Wednesday, July 25, 2007
That's some Loonie monetary policy, eh?
So the Canadians have a dollar coin that they actually use. It has a loon on it so they call it a loonie. Beauty joke, eh?
So anyway, you can see on the chart that in 2002, the Canadian dollar was worth about 66 cents U.S. What the chart doesn't show is that upward trend has continued, and as of this morning a Canadian dollar costs 96 cents U.S., which means they have the puck and are about to cross our blue line for the first time since Gerald Ford was president. (I changed the lines on the chart to make it look more like a hockey rink. Beauty pedagogical construct, eh?)
The U.S. dollar isn't just weak against the Canadian dollar. The British pound is well over $2 U.S. and the Euro is at record highs as well. A weak dollar isn't a 100% bad thing. It means other people (you know, foreigners) can afford to buy more of our stuff and visiting the United States is a bargain. The problem there is that air travel is kind of a pain in the ass worldwide, and a lot of other people think Americans are, well... assholes and they don't want to visit. I don't know how they got that impression, eh?
Not every world currency is gaining on the U.S. dollar at the same rate. The Japanese yen and the Chinese yuan are not showing the same strength as the Canadian, British or European currencies. That's because the Chinese and Japanese central banks are buying lots of dollars to make the dollar look artificially strong vis a vis their currencies. Where can they find all these dollars? Like, don't we need those dollars here in the U.S. to buy Pepsis and Slim Jims?
No worries! They are buying our debt. We produce a lot of debt, and they are willing to buy it, so their goods will be cheap here in the U.S. and we will buy more of their stuff. It's the genius of the marketplace!
Hang on a minute, I don't think genius is the word I want in that last sentence, eh? What's the word I was looking for? It was on the tip of my tongue just a minute ago...
Oh, yeah, sure I remember. That's some loony monetary policy, eh? No Canadian pun intended, so I spelled "loony" like an American.