Canadian Dollar US Dollar parity

[DS]

I have no real clue what it means in the world of business,but I did a bit of research into the Canadian dollar and found these facts
.DATE VALUE
1976-11-01 0.9859
1976-12-01 1.0183
1977-01-01 1.0103
1977-02-01 1.0279
its been 31 years since our $ was equal
.2006-11-01 1.1359
2006-12-01 1.1532
2007-01-01 1.1763
2007-02-01 1.1710
2007-03-01 1.1682
2007-04-01 1.1350
2007-05-01 1.0951
2007-06-01 1.0651
2007-07-01 1.0502
2007-08-01 1.0579

heres what was happening back then
http://www.1970sflashback.com/1976/TV.asp
Does that bring back any memories?

 

[DS]

Nobody seems to care about my post.
I felt guilty using an American quarter at the donut shop the other day...
Its been a long time since you had the monopoly money...

 

[cheryl]

The US dollar has been falling for quite a while now. From what I read the Fed helped initiate the latest dollar slide by cutting interest rates:

From the International Herald Tribune:
Dollar tumbles to new low against the euro after Fed's half-point rate cut

Lower interest rates, used to jump-start the economy, can weaken a currency by giving investors lower returns on investments denominated in the currency.

How does the weakening dollar effect US citizens?

From the Chicago Fed:
Weakening Dollar
Advantages

• U.S. firms find it easier to sell goods in foreign markets.
• U.S. firms find less competitive pressure to keep prices low.
• More foreign tourists can afford to visit the U.S.
• U.S. capital markets become more attractive to foreign investors.

Disadvantages

• Consumers face higher prices on foreign products/services.
• Higher prices on foreign products contribute to higher cost-of-living.
• U.S. consumers find traveling abroad more costly.
• Harder for U.S. firms and investors to expand into foreign markets.

I've read a few articles which predicted this was a symptom that the US is going into a recession which I think is a real possibility. Let's look at the other side. Not everyone thinks the fall of the dollar is a bad thing:

From Newsweek:
Swooning Beautifully

Falling greenbacks used to induce economic panic. Now, it seems, the dollar's demise may actually be a good thing for America and the rest of the world.

But even as homeowners and greenback-toting tourists abroad feel the pinch, the demise of the dollar will ultimately be a good thing for both the United States and the world. The rebalancing would offset America's $765 billion trade deficit. It would also help reduce the cost of labor and keep more work at home. The diversification of reserve holdings could also help ease U.S. political tensions with China and the Mideast by diminishing the notion that those countries stockpile dollars in order to retain a competitive trade advantage.

And finally, my favorite part: This is the only explanation I've ever seen that is simple enough to help me understand the difference between exchange rates and [wiki]purchasing power parity[/wiki].
From The Economist:
Big Mac Index

[wiki]Burgernomics[/wiki] is based on the theory of purchasing-power parity, the notion that a dollar should buy the same amount in all countries. Thus in the long run, the exchange rate between two countries should move towards the rate that equalises the prices of an identical basket of goods and services in each country. Our "basket" is a McDonald's Big Mac, which is produced in about 120 countries. The Big Mac PPP is the exchange rate that would mean hamburgers cost the same in America as abroad. Comparing actual exchange rates with PPPs indicates whether a currency is under- or overvalued.

 

[cheryl]

The Economist's latest Big Mac Index:

 

[cheryl]

I didn't want anyone to think I'm ignoring that you're a Canadian DS so I looked up some info from your perspective too. I'm no expert but based upon what I have read I will offer you this advice, bring your loonies and shop in the US.

Economists were writing about the possibility of parity between the loonie and the US dollar last year. Why? The Canadian economy is strong in comparison to the US economy and that strength is boosting the loonie.

From CBC.ca May 2006:
What's behind the soaring Canadian dollar?

Look for 92 to 95 cents US by later 2006, some say. And several analysts are calling for the loonie to reach parity with its U.S counterpart by 2007 – something that hasn't happened since 1976.

The loonie's been flying in large part because the U.S. economy has been struggling to get off the ground. Washington is facing budget and trade deficits that have never been higher. In 2005, the U.S. bought $723.6 billion more in foreign goods and services than it sold, registering yet another record annual trade deficit.

