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Oh. My. God.

I don't know what else to say.

It is too bad he doesn't understand PPP. If he did then his comparison would not have been between 1910(!) and today. He would have picked something that could be reasonably bought in many countries around the world, then checked out how much it took in local currency to buy that basket of goods, and then declared the exchange rate of that currency amount to be "parity" compared to all other countries. Or Purchasing Power Parity (PPP).

Figuring out the price for a resonable basket of goods is a pain in the %#@. As a shortcut he could do what The Economist does, and construct a Big Mac index. Or he could save himself yet more time and simply copy The Economist's figures.

PPP is the only parity that makes economic sense.

Of course, PPP doesn't determine an exchange rate though. That is determined by FFF, in a relatively free market for currencies anyway. What is FFF? My pet nickname for Flow of Funds Fundamentals. FFF is the relative desire to export and import, and the relative desire to invest "here" rather than overseas, and the whims of currency traders all added together, thus causing currencies to rise and fall.

Note that PPP is a factor in exports and imports, and in the decisions of tourists (if you don't already count that as imports and exports), and in the decision of capitalists who are thinking of building factories somewhere, or buying businesses somewhere etc. But it is only one factor in those decisions and it may swamped for a long time by other more important factors, such as tax treatment of corporations or individual savings, the perceived neccessity of such savings in the wake of things like government pensions, the perceived relative property rights of various countries (e.g. safe havens), commodity prices vs a country's position as a commodity producer/consumer, etc.

Take away the ))) from the PPP and you get FFF, which is what matters for a currency's exchange rate (in a relatively free market). :)))

However, PPP is what matters when figuring out if resident's as a group are "gaining" or "losing" as a result of their currency's world price.

Finally, if the writer of the quoted article wants to give Canadians a raise, he should figure out how to raise their productivity. The employee/employer percentage of workers' productivity as a group is remarkably stable over long time periods.

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