Tuesday, May 22, 2007

A (US) dollar saved is 70¢ earned (2002 vs. 2007)

Every few years or so, we get treated to another dose of this...

Dodge says single currency 'possible'
May 22, 2007

WASHINGTON -- Bank of Canada Governor David Dodge says North America could one day embrace a euro-style single currency.

But to get there, Canada, the United States and Mexico must first tear down barriers to the free flow of labour, which he pointed out yesterday have "gotten a bit thicker" in recent years...

The idea of a common currency has long been a subject of curiosity, particularly among Canadian academics, who see it as a way to escape sharp gyrations in the exchange rate.

The recent surge in the Canadian dollar to a 30-year high against the U.S. currency makes Canadian products a lot less competitive in Canada's major foreign market. The high loonie also makes Canada a more expensive tourist destination.

Some proponents have dubbed the single North American currency the "amero."

It is more likely, however, that a common currency would mean that Canada and Mexico would adopt the U.S. dollar, giving up significant economic control to a central bank dominated by the United States.

The last time this came up, and in a big way, was five years ago when our dollar tanked at just under 62¢ US. But you know what I've noticed? For some people, the advantages never matter. Only the downside. Back then, it was how Canadians couldn't go abroad, couldn't buy from foreign countries, our companies were getting bought out from under us. Now you would imagine that as our dollar appreciates, those negatives would suddenly be positives: we can afford to go abroad, buy what we want, guard our own companies and maybe start buying up someone else's, but no. No, it's still all bad news, but from the opposite end. Now it's hard for us to sell abroad, now our domestic goods are being out-competed by cheap foreign ones, now Canadian investment is bleeding to other shores (of course, the corollary of all this back a few years ago was that our exports were beating the pants of everyone else's, domestic products were favoured, Canadian investment stayed in Canada and foreign investment poured in...). Jesus, you can't win. And you know why? Because there tons of douche bags in this country who simply get hard at the idea of us joining the United States, always have and always will, and they'll paint any picture in whatever shade of black they have to to make that seem inevitable, and hang it upside down the minute it makes sense to; whatever it takes.

It's all bullshit.

Why on Earth, now of all times, would we even consider hitching our wagon to the American star(s)? For the first time in decades, our trade with them is down and the EU is nicely taking up the slack, ameliorating that terribly large egg in just one basket we've had for far too long. Their economy, largely fueled by $2 billion of foreign borrowing a day and a hideously overinflated speculative housing market, is slowing down in ways not reflected in ours; these same practices are what's propping up their dollar, but the leaks seem to be spring up faster than they can be patched. We have a trade and budgetary surplus; they have monstrous trade deficits and a national debt that will likely approximate $10 trillion by the time Bush heads off to hunt armadillos with Barney for good. You might as well offer to have your circulatory system knitted to that of a 500 lb. guy in need of a quad bypass but no money to pay for it, who's constantly reaching into your wallet to order a meat lover's pizza. Yeah, if you don't care that your life savings will evaporate before your very eyes as other countries flush increasingly huge volumes of up-till-now hidden US assets from their central banks as the rot really sets in, then by all means, be my guest. Just don't ask me to do the same. You go trade your Canadian dollars for US ones; I'll hold onto mine, thank you very much.

The euro makes sense because it's centred on four or five countries of roughly the same size, social policies, wage scales, and economic oomph. There's no such parity in North America on any of those matters. Canada matched to the US alone would not survive in the way Portugal can linked to France, Germany, Britain, and Italy. And there's no way the Americans would yield the kind of sovereignty to a supra-national body required for us to defend ourselves in the way the Europeans have. So it's not on. We swallowed NAFTA, and what do we get? "Do as I say, not as I do." Rules are for everyone else, not Americans. Fine, this far and no farther.

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