$1 USD, that's like $1 CAD?

[Andrew]

So today the two currencies reached parity. First time in 31 years. And the Euro is breaking records against the USD. So the USD is becoming crap compared to 5-10 years ago.

This is bad for Canadian exporters to the US, although it has been at 90 cents for a year and the economy is still growing. Unemployment is at 30 year record lows.

Last couple springs the amount of Canadians going south for vacation was quite big. Now with parity I'm sure more will be going. I wonder if tourist destinations in Mexico and Caribbean will be raising their prices because of the USD not being worth as much.

[Khan]

Heh the GBP is

[Caid Ivik]

me too (nobody in government cares that the most people don't want euro here)

[Phoenix]

I just looked at that chard.. in the topic about investment..

and was happy to see that one USD now 1.0002 CAD is..

USD is loosing terrain here...

[Acriku]

Not sure why that is happy news... but anyway, yes europeans especially are eager to vacation here! But that's because we rock ;) (mostly)

[TMA_1]

If only the world could produce paper cash that didnt blind the eyes...

[Andrew]

If only the world could produce paper cash that didnt blind the eyes...

Are you saying Canadian money is ugly? It is many years ahead of US currency. And color coded makes it easier to know which denomination the bill is. Instead of all the bills being green.

[Acriku]

Are you saying Canadian money is ugly? It is many years ahead of US currency. And color coded makes it easier to know which denomination the bill is. Instead of all the bills being green.

Actually they are starting to phase into colored money - the ten, twenty, and fifty dollar bills have been introduced and the one-hundred dollar bill will be soon. The ten-dollar bill looks like chinese money  :O

[Andrew]

Well, China owns most of your money, so it only makes sense. :D

[Tatar Khan]

Well US is in heap of trouble with its dollar. If it will continue t spend as it did its dollar will keep on falling, which could shake up the image of dollar completely and prone countries to replace it as foreign currency reserve for other more stable currency. Such action will destroy dollars value causing a crisis that can affect many parts of the world. The only way to counteract the falling dollar is to cut federal spendings (stop spending on Iraq and Afghanistan) or get FED to raise the interest rate. However FED is not going to raise interest rate because it already did and many people who got mortgages during low rate period were unable to pay them and so gave their houses to the banks. Banks now due to excess supply of housing (promoted by people walking out on their mortgages and speculation from the low rate period) can't sell the houses. Now the smaller banks begin to feel that their money reserves are low. If interest rates go up more they could cause more people to walk out on their mortgages and companies to stop many projects that were taken due to calculations of rate of return based on low interest rates. This all is not good for economy. Also raising interest rate could cause smaller banks to fail due to lack of reserve funds and cause run on the banks to occur in some parts of the country. Lowering interest rate would further devalue the dollar, so now US is stuck.

[gunner154]

Good analysis there, Colonel_here. Foreign reserves obviously don't last forever. It's macroeconomic policies are really stuck, after all.

[Andrew]

An online Bank was shut down this week, the first bank to be shut down in 6 years I think.

FDIC Shuts Down NetBank Due to Defaults

The American banking system is complex. Up here in Canada we only have 5 major banks, so the chance of one closing is almost impossible. The last time one did was back in early 1990s

[Megashrap]

There are so many different banks here it's unreal. I'm sure I could find out by doing a little research online,but i'm just not going too...well I should say too lazy too do that sort of thing. What ever the number is and how high it would be would not surprise me at all.

[Egeides]

Is this a new regular and widespread phenomenon or what?.. I feel like I'm missing on bank news, since I recently read similar for Britain:

"On Thursday 13th September, after the market had closed, the Bank of England announced to have provided emergency cash to Northern Rock, the fifth largest mortgage lender in the country."

(from http://www.kuro5hin.org/story/2007/9/17/93211/4235)

[Andrew]

Nothing new, for the past month Bank of Canada and US Federal reserve have been bailing out the banks. Although it is mostly in the US with lots of mortgage companies going backrupt.

The US has even gone as far as lowering interest rates by 50 basis points (0.5%) which shows that they are concerned over a recession. But lowering interest rates will only increase inflation and decrease their dollar value. So no matter what they do they are screwed. Banks simply need to stop giving out mortgages to people who will default, and people need to stop getting mortgages they cannot afford. They are both crazy.

With housing prices inflating 10% a year, and incomes not increasing any, it is making it impossible to afford a house.

[Egeides]

But lowering interest rates will only increase inflation and decrease their dollar value. So no matter what they do they are screwed. Banks simply need to stop giving out mortgages to people who will default, and people need to stop getting mortgages they cannot afford.

And you personally find any solution to this?

To tell "please stop" won't do. It looks like the environment bringing this is also the environment limiting solutions.

[Andrew]

No I don't have a solution. :P

But when banks give out loans to people who cant pay them, then the banks complain that their customers are defaulting, why should the government bail them out? This just gives banks more reason to continue giving out bad loans and for people to continue getting them.

