So High It Can Touch The Sky

With daily reports of a soaring Canadian dollar hitting levels many economists feel shouldn't be possible, it's hard to remember that just five years ago the lowly loonie was at an all-time low, trading at 62 cents US. But since then there has been steady growth, first hitting 76 cents, then 81, then 92, and, on September 20 at 10:58 a.m, the loonie achieved parity with the American greenback for the first time since 1976. At the time, it was written off as an anomaly, something interest rates and US economic recovery would soon straighten out. But despite warnings from economists and the Bank of Canada, the loonie just kept on going. And going. And going.

It's no longer sitting at the impressive $1.10 US, but at the time of this writing the loonie is still comfortably (or uncomfortably) high, closing at just below $1.04. Many are saying that by the time you read this it will be back where it belongs, in the $.097 range, but the experts have been wrong before. And if ever there was a time for our golden goose to get a jump on US bills, this is it. The American economy is tanking, driving foreign investors out in droves. Meanwhile, Canadian unemployment is at historically low levels, and the robust oil and energy industry is leading many speculators to bet on future growth.

In both these areas, you can blame China: its strong position means that any moves it makes will have a profound effect on other economies. Of course, the problem right now seems to be that it's not making any moves at all. China's government has refused to allow for any inflation when it comes to its own currency, meaning the yuan is trading at a rate far lower than it should be. This, more than anything else, is the root cause of the current trends in North America, say some experts. The Chinese own more US dollars than anyone else, therefore the strength of the US dollar is directly tied to that of the yen. If the yen doesn't grow it means the USD falls, and as that happens, the Canadian dollar rises. And don't discount the role of China's hunger for foreign fuels in the current strength of Canada's oil industry.

Whatever the reason, the fact remains: despite what others say can and should be possible, the Canadian dollar is higher than ever. And that leads one to wonder: what if at some point, now or in the not-so-distant future, the Canadian dollar gets to levels above the US dollar, and then doesn't come down? Would there be a flood of lost jobs? Or would new opportunities offset these costs? You don't have to look far to see the doom-and-gloom. Even back when it was trading at 93 cents a pop, analysts were warning of the costs a stronger Canadian currency. Then, as now, they pointed to the loss of manufacturing jobs on the east coast, and hits to the forestry industry here, as outsourcing to Canadian producers became less attractive for US markets. Over the summer, mills throughout northern BC scaled back their production, and a recent spat of closures has led to hundreds of lost jobs in the region. Similar stories are coming out across the country, with everyone from auto workers to paper producers being affected by the loss of demand for their products in the United States.

Of course, the hidden story here is one that has been plaguing politicians for decades: the dependance of the Canadian economy on American markets. Pierre Trudeau tried to deal with it by nationalizing industry, while Brian Mulroney went by the maxim "If you can't beat 'em, you might as well join 'em." The 1984 fair trade agreement was brought on by the fact that despite Canada's best efforts, businesses simply couldn't ignore the lure of the American marketplace. Since then, the two economies have become ever more linked, with around 80% of Canada's exports moving south-- and in a market that's export-based, that means a lot.

In other countries, a strong currency is good news. The Euro has been sitting above the USD for years, as has the pound in Britain. Its only for countries dependent on selling cheap labour and resources-- generally Asian and African ones- that a rise in a currency's value is seen as a bad thing. When examined this way, Canada might be seen as something less than flattering to our post-industrial mindset: a banana republic of the north.

And this is where, for some, the opportunity of a high Canadian dollar comes in. Canadian businesses, politicians, and consumers will have to grapple with how to make Canada work, with or without the United States. Tourism will have to start actually highlighting the attraction of Canada, rather than getting by on, "We're cheaper than the United States," which never worked much anyways. Same goes for other industries, who will be forced to be more competitive, thus stronger over all. For some, this might mean looking to other foreign marketplaces. It also might mean moving towards a more diverse economy overall. Combined with the threat of global warming this could result in a major upheaval of current economic practices, which are largely based on unsustainable environmental development.