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Canadian Dollar and US Dollar at Parity, Once Again

By Kevin

Image of a balance scale balancing the CDN$ and the USD$The Canadian Dollar and the US Dollar are at par, once again! The last time this happened was back in September 2007, and the time before that was in November 1976.

Great… I’m Canadian! So now what can I do?

Well, if you don’t live far from the U.S. border, now might be a good time to take a short vacation and stock up on cheaper goods while you are there. Sometimes there can be a significant difference in price. For example, junk food at Walmart is much cheaper in the U.S., although I don’t recommend you go there just for that.

Vehicles can be much cheaper. For example, a Kawasaki Ninja 650R lists for $8 699 CDN$ MSRP, but the same motorcycle lists for only $7 099 USD$. For another example, a Lexus LX 570 starts at $89 750 CDN$, but only $76 905 USD$. There may be additional taxes to pay when crossing the border, so you still need to check if it’s worth it, but the savings can often be quite significant.

Another way to save money is to book flights out of a US airport. This doesn’t always save money, but for some flights, it can be cheaper to park at the US airport and fly out of there than flying out of your local Canadian airport!

There are many other ways to take advantage of the high Canadian dollar, such as taking vacations down south or buying stuff online. I recommend to look for the opportunities out there and to take advantage of them.

Wait a second… I’m American! How does this benefit me?

Sorry, it doesn’t really benefit you as a consumer, since if you come up north, everything will be more expensive for you. Our exports will also be more expensive for you to buy. However, a stronger Canadian dollar still benefits the U.S.

The U.S. is currently a nation of consumers and not of producers. You guys consume far too much and don’t produce enough. The U.S. was once a mighty industrial nation, and has the potential to be one once again. If the U.S. dollar falls relative to other nations, then that means foreign goods will be more expensive relative to U.S. produced goods, encouraging both Americans and foreigners to purchase U.S. goods. U.S. production will rise, creating jobs and reducing the trade deficit.

If a lower dollar helps to create jobs, then why not just drive the value through the floor?

That seems to be what both the Canadian and American governments like doing. Whenever the Canadian dollar becomes strong, the manufacturers cry that it kills their competitiveness, because it costs more for consumers in foreign countries to purchase their goods. Although this could potentially set off a “race to the bottom” in order to prop up manufacturing sectors, the fact that Canada’s economy is propped up by natural resources lessens the pressure to do so here.

Another reason is that nothing comes for free. If the value is driven to the floor, that means that it will be difficult for consumers to purchase goods overseas. Cheap goods from China might have driven American jobs overseas, but they only did so because the cost of doing business in the U.S. is much higher, and with government growing larger the costs have nowhere to go but up. If U.S. purchasing power collapses, this will necessitate a drop in living standards as Americans struggle to be competitive once again.

So, how do you feel about the rising Canadian dollar? Do you see it as desirable? How long do you think it will last?

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Filed Under: Miscellaneous, Opinion, Saving Your Money Tagged With: Canada, currency, currency depreciation, foreign exchange, parity

About Kevin

Kevin has left the office, and he is currently fighting the rat race by working on his own business. He enjoys exploring unvisited places around the world and gaining new experiences. He believes that by properly managing our energy and time, we can learn to invest our lives wisely.

Comments

  1. Mich says

    April 7, 2010 at 10:15 am

    Canada is becoming an energy super power. We are a major oil exporter to the US so oil prices directly impacts our currency, talk about Petro-Dollars!

  2. Valentina says

    April 15, 2010 at 1:52 am

    I too am a Canadian. Most of my income is based on the US dollar so I rather like it better when our dollar is less in value than the US dollar. The US Dollar, however, for the time being is still the official international currency … don’t know how long that will last and which currency will take its place.

    But the whole economy thing is very complex. Once the world embarked on a global economy turbulence began to strike in unsuspected corners. China is now churning out billionaires like they are going out of style and generally the living standard has improved … but friends who have relatives there say that the people work awfully hard, as many as 12 hours a day 6 days a week!

    I don’t think we can ever go back. I don’t necessarily think that going back is desirable either. What we should be doing is developing our intellectual capital, more scientists, more engineers. We may be rich in natural resources but we turn out some of the best in the world in sciences & engineering and our business types aren’t exactly shrinking violets either. Its too bad that we lose a lot of them to other countries.

    Oh did I get totally off track? Methinks I just rambled on too much …

  3. Kevin says

    April 15, 2010 at 12:16 pm

    @Mich

    Good point, our currency appears to be highly tied to commodities these days!

    @Valentina

    Much of Asia still has an industrious culture where savings and hard work are highly valued. I think that sometimes they take it a bit too far in terms of lifestyle, but they are definitely a competitive force to be reckoned with. I don’t want Canada to be relegated to the role of raw material producer; that would mean we are basically resting on our laurels, selling our raw materials for a short term gain and letting others use these materials to provide added value.

    I agree with you we need to be developing our intellectual capital. In fact, Canada already has a well-developed law system, property system, and has good social cohesion. Imagine the potential of our country if we took our natural advantages and instead of using them to please special interests and increase government largesse, we used them to reduce income tax rates and make it more attractive for highly-skilled talent to do business here and to live here?

    Maybe I am holding my hopes too high, since government spending has risen so much in the past decade… but the potential is there!

  4. Clay Overholser says

    April 18, 2010 at 4:56 am

    I must agree with you, very good items you have crafted in your case.

Trackbacks

  1. To Parity… and Beyond | Invest It Wisely says:
    April 12, 2011 at 9:04 am

    […] was only last year that I wrote a post about the Canadian dollar hitting parity, something that was quite a feat considering that it was digging around 60-70 cents back in the […]

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