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Not only are you gentle and wise, unlike folks at The Economist, you even know what the passive voice is.

I have to admit that was soooo goooood!

now that was a smackdown, bravo!

haha nice

This one really takes the cake.. probably the worst article on economics ever published by the G&M, and that's saying a lot.

It's strange that the average Canadian has a better grasp of economics than the journalists/politicians/bay street economists/talking heads featured in our national media. Even in the G&M comments section for that article, 95% of the comments are about how idiotic the article is, and most of them are actually based on a decent understanding of economics: fungibility of oil, optimal currency areas etc.

I think I understand where this twitdom is coming from. I've been in a situation for a while now that I have been getting paid in US dollars from US banks. The result is unpleasant and expensive. Even ignoring exchange rate issues. I am assuming the G+M editorial staff is being harassed by people in this situation. There area not enough people dealing with this circumstance to justify a direct attack on the problem, so they create a related problem and it's justifications to make the attack work.

The ultimate champion of floating exchange rates was Jane Jacobs. She figured that places like Cape Breton would be much better off if they had their own currency to adjust.

BTW, thank you for permitting me to avoid the pain of reading the article.

Here's an exception in today's Globe ROB by a Bay Street economist with some real smarts - David Rosenberg:

If there is one thing that Canadians are never happy with (in addition to their local hockey team) it is the Canadian dollar. When it was flirting near that record low of 62 cents nearly a decade ago, everyone lamented the future of the loonie. It was too expensive to buy anything that was imported, it was too costly to make that annual trip to Florida, and tickets on Broadway were prohibitively expensive. We felt poorer. We must have been doing something wrong.

But we did nothing wrong back in those days because it was 100 per cent a U.S. dollar story. The U.S. was home to the Internet mania – and all the global capital flow that came with it – and Robert Rubin, treasury secretary at the time, was carrying out an overtly strong dollar policy partly to keep inflation at bay. I recall all too well telling clients that the loonie was actually either holding its own or appreciating against the global basket of non-U.S. dollar currencies. People would just roll their eyes.

Today, Canadians are fretting about a strong currency. After all, it is going to crush our manufacturing sector, kill our export base and undermine our domestic competitiveness. Even the Bank of Canada is saying the strength in the Canadian dollar is dampening our growth prospects.

Let's all step back and take a deep breath. For years when the Canadian dollar was trading around 60 cents, exporters did indeed reap the rewards, while importers were hit hard by rising costs. Our exports to the U.S. did improve, but we needed that source of growth as an antidote to the pain from the budget belt-tightening during the 1990s. Of course, there was no shortage of complaints from snowbirds headed south.

Today's strong Canadian dollar is obviously a tremendous challenge to our exporters, but hopefully they were getting their house in order when they were sheltered by those years of Canadian dollar depreciation.

While Canada is a large exporter, we also are a huge importer. At $400-billion annually, we import as much as we export, and the cost of those imports are now going down – a very good thing for profit margins.

While it may be a roadblock for our manufacturing sector, the loonie's ascent is good in many respects. Our purchasing power and standard of living are actually going up.

Now, why is the Canadian dollar back near parity against the greenback? There are valid reasons for the strength of the Canadian dollar, and they are likely to persist for the next several years.

Just as Canada had to rely on a soft currency in the 1990s, cleaning up the budgetary mess in the U.S. is going to require a similar strategy. I would contend that the Obama administration is already carrying out a policy of ‘benign neglect' when it comes to the U.S. dollar.

Moreover, commodities have resumed their upward trend, accentuated by the growth in emerging Asia, which was merely dented amid the worst of the credit crisis.

Canada has three times more exposure to commodities than the U.S. and while this was an albatross during much of the 1990s, it is helping to lift the Canadian dollar now.

Finally, according to Moody's and the World Economic Forum, for the second year in a row, Canadian banks are ranked No. 1 in the world. During this cycle, no Canadian bank failed, went cap-in-hand to the government, or even cut its dividend. While we did experience a housing mania (2003-07), our banks never suffered what their counterparts in the U.S. did. Call it good luck. Call it good management. Call it a combination of the two.

