Believe it or not, but "cheers erupted on the foreign exchange desk at Scotia Capital" yesterday when the Citigroup's New York currency desk. Oh, well.The Canadian dollar hit its historic low of 61.79 cents (U.S.) on Jan. 21, 2002, but has gained more than 16% this year and almost 8% since mid-August alone. The True North is indeed strong. But is this good for Canada? For the U.S.? Canadian exporters are no doubt suffering, American ones will be doing better following the fall of the U.S. dollar. Tourism will likely improve in the U.S., but suffer in Canada. And consumers? Canadian consumers aren't happy, but I'm sure U.S. outlet malls along the Canadian border are quite happy. It used to be the other way around.
Already today Statistics Canada reported that retail sales fell 0.8% in July, mainly due to a decline in the automotive sector. This trend will likely continue as the majority of Canadians live near the U.S. border and will go do their shopping there. Prices have always been generally cheaper in the U.S., so with the dollar at par and the lower taxes, Canadians can buy goods at a real bargain!
In fact, according to a study done by the Bank of Montreal's stock brokerage, BMO Nesbitt Burns, "Canadians are paying up to 24% more for a basket of assorted goods purchased at home as opposed to buying the same items in the United States." Some examples: a kid's chair at Pottery Barn costs 34% higher north of the border and Acura MDX sport-utility vehicle 17% higher. Despite a campaign to lower prices in Canada, they haven't moved as fast. One saving grace in all this comes from ... Apple Inc. (NASDAQ: AAPL) as Canadians and Americans pay the same for the iPod. At least that.
Already border crossing times going into the U.S. are ridiculous, and I can only assume these will now double as even more Canadians will go shopping in the States. Indeed, I myself have bought more than my share of books in the Land of the Free when I was in Buffalo last (Labor Day weekend). A paperback book costs CAD$10.99 and USD$7.99 -- you see what I mean? As for online shopping, eBay Canada yesterday released data that show sales of items priced in U.S. dollars are up dramatically. That trend will likely continue and grow even with big ticket items such as cars. The North American Free Trade Agreement made importing vehicles not that complicated, so with car prices $10,000-20,000 more in The Great White North, Canadians are shopping south of the border even for cars.
Personally, being paid in U.S. dollars, I have seen my salary erode over time -- a 16% pay cut this year and an 8% cut in the past month. Ouch. My U.S. investments, too, had to have made more than 16% since the beginning of the year to just break even. Double ouch.
Canadian funny money is not so funny anymore -- great for Americans, not so for Canadians.
[photo rick]
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Reader Comments (Page 1 of 1)
9-21-2007 @ 1:01PM
Jeff said...
I'm sick of everyone pretending the falling dollar is a good thing for the American economy.
No matter what silver lining you're able to grasp, bottom line is your stuff isn't worth what it used to be. It's bad news.
9-21-2007 @ 2:02PM
Doug said...
In order to survive and make the dollars of the two countries viable, there should be a North American Dollar. It would be our answer to the EURO.
9-22-2007 @ 10:16AM
Thomas McCabe said...
The new Gold standard is not Gold it's OIL. Who's got it; who doesn't. Saudis are buying up the world with a diminishing commodity. Anyone for a Saudimobile? I hear it is a gas guzzler! No doc loans to pay for the gas.
9-24-2007 @ 9:34AM
investag8ating said...
About the oil, isn't that the truth. Been to Dubai lately? It's the new Manhattan. Only it's much more luxurious, has more money, and is the new place to be. The oil rich countries have grand buildings even palm shaped man made islands. The US can't even afford to fix our infrastructures then alone build any new grand buildings. The oil countries are becoming the new world leaders. The US is becoming their spend/debt servants.
9-24-2007 @ 9:40AM
Investag8ating said...
The falling dollar is just another sign of our failing economy. They can sugar coat it all they want. But we're living it and know the truth. Low paying jobs with no healthcare and devaluing home prices. Our outsourced economy is crumbling just like our infrasructure. Spend/debt consumer economies can't last forever.