The seemingly unstoppable Canadian dollar surged to its highest level yet Wednesday, topping 106.17 cents (U.S.).The record came just after 4 p.m., when official trading ended for the day. Officially, the dollar closed at 105.85 cents, up nearly a cent from Tuesday's close, but trading continues virtually around the clock.
By cracking through 106 cents, the dollar topped what most observers believe to be the old record of 106.14 cents set on Aug. 20, 1957.
Looks like I'm going to have to rewrite my own contracts with US businesses so I don't lose even more money to this. Funny how your own advice (I was writing about the dollar's inexorable rise years ago) is the hardest to take.
Canada's a petro-economy now. That's a mixed blessing, but it is making consumer goods cheaper and it is fueling a massive boom in Alberta. It's also gutting Canada's manufacturing sector, and is especially hitting southern Ontario hard, since it's caught between Detroit's collapse (which is now so extreme that even cheaper costs due to universal healthcare can't make up the difference) and the dollar's rise.
The dollar's rise is one reason why Quebec, whose economy can be summed up as "power to New York, farm goods to the rest of Canada," is feeling generous towards the conservatives - those export earnings are going far.
Overall I'm not pleased with the dollar's rise. In 7 years it's risen around 50% against our main trade partner. Since Americans have to have oil, natural gas and electrical power no matter what, they've had to pay, but it's devastating our industrial sector. What would you do if, for no reason you have any control over, the majority of your expenses rose 50%? In many cases there'd be nothing you can do, you can't pass on those sort of increases to your customers when China has been spending about 10% of GDP to keep their prices down.
Eventually the oil boom will end. All resource booms do. And when they do Canada's going to have a lot less of an industrial sector than it used to. Resource wealth is, generally, fake wealth. It builds very little permanent prosperity for those who have it. It is, though those getting wealthy in Canada's oilfields won't believe it, a curse.
Once the Maritimes, with their great tall straight trees, were one of the jewels of the British Empire. Today maritimers live on what amounts to federal government aid. When the trees (and later the coal) were no longer needed, none of the money that had poured out of the ground stayed.
That's the future of Alberta, almost certainly. What I fear is that it is the future of Canada.
Gee, you sure know how to cheer a girl up before her first cup of coffee, don't you, Ian?
Seriously, though, this is having a big impact on individuals, too, in addition to affecting entire sectors of the economy. A lot of tech workers here in Ottawa work on contract to big U.S. firms (think Silicon Valley), and are paid in U.S. dollars. Years ago, it seemed like a no-brainer to have that written into your contract. Now, people like my brother keep asking me when it's going to start to get better, when are they going to stop being underpaid, when is a good time to switch their U.S. money to Canadian, etc.
I can't help thinking it's going to get worse before it gets better.
People have been worried for years. Now they're really worried.
Ian Welsh:
Speaking as one of those Maritimers whose family has been a Maritime family since Confederation I would agree with your evaluation regarding resource economies and the example of what happened in this region. Although I would note that it wasn't just the loss of the coal and tree markets but also that shipping shifted to metal hulls killing our local shipwright sector (I know a little about this because one of my great grand-fathers was one of the last serious shipbuilders in this region) and then started to bypass the region altogether and go straight to central Canada via the St Lawrence Seaway (also aided by the government of the day to make increased heavy shipping transport viable) to Montreal/Central Canada and easy access to the American Midwest. Combined with the resource losses you already noted and the local economy simply disintegrated from being an economic powerhouse to what has been true for the past half century now.
We did finally learn some lessons about putting too many eggs into the resource basket; indeed, the local telecommunications and IT sector shows this quite nicely. However, it is still a significant component which is why the Atlantic Accord held such import out here and why Harper's rewriting of it unilaterally has caused such a strong reaction. You are quite right about the dangers of a resource driven economy, especially when that resource is a finite one as oil most certainly is. You are also right on the money regarding the lack of long term economic benefit/infrastructure a resource driven economy leaves behind, and I don't think Albertans truly appreciate that (or at least those in power and influence over those with power) and will inevitably pay a much higher price for it than they can believe possible.
After all, NS/The Maritimes went from being the economic powerhouse of the Dominion of Canada from birth until WWII and then essentially collapsed within little more than a decade into decades of economic stagnation, irrelevance and need for help from the new economic powerhouses within the nation. It can happen very quickly once the resources driving the economy are no longer there or are no longer in demand the way they once were.
The truly fake wealth has always been Ontario's manufacturing sector. Without the protectionist policies of successive federal governments - ridiculously high tariffs and duties - Ontario's inefficient, amateurish and uncompetitive manufacturing sector would have disappeared decades ago. And now Ian wants us to feel sympathy for these heavily subsidized coddled industries who cannot compete on anything remotely resembling a level playing field if their lives depended on it. I suppose we in Alberta should be thankful that Ontario has been gouging us since Confederation.
I know I shouldn't feed the troll, but how does that even make sense? How do duties and tariffs help Ontario industry sell to the United States?
I don't follow either. Despite the current problems, driving from Toronto to Waterloo I see many a gleaming factory or industrial plant. Ontario's current problems have nothing to do with "inefficient" or "amateurish" or even "uncompetitive" manufacturing, but with a high dependence on automaking and all the spinoffs that that implies. In fact, the efficiency of the auto sector is the only thing saving it from the fate of Detroit.
Anyhow, Albertans (and their reliably re-elected PC governments) seem happy to fritter away the proceeds of resources extraction on short-term consumption, all the while causing further environmental deterioration and high inflation. Meanwhile, they'll happily support a federal government which fiddles and pisses off major markets like China for puerile political reasons.
Of course, I'm interested to know how an externally-imposed 50% increase in costs amounts to a level playing field.
On resource wealth being generally fake wealth--hard to disagree in general, but I don't think it *has* to be that way. Venezuela seems on track to become an exception, using the oil wealth to build infrastructure and start new industries. Yes, using oil wealth to pursue an *industrial policy*. Man, wouldn't it be nice. But I'd say even an NDP majority government wouldn't have the political will to start doing any of that shit.