On the policy front, it goes without saying that Canada's pro-market Conservative government is more likely to follow policies that attract global capital than a left-leaning government south of the border. Indeed, Canada is witnessing a boom in capital inflows. Foreign investors plowed $5.1-billion into the Canadian markets, and year-to-date, have added a record $67.4-billion of Canadian securities to their portfolios. The fact that Canada is now a beacon for global capital flows is something, I think, we should be proud of.

For its part, the Bank of Canada has said that “persistent strength in the Canadian dollar” is going to “slow growth and subdue inflation pressures.” So, in return for softer growth, what we get back is lower “inflation pressures.” The winner here is anyone who needs to borrow money – a strong loonie will prevent the Band of Canada from taking the interest-rate punchbowl away any time soon.

For Canadian businesses, the silver lining is that it will be easier to attract talent than it was when the loonie was sinking – a reverse brain drain of sorts. Whatever it is, it is a good thing from a productivity standpoint, which is the cornerstone of our standard of living. That is why I think we should embrace this new era of strength for the loonie.

David Rosenberg is chief strategist for Gluskin Sheff + Associates Inc. and a guest columnist for Report on Business

Thanks for the article. In the history of dollarization, my favorite is the nasty little Sherri (is that with an I or a Y?) Cooper. She used to be a regular on the tube insisting Canada throw in the towel as a country and throw ourselves on the mercy of the US.

She was big when the dollar was around 70 cents - thank god she was not making policy. Too bad people like her don't get fired for being so spectacularly wrong.

"Is today's Spain-Germany exchange rate correct?"

Spanish unemployment: 17.93%

Ireland Unemployment (April 2009): 11.4%. In 2007 it was something like 4.6%.

I suspect they'd both like to have their own floating currency back again.

Wow....I could somewhat understand appeals for monetary union in the late 1990s, but now? Is this guy on crazy pills?

In the spirit of Brad DeLong, I thank you for taking apart the idiocy of this article so that the rest of us don't have to read it. If this keeps up, you will have to stop linking to the G&M.

The Globe used to be (relatively) smart. Either it is getting more stupid, or the rest of the world is getting smarter. I see little evidence of the latter claim.

How about another basic question: if we are going to have the same currency, do we not also have to have a unified financial (banking) regime? (As the Europeans have mostly admitted, even if they're not there yet)

Ummmmmmmmmmm, HOW exactly would this be beneficial to Canada?

We can criticise the BoC and the regulators, but when it comes to banking sector regulation, Canada is clearly the Tallest Midget in the World. (TM)

GA: The rest of the world is getting smarter. Hence why the G&M gives me free daily delivery now. No one pays for this junk anymore. 10 years and they will be done.

Anybody wanna become Ecuador?


[edited to make the click-through link - SG]


And I see that there's a complimentary link to here in the comments. Merci Guillaume!

The common USD-CAD currency issue is a special case relative to deeper integration of the two economies. In rejecting the currency case, does it raise the question regarding the value of Canada’s “free trade” agreement with America? That integration deal has been the format for special state-to-state trade agreements that has primarily served corporate interests not only in NA, but worldwide, I believe. Would Canada have been (still be?) better off promoting the principle and practice of free-trade worldwide, without Fortress North America?

People arguing for currency union with the U.S. always remind me of a quote from David Hume where he dismisses those who argue that people are motivated solely by self-interest,

"All attempts of this kind have hitherto proved fruitless, and seem to have proceeded entirely from that love of SIMPLICITY which has been the source of much false reasoning in philosophy. I shall not here enter into any detail on the present subject. Many able philosophers have shown the insufficiency of these systems. And I shall take for granted what, I believe, the smallest reflection will make evident to every impartial enquirer."

The article was politically even more lunatic. The Americans will never let another country into the Federal Reserve Board. Canadians might be persuaded to accept a fixed exchange rate, but I cannot imagine them giving up their national currency.

This Canadian government already lets Washington dictate our "homeland security" policies and supports the US in their fruitless and self destructive foreign wars, a stark turnaround from previous hard won, made-in-Canada policies, so why not throw in the loonie too?
Let Harper publicly boot lick the American Federal Reserve by forcing Canadians to trade in their loonies for the rapidly deteriorating greenback as a means of having Canadians help pay for the disastrous American foreign and monetary policies, and line the pockets of the foreign banksters!

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