Canadian Dollar keeps going up
- Thread starter Cobster
- Start date
Higher CDN$ gives everyone a payraise
Good: It gives everyone here the means to buy more foreign stuff and work less hours to get it, too. What's happening in canada is the equivalent of a company that sells a product in ever increasing volume (our resources are flying off the shelves) with an ever increasing price (both the price of those commodities and the VALUE of the receipts in foreign money is going up).
Good: It gives companies the incentive (ie: staying alive) and the means (cheaper machines) to buy machines and tech. which'll mean a higher rate of producitivity in future.....
Bad: .....but that'll mean a slower uptake of labour as machines increasingly take over tasks which would have been done by people when the dollar was lower.
Good: the higher dollar is keeping a lid on interest rates. An increasing dollar has a dampening effect on the economy so the BOC holds off on agressively raising rates so as not to kill the economy.
Overall it's a good thing when the loonie is strong 'cause it forces people here to get more innovative to stay alive in the world market and gives everyone a raise vis-a-vis the rest of the world.
Good: It gives everyone here the means to buy more foreign stuff and work less hours to get it, too. What's happening in canada is the equivalent of a company that sells a product in ever increasing volume (our resources are flying off the shelves) with an ever increasing price (both the price of those commodities and the VALUE of the receipts in foreign money is going up).
Good: It gives companies the incentive (ie: staying alive) and the means (cheaper machines) to buy machines and tech. which'll mean a higher rate of producitivity in future.....
Bad: .....but that'll mean a slower uptake of labour as machines increasingly take over tasks which would have been done by people when the dollar was lower.
Good: the higher dollar is keeping a lid on interest rates. An increasing dollar has a dampening effect on the economy so the BOC holds off on agressively raising rates so as not to kill the economy.
Overall it's a good thing when the loonie is strong 'cause it forces people here to get more innovative to stay alive in the world market and gives everyone a raise vis-a-vis the rest of the world.
It depends who you talk to.FOOTSNIFFER said:
It is very bad for tourism.
It is very bad for exports (manufactured & agricultural )
Seeing most of our goods go to the USA, they are now much more expensive for the americans to buy. Many auto plants still exist in Canada because of the cdn dollar was worth much less than the american. I think we can expect to see the auto & other manufacturing plants close down as it makes more sense to move the jobs south (USA or mexico)
BMO is calling for parity between the 2 currencies by 2007. Maybe there will be a push for a north american currency to compete with the Euro. Which I think would be a mistake for Canada.
Maybe the USA should stop calling it the dolar and name it the US Peso... cause it will keep going down against world currencies
Higher Canadian dollar has a negative effect for the tourism and service industries that live on out-of-town money (ie. Americans) With such a high dollar, the flow of consumers coming to spend their money doesn't look appealing to spend it where it would cost the same if not more then if you went somewhere else. If they don't come here and get more bang for their buck (no pun intended) then they will go where it will. The SP industry will get hit hard this year, I predict. High Dollar, no major campaigns planned by Ontario/Toronto Tourism just screams "we are in for a bumpy ride".
Good one.Papi Chulo said:
On the plus side, time to go cross-border shopping.
Pretty soon, Going to Hawaii will be cheaper than going to N.F. Aloha!That depends on who you talk to. Wallmart is the only store to drop their prices on various products. That's a promise, that isn't affected by the loonie, but rather by purchasing volume. I don't think the foreign auto dealers are going to lower their prices, based on a stronger loonie.FOOTSNIFFER said:
BTW the US economy, is headed for a major crash sooner than later, and it will hurt Canada big time
Auto parts manufacturing is a bid "to supply" contract, and you are right. If a contract was bid when the dollar was worth 67 to 76 cents, it works for Canadian factories, and there is a profit to be made making parts in the Canadian division. When the loonie hit 80 plus, we can't compete with American factories. Plus the cost of steel has gone up, and that is hurting Canadian factories too.Papi Chulo said:
On the plus side, those who have kids in the US on scholarsips will have their expenses cut by the strong dollar.
broke 90 cents this morning.
You have to wonder why in hell the Bank of Canada keeps raising interest rates. I guess they are intent on destroying Ontario.
You have to wonder why in hell the Bank of Canada keeps raising interest rates. I guess they are intent on destroying Ontario.
USD Impact
The one thing that most economists dont take into account, and the auto parts business is the perfect example, is that if I was manufacturing a part 3 years ago and selling it for $1 USD when the dollar was at 65 cents, I had revenue ot about $1.53 CAD with which I could buy material and pay for labour and overhead. Now, assuming I am still getting $1 US for that part (which given the pressure on suppliers in the auto business is a stretch...) I am now getting revenue of about $1.11. My costs have not changed, yet my revenue has gone down by 27.5%. Oh, and I am still paying the same in CAD for that car as well.....
IF, and I do mean IF, the cost of imported goods were actually reduced, the high CAD would be of benefit to the economy in general, but at least in my world, I have not seen much evidence of this happening. Ontario in particular, with its exposure to manufacturing and tourism will be hard hit, and soon. And if the US economy even has a hiccup (which I also believe will happen as a result of high energy prices and increasing interest rates) we could be in for a pretty bad economic period.