My economics prof gave a hand out chart showing that on the day the US fed dropped interest rates by 50 basis points the USD vs CAD decreased (it was relevant to what we were learning). It's hurting Canadian exporters a lot, but then it also hurts US importers.

I wonder how much more money CAD resources like electricity and oil will create large amounts of profit. Alberta is always making huge amounts of money from oil, now with the Dollars on par, they should make a lot more.

[Tatar Khan]

There is a solution however it is unralistic right now. Alan Greenspan left because he knew that situation was getting bad and he did not want to be blamed for any crisis that could follow. Solution right now is simple. Get out of Iraq, Afghanistan and so cut federal spendings thus decreasing the supply of American dollar and so stopping it from falling, now there is no need to touch the interest rate. So banks now can focus towards bailing out the banks in trouble.

This will stop drop of the dollar and potential speculative run on it and possible crisis.

[Andrew]

That is the best solution, but sadly will not happen. At least not until the next government/president, but the only person who is committed to fixing it is Ron Paul, but sadly the sheep won't vote him in.

It would seem the USA does not remember about the early 1990s recession where governments tried to spend their way out of the recession. It did not work and only put governments in huge deficits.

Also today the US government increased it's deficit ceiling to 9.8 trillion debt.

It's Official: $9.8 Trillion Debt

Thus, a Republican president who inherited a budget surplus and campaigned on staying true to GOP conservative fiscal principles will leave office as the biggest national debt builder ever. Since Mr. Bush assumed office, the debt has nearly doubled. For most of those years, Republicans also controlled Congress.

Ouch.

Republicans still control congress. Democrats pass a bill and Bush vetos it and it goes back to the senate where it needs 2/3 vote to override Bush veto, but democrats don't have 2/3 vote.

It's funny those American conservatives talk about fiscal responsibility but always end up in deficits.

[alchemi2]

Republicanism cost! All that chest tumping and bible bashing, patriot crap and Americas Divine right to rule the world.

[Andrew]

$1.02 cents today (it went slightly below that at closing time). New stats out that show Canada unemployment rate is lowest in 33 years at 5.9%.

October 16 Bank of Canada will raise/lower/do nothing to the interest rate. With a great economy, they will either increase or keep same interest rate. Unlike the US which cut it by 50 basis points (which is ridiculous, unless their economy is doing bad, and that may be caused by Mexicans fleeing USA and coming to Canada ;)).

My bet is that BoC will keep interest rate at the same rate of 4.5%. If they do increase it by 25 basis points expect Canadian dollar to increase lots against the USD. That alone could increase it several cents against the USD.

Damn I need to get a passport ASAP. Shopping spree in the USA! Everything is 40% off! :D

[Acriku]

I guess I can no longer look at the backs of books and see the Canadian price higher than the US price.

[Andrew]

Actually you will probably not see that for at least another 6 months, especially for books already printed. This is quite a big discussion in Canada when books are selling for 30% more than the US price list. They have not adjusted prices and I'm not sure if they will for currently printed books.

I'm not sure how the book industry works, but I'm guessing the bookstore buys the book at publisher prices, and if 6 months later they still have them in stock, they will not automatically reduce the price based upon currency prices, since they paid for them already at a certain price. They would be losing money.

Same for currency conversions, they are about a week behind and do not actually use the markets currency conversions since there are at least 1/2 a dozen ways to calculate it (and on each stock exchange market has a different price, although they are all quite similar within a cent or so).

I'll be buying PBF book soon. :) Awesome web comic. Only costs $12 Canadian for 96 colour pages. Cant go wrong with that.

Ha at Chapters.ca book store it is $2 cheaper than at amazon.ca sweet.

Also you can expect to pay more for Canadian imports. Such as our great beer ;) and natural resources (electricity, oil etc). Also wheat prices will be more expensive for you which will increase the price of lots of goods. Bread, booze etc. And with high cost of oil/gas, transportation costs will increase, thus inflation will be bad for USA.

[Andrew]

Today it reached 1.0238

US stock market is doing good despite the poor dollar and housing foreclosures have doubled since last year. Although their stock market is probably doing good because it is so cheap for foreigners to invest in US stocks now. Then if the US currency rebounds, the foreigners who invested will get even more money in return because they bought it in USD (when usd sucked and was cheap to buy) and will sell in USD (maybe when it gets better against their own currency).

I can definitely see this happening with tourists who own summer properties where I live. They bought them when CAD was 0.6 of USD 10-15 years ago (a property that cost $100,000 CAD would cost tourists 60,000 USD), and with property values doubling in past 10 years (now worth $200,000 CAD), and then with them selling them now with CAD:USD 1:1 (They get $200,000 USD back) they are making a killing in profit. 200,000-60,000 = $140,000 profit before taxes.

The good thing for Americans is that outsourcing will decrease. Less investment in India etc. So less stupid phone calls for tech support.

[Andrew]

1.037 today so far

Up 1 cent today alone.

Canada kept it's interest rates the same on Oct 16. They are still saying inflation is high.