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I'm amused that at the same time that your politicians in Canada and those in France are complaining about the strength of their currencies, that pundits in the US are complaining about the weakness of the US dollar.

Personally I think strength and weakness works out to a wash. The real issues in my mind are how far away from the PPP rate currencies are, and the speed of their fall or rise. A gradual change (in anything) is much easier for an economy to handle than a sudden change. At the same time, the farther exchange rates get from PPP, the more you get some ugly displacements on an increasingly large scale, noting that in time the rubber band of exchange rates seems to eventually oscillate closer to PPP and thus those large dislocations can't really be good for an economy.

Hi Steve;

Just found your blog - why didn't you tell me about this earlier?

Re: provincialism and exchange rates. Would you be more sympathetic to Charest's and McGinty's stated concerns if we restricted the debate to the effects of the CAD appreciation (a) only against the USD, and (b) since March? The CAD traded below below 0.85 in early March and traded briefly above 1.08 around the time of their remarks. When I listen to their remarks, I think I hear the same blatant self-interest that you do, but I also think that I hear a focus on the most *recent* appreciation and comments on its speed. To give the devil his due, I think it is reasonable to suspect that the full impact of the last six to nine months of the appreciation is not captured by the evidence that you're showing.

Cheers,

Simon

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