1. the affects of the rise of the
canadian dollar has not been felt
equally across the canada. identify
the roles of the federal and
provincial governments in dealing
with these unequal affects.
2. in 2007, the canadian dollar
rose approximately 25% against the
united states dollar. describe the
cause and effects of the rising
canadian dollar for the canadian
economy in your answer, assess the
impact of the rising dollar on
canadas competitiveness and assess
whether the government should
intervene with fiscal or monetary
policy measure.
3.identify an industry sector
negatively affected by the rising
canadian dollar and an interest
group that is lobbying government
for relief for the industry sector
identified.
any thoughts, ladies and
gentleman?
The falling US economy makes the
Canadian dollar more valuable when compared to the US dollar .
The oil market is scared, the price to pull oil out of the ground, ship it and make gasoline has not changed that much, but China and India are using more oil so the price goes up. The whole world is scared that Iran will cut the spigot on the oil supply and THAT has driven up the price of oil. Most of the US oil comes from the US, Canada, and Venezuela in that order. So Canada is not hurting much by the rise in the price of oil, they have oil rich shale and are working on refining that. When they make it economical they will have as large a supply of oil as Iran. With the cost of oil rising the cost to refine the oil shale is becoming more competitive. They also share in the oil rich fields of Alaska, since part of it goes under
Canadian soil and is their oil.
Lenders got crazy and gave out house loans too easy and with the change in the interest rate a lot of home owners are no longer to pay their mortgage and so default on it. Add to that 1/3 of New Orleans land owners abandoned their land after Hurricane Katarina destroyed their houses and stopped paying their mortgages. This has made the market nervous and the whole world is worried about the US economy so many people are selling their investments in dollars to
buy other currencies. This drives the price of the
dollar down.
The US economy is heading for a recession, but by the end of the year it will probably pull out of it. Ironically the low
dollar will help. As the US
dollar is worth less it is cheaper for Canadians to cross the border and
buy US goods; helping the US economy. The same is happening in Europe; a lot of European junkets are being formed to send Europeans to the US for better shopping. All those people buying US goods will help the US market, but it will take time for the effects to trickle down.
Meanwhile, the longer the US is in Iran and a possible threat to Iraq the more the international market is worried and doesn’t trust the US
dollar, so they sell them. With the US dollar’s value dropping it becomes more attractive to use other currencies. Therefore the
Canadian dollar is getting stronger and you can
buy more US goods with it. Be happy with the price while it lasts. By Christmas, after Christmas at the latest the US dollar’s value will rise and the
Canadian dollar will not
buy as much US goods.
If you look at the US market it is still strong. McDonalds and Coca Cola are still wanted world wide, our other products are still good and in the end people will realize that and the value of the
dollar will increase; that is only a matter of time.
The economies of nations run in cycles of inflation or recession and the US has been on an upward swing for a long time, we are due for a correction. With the coming recession the price of US goods in the US will drop and become more affordable and actually be a good thing. It will be painful, but it will happen.
The US Government controls the value of the
dollar by the amount of money printed; and how much hard currency (gold) they have to back it. They also control it by the Interest Rate set by the Federal Reserve, which has been rising lately in an attempt to prevent the coming recession; but it is too little too late. All other governments have similar controls in place. They have a national bank that can
buy up or release more currency to change the value. Also currency is traded like any commodity on the hopes that the price will change. If you turn your dollars into Yen then tomorrow if the price of the
dollar falls and you use those Yen to
buy more dollars then you have made a profit. That is what drives the change in currency values; that market is controlled in part by the market, but also by other nations who try to strengthen their own currency by controlling the amount of it on the market. If they flood the market with their own money then their money loses value.
As the value of the
Canadian dollar rises it will become cheaper to
buy prescription medications from US pharmacies killing a big business in Canada. But, as the rise in the
Canadian dollar continues Canada’s oil will cost more US dollars and so be more valuable. Also the growing market of China wants more
Canadian oil.
Coca Cola is made in the US, but we use sugar grown in the state of Hawaii and from other nations; this causes the price to make Coca Cola increase, but he demand for it is growing at a pretty constant rate as the population of the world increases, so Coca Cola is a safe investment. As the price of Coca Cola falls than it will be cheaper to
buy Coke than it would be to
buy a competing
Canadian product, meaning that the company making that soft drink will lose money. The same would be true with American made beer or bread or any other product. That is going to harm the
Canadian market a little. What could really hurt the
Canadian market is if the operating costs in Canada rise high enough that the factory relocates to the US, that would really hurt the
Canadian economy.
When the US passed the North American Federal Trade Act they reduced the operating costs and the import fees on goods made in Canada and Mexico for US citizens. So a lot of US
companies relocated to Mexico, with cheaper labor costs. This took jobs away from US citizens hurting the US economy. That could happen in Canada, I don’t know any specific
companies off-hand, but I do know the makers and sellers of medical drugs will be hurt.
The rise of value of the
Canadian dollar will let Canada
buy more US made goods and services so it will help the people and the government. But, it will drive US
companies to become more efficient so they could produce their goods cheaper and undercut the
Canadian competition, maybe even driving some
Canadian business out of business. Toyota did that to Ford and GM. Toyota cars tend to cost more now than many Fords and GMs, but more American people want Toyota cars so the value is more as well, which only drives up the cost. GM and Ford are making record losses and need to create cars that Americans want.
When Ford and GM make less money and produce less cars it hurts two dozen other industries; those that supply the parts for Ford and GM to make their cars. So a
Canadian company that makes; say radios for GM cars will be hurt with the loss of GM. Their profits will be tided directly to how well the US economy is. The need for glass and sand to make that glass from Canada will drop as the US dollar’s value drops. So along with the bad comes the good and vice-versa. It all depends on how sound the basic economy is and what goods and services are made by that nation. Canada has some great sources of minerals and the need for that will only increase so as the
Canadian dollar’s value increases US
companies may
buy more of those minerals from US or other countries, but the amount of those valuable minerals in the world is finite so some other nation will come into the market to
buy them, then the markets will adjust and the prices will rise and fall.
The US government controls the value of the
dollar with the interest rate; the higher it is the smaller the supply of dollars, the lower it is the more likely people are inclined to borrow money so the larger the supply of dollars; this interest rate is set by the Federal Reserve.
The value of services changes with the demand, but the value of goods changes more with the supply, or the perceived supply; how much of it the market thinks will be available. Oil is not scarce, but the market is nervous and acts like it is scarce, so any oil producing nation, like Canada is going to do well.
Canadian companies used to compete well with the US because their cost to make and sell the product was cheaper. Senior citizens were coming from as far as Arizona to
buy cheaper medications in Canada, but when the value of the
Canadian dollar increases then it will no longer be worth going to Canada to get those drugs. This will hurt the drug market; prices will fall until the market stabilizes. The dollar’s value will rise and fall in both nations, but over the long term the value produced by the nation; the Gross National Product is the best measure of what economic value a nation has. The US has a high GNP, higher than that of Canada, but Canada’s GNP is nothing to sneeze at a lot of Europeans wish they had that good of a GNP. In the end the GNP will decide who is doing the best and the market will adjust accordingly.
If the US dropped its presence in the Middle East and stopped scaring the market then the supply of oil will seem to be more secure, the value of oil will fall and the value of the
dollar will increase. Unless the US leaves too early and lets Iran come in and take over Iraq. Politicians, even Democrats, know this. The US will have troops in the Middle East for at least the next 25 years, but with the next election that number will fall sharply and that will make tensions ease. That alone will drive the value of the US
dollar up against the value of the
Canadian dollar, so enjoy the rich times while they are here, they won’t last forever.
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