Unfortunately the Federal Government and the Bank of Canada is not motivated to try and stem the streaking dollar (even if they could, and that is debatable given how small the Canadian economy is in the grand scheme of things) since none of the economic indicators seem to be showing that it is a negative. Government revenues (which we will hear more about today) continue to bulge with the record energy prices translating into record profits and record tax expense for the energy sector. I think the BOC needs to halt the increase in interest rates, at least to give the CAD one less reason to keep going up. Inflation may rise, but lower rates may keep the recession wolves away for a bit longer.
Just my 2 cents worth.
JB
The one thing that most economists dont take into account, and the auto parts business is the perfect example, is that if I was manufacturing a part 3 years ago and selling it for $1 USD when the dollar was at 65 cents, I had revenue ot about $1.53 CAD with which I could buy material and pay for labour and overhead. Now, assuming I am still getting $1 US for that part (which given the pressure on suppliers in the auto business is a stretch...) I am now getting revenue of about $1.11. My costs have not changed, yet my revenue has gone down by 27.5%. Oh, and I am still paying the same in CAD for that car as well.....
IF, and I do mean IF, the cost of imported goods were actually reduced, the high CAD would be of benefit to the economy in general, but at least in my world, I have not seen much evidence of this happening. Ontario in particular, with its exposure to manufacturing and tourism will be hard hit, and soon. And if the US economy even has a hiccup (which I also believe will happen as a result of high energy prices and increasing interest rates) we could be in for a pretty bad economic period.
Unfortunately the Federal Government and the Bank of Canada is not motivated to try and stem the streaking dollar (even if they could, and that is debatable given how small the Canadian economy is in the grand scheme of things) since none of the economic indicators seem to be showing that it is a negative. Government revenues (which we will hear more about today) continue to bulge with the record energy prices translating into record profits and record tax expense for the energy sector. I think the BOC needs to halt the increase in interest rates, at least to give the CAD one less reason to keep going up. Inflation may rise, but lower rates may keep the recession wolves away for a bit longer.
Just my 2 cents worth.
JB
For a very long time Canadians were told the price of goods in Canada was higher due to the low Canadian dollar, hence we paid more for TV's.. you name it.
The dollar has been "soaring" for nearly a year and there is no signifigant drop in pricing. Not unless it's oil which changes the moment it's pumped out of the ground. Even that doesn't seem to reflect a downward price.
For me a high dollar is bad...very bad. Most of my clients are US and it sure was nice getting a near 50% bonus a few years back!
The dollar has been "soaring" for nearly a year and there is no signifigant drop in pricing. Not unless it's oil which changes the moment it's pumped out of the ground. Even that doesn't seem to reflect a downward price.
For me a high dollar is bad...very bad. Most of my clients are US and it sure was nice getting a near 50% bonus a few years back!
Auto Industry is more complicated. Exchange rate is one aspect, but on the plus side factories pay much less in health care costs up here. Also, suppliers who supply to Canadian tier 1 or assembly plants usually quote in Canadian dollars.pussylicker said:
Also the cost of steel has gone up for everybody, not just Canadians.
The reason they keep plants in Canada isn't merely due to the dollar but because the plants we have operate more efficiently and with less hassle than in the USA. Add the fact that the govt is paying the health care, as well as giving generous tax breaks and you can see that it is still profitable to have the plants in Canada, even as we reach parity. The huge change will be for US plants to close and move south as the US dollar collapses, but the issue of our dollar approaching parity will just ensure that no new plants will be built here (except by foreign automakers, which is where the action is these days anyhow).Papi Chulo said:
hyperbole
I'm not sure how Toyota or Honda are dealing with production costs or sales, but I was thinking of plants that manufacture parts for shipment to American plants.Meister said:
I know a Canadian plant that's losing 450 people off the floor because the profitability is gone because of the rising dollar, and the jobs have already started to go south to the American sister plants. They yanked a couple of contracts from the Canadian plant to be made in the States. Health cost are higher in the States for factories, but most don't contribute to the employees pension either. My point was that between both countries, it will be cheaper to manufacture parts south of the border for a company that has factory in both countries
Come to think of it, there is one other very important factor that will make or break Canadian plants: the state of illegal immigrants in the USA. Many of these plants down there likely also have lower paid illegals working a chunk of the jobs. As such, depending on how that all plays out in Congress and the Senate, this will determine how profitable those American plants will stay and the ultimate fate of our own plants.pussylicker said:
Start praying for illegals to be considered felons and a sealed border with Mexico!!!
hyperbole
I don't think you'll find a lot of illegal immigrants in the big auto plants in the states. You'll find them mostly in agriculture, restaurants, domestic, landscaping....hyperbole said:Come to think of it, there is one other very important factor that will make or break Canadian plants: the state of illegal immigrants in the USA. Many of these plants down there likely also have lower paid illegals working a chunk of the jobs. As such, depending on how that all plays out in Congress and the Senate, this will determine how profitable those American plants will stay and the ultimate fate of our own plants.
Start praying for illegals to be considered felons and a sealed border with Mexico!!!
hyperbole
Toyota can't build plants fast enough to satisfy their U.S. demand. Both have Canadian plants that are higher standard and cost-effective than their U.S. counterpart.pussylicker said:
