Should we adopt the U.S. dollar?
I have a lot of respect for Sherry Cooper, the chief economist at BMO Nesbitt Burns. She’s insightful, pragmatic, well-connected, and extremely articulate. So when she pronounces on a subject as forcefully as she did on the future of the Canadian dollar recently, I pay close attention.
Cooper’s case, in a nutshell, is that it’s time to say good-bye to the loonie and to adopt the U.S. dollar as our national currency. (Forget about a North American equivalent of the euro, the Americans would never sit still for it.)
I won’t repeat all of Cooper’s arguments here. You undoubtedly read or heard the media coverage. All I want to say is: Amen. This is likely to happen sooner or later. Let’s get on with it before the whole country is sold off.
Selling our soveignty
I know I am going to be deluged with outraged e-mails accusing me of selling out our national sovereignty. Well, let me ask a simple question: Are we not already seeing our national sovereignty being chipped away, piece by piece, as one Canadian company after another is snapped up U.S. purchasers at what they see as bargain prices?
Just look what’s happened in the energy eld recently:
- Berkeley Petroleum
- Gulf Canada Resources
- Anderson Exploration
- Westcoast Transmission
All gone, and there will be more to follow.
Buying power eroded
The increased vulnerability of the corporate sector isn’t the only problem. The buying power of pension and RRSP savings is being steadily eroded by the continuing decline of the loonie.
I’m not just talking about the increased cost of Sunbelt retirement here. A sinking dollar raises the price of goods imported from the U.S., from food to technology, which has an effect on all Canadians.
The ripple effect from a weakened currency affects so many sectors that it’s impossible to list them all.
- Our sports franchises in baseball, hockey and basketball face financial crises.
- The cost to governments of servicing foreign debt rises.
- A lower dollar weakens our already struggling airlines, which have to pay many of their expenses in U.S. currency .
These latter costs include capital costs for things like new planes. A weak dollar was certainly a contributing factor in the Canada 3000 debacle). And the list goes on.
Next page: Hard to swallow
Hard to swallow
Yes, it’s a hard pill to swallow. Yes, it will take an effort of political will that I do not believe this government possesses. Yes, it will cost us the ability to establish a made-in-Canada interest rate policy. Certainly all these issues need to be debated.
But the alternative is to allow the situation to continue to deteriorate in the years to come.
Forget about the forecasts that our loonie is actually worth something north of US$0.70. It’s worth what the world is willing to pay for it, it’s that simple. And the world has been telling us for years that, despite all the positive things we’ve done, they don’t like our currency.
If the government was prepared to make a genuine effort to at least stabilize the loonie, I wouldn’t be so strident on this issue. But the Prime Minister, who continues to do a magnificent imitation of an ostrich, seems to be quite content to let our dollar continue to slide, on the grounds that it makes Canadian goods more competitive in world markets.
Applying the philosophical concept of reductio ad absurdum to that, it follows that a loonie worth US$0.01 would be extremely beneficial to Canadians because it would make our goods so cheap that everyone would want them! Get real!
Like Cooper, I do not expect this government is going to budge on this issue, even to the point of naming a special commission to investigate the possibility.
Demand for action
Politicians don’t move on matters that touch raw nerve ends, as this does, unless and until there is a clear public demand. This eventually happened over the issue of budget deficits. When they sense voters are onside on an issue, they will take action, not before.
So, as individuals, all we can do is to continue to protect our assets from further currency risk. I’ve been advocating this practice for a long time. If you haven’t already taken steps in this direction, it’s time to get started. Do so before the loonie falls all the way to the US$0.50 range.
From the November 12, 2001 edition of the Internet Wealth Builder.