From Reuters Feb 06:
Canadian dollar parity with US dollar looms

It might have been unthinkable only a few years ago, but parity between the U.S. and Canadian dollars some day is not that much of a long shot any more.

From Export Development Canada May 2006:
Dollar parity possible – but then what?

Many have begun to contemplate the possibility that the Canadian dollar might reach parity with the U.S. dollar. Since the vast majority of export sales are conducted in U.S. dollars, a 10% rise in the Canadian dollar would clip C$3-4 billion per month from export revenues – a serious matter.

BTW, the US govt acknowledges that Canadian currency has earned parity with the US dollar and that it will probably stay that way for a long time.

From Canadianpress Sept 2007:

U.S. official suggests loonie deserves lofty heights near parity with greenback
Responding to a reporter's question that speculation was driving the loonie higher, Treasury Secretary Henry Paulson, in the Ottawa area to sign a new bilateral tax agreement, said there were sound economic fundamentals supporting the Canadian currency.

 

[over9five]

Cheryl, Stop trying to make him feel better! He's right:

"Nobody seems to care about my post."


<snicker snicker!!!>

 

[moreluck]

If nobody cares, it's because we have money in our wallets & purses and it's gonna spend the way it spends.......nothing we can really do about it.
It's not that we don't care, we're just apathetic.

 

[DS]

Cheryl, Stop trying to make him feel better! He's right:

"Nobody seems to care about my post."


<snicker snicker!!!>

Hey man,I`m kinda surprised you would take this attitude.Are we so insignificant that you just brush us off like that?Or is it me personally that you refer to.It's a rather significant thing.After years of converting US$ to Can $ in my head I can finally do it without using my fingers.
Who knows,maybe I`ll nip over to New York and do a little shopping.

 

[wonderboy$]

The Canadian $ isn't getting stronger, the US $ is getting weaker.

When the price of gas and milk hit $10 a gallon maybe some people here will start to care?

 

[over9five]

J/K, DS!

I'll meet ya in NY an we'll do sum bar-hoppin'!!!

 

[satellitedriver]

The Canadian $ isn't getting stronger, the US $ is getting weaker.

When the price of gas and milk hit $10 a gallon maybe some people here will start to care?

In the 1960's a gallon of milk cost 99cents.
Most people didn't make a $1.00 and hour.
In the 1930's gas was a $1.00 a gallon.
Most people didn't make a $1.00 a day.
Water now costs $8.00 a gallon, when bought per bottle.
Most people can turn the tap and get water free.
Many things are cheaper now than they ever have been, per earned dollar.
Economics is a very simple, and at the same time complex.
You are applying the micro to the macro.
I am amazed you can still get 2 tacos for 99 cents.
I cared then.
I care today.
And, I will care tomorrow.

 

[diesel96]

Years ago as a pkg driver there's a little pocket of Canadian citizens on my old route with winter condo's, and on a few occasion some would recieve a COD pkg,they jokingly ask if they could pay in Canadian money. We both had a good laugh..I guess its not so funny now.

 

[DS]

I never thought I'd see the day.I was in Chicago at the bus station years ago and I asked a cop to switch a Canadian quarter for a US one so I could get a coke out of the machine and he laughed at me.Now I have a few US $ in a drawer that I think I'd better get rid of soon.I'm sure its temporary,but somehow I'm glad.

 

[1timepu]

I have no real clue what it means in the world of business,but I did a bit of research into the Canadian dollar and found these facts
.DATE VALUE
1976-11-01 0.9859
1976-12-01 1.0183
1977-01-01 1.0103
1977-02-01 1.0279
its been 31 years since our $ was equal
.2006-11-01 1.1359
2006-12-01 1.1532
2007-01-01 1.1763
2007-02-01 1.1710
2007-03-01 1.1682
2007-04-01 1.1350
2007-05-01 1.0951
2007-06-01 1.0651
2007-07-01 1.0502
2007-08-01 1.0579

heres what was happening back then
http://www.1970sflashback.com/1976/TV.asp
Does that bring back any memories?

Been taking my Vacations for over 20 years in Quebec skiing, this is the first time in over 30 years the Loonie is worth more than the greenback, just hope the world bank doesnt decide NOT to use the American currency as it's money or else we are in for a tailspin, with China holding most of our debt they would pull out in a heartbeat, and our economy would be worse than the great depression