US distributors, who set different (higher prices)?

Yup, if you're a Canadian bookseller, regardless of whether you're an independent small-town store or whether you're Indigo/Chapters, the only distributor you can buy Harry Potter from is Raincoast Books, who have exclusive rights to Canadian distribution of it (and have gone from being a small-time player to being one of the largest and richest players in the Canadian book industry as a result).
Not all books have exclusive distribution contracts, but most big ticket books do. Sometimes a publisher will have a contract to put all their books through a specific distributor, sometimes they'll conduct a bidding war for distribution rights (which is what happened with HP). It's not a Canadian thing, I think it's fairly universal through the global industry.

However apparently there's been such an outcry that many Canadian distributors are actually reducing the Canadian selling prices. So once this system is implemented, a distributor will put a sticker price over the Canadian price on the book jacket, which means that Canadian bookstores will buy and sell books at lower prices. Look for this to be common by January (after the Christmas rush, but that's greed for you).

[BlackArcher101]

Now @ 1.00 CAD = 1.00368 USD

[HOOT]

Originally Posted by BlackArcher101

Now @ 1.00 CAD = 1.00368 USD

This is crazy...I never thought I would see the day, then Bush got elected