Denver Bar Association
January 2008
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Economics 101: You and the Canadian dollar

by Marshall Snider

Those of you who have been paying attention are aware that the United States economy is not as strong as it used to be. Rising oil prices, mortgage defaults and a host of other factors have led us close to the utterance of the dreaded "R" word (dreaded, at least, by the current administration in Washington, which hates to admit that it might have made a miscalculation here and there). Normally, a downturn in the economy is nothing to fear. The country’s economic engine runs in cycles and a valley typically will turn into a peak before we are all standing in bread lines. But the current situation is different, and strikes fear in the hearts of all true Americans. For the first time in history, our dollar is not worth more than the Canadian dollar (and on some days, has been worth less). This is cause for widespread panic. If there is one thing that could always produce pride and confidence in the United States it was that no matter how bad things got, we were always better than Canada.

No longer. Last fall, the value of the U.S. dollar slipped so low in relation to the Canadian dollar that in November the two currencies became more or less equivalent. Now, we are accustomed to our currency losing value against the Euro and the yen — no shame in slipping a tad against these world economic powers. But Canada? The sky must be falling!

The consequences of this disaster already are apparent. No longer can we go to a bookstore and take pride that every item appears less expensive here than in the Great White North. Price labels on paperbacks and hard covers trumpet our economic superiority over our bilingual neighbors to the north by listing the prices in both currencies: a book costing US$25 sells for a ridiculous CAN$37.50. But now, Canadians no longer need to suffer such discrimination. A bookstore in Edmonton already is ignoring the Canadian price on its books and selling its wares for the listed U.S. dollar amount, while accepting payment in Canadian money. The US$25 book now also sells for CAN$25. Civilization as we know it must be crumbling.

It gets worse. Drug dealers, who don’t mess around when it comes to money, no longer conduct business solely in U.S. greenbacks, which up until now had been the gold standard for contraband transactions. They now want Euros and, heaven forbid, Canadian dollars instead of our Benjamins. As a result, cocaine sales in Canada have risen; the drug cartels have increased their Canadian markets to take advantage of the better value of that currency. (You probably think I made up these examples of book and drug sales in a lame attempt at humor. Would that I did. Both of these stories were reported on National Public Radio last November.)

So, "How could this happen?" I hear you cry. This question can be answered by some simple economic theories (you can always rely on simple economic theories — remember, economists have predicted seven of the last three recessions). For those of you who have forgotten the basic economic theories you learned in college, I will identify the major factors that have led to the decline of the U.S. dollar in relation to Canadian currency:

1. Global warming. This phenomenon has strengthened the Canadian economy in two ways. First, it has increased domestic food production by lengthening the growing season north of the border from two months to 10 weeks. Second, melting ice has opened the Northwest Passage to commercial shipping, and Canada now moves more goods between the Pacific and Atlantic Oceans than the Panama Canal (it is true that ships wind up somewhere around the Arctic Circle after making this passage, but eventually they find their way south to some inhabited place where they can sell whatever they have on board).

2. Canadian paper money is printed in two languages, and sports different colors for different denominations. American bills, like most of our citizens, barely speak one language. And let’s face it, having only one color for our banknotes is just boring (although the single color does tend to confuse foreigners, making it consistent with many of our national policies).

3. There are 12 players on a Canadian Football League team, compared to 11 in the NFL, which thus creates nearly 9 percent more jobs in this industry in Canada, compared to the U.S. Also, the Canadian professional football season ends before it gets too cold, resulting in a heating oil savings at stadiums.

4. No one hates Canada’s prime minister. In fact, other than Fred Thompson, no one knows his name. Contrast this situation with world opinion of American leadership.

5. The United States is so desperate that we have to steal tourists from Canada. The State Department recently created a video promoting major U.S. tourism destinations. While encouraging visitors to the U.S. to see Niagara Falls, the video pictured the Canadian side of the falls, in a view shot from Canada. (Again, true story.)

As you can easily see, these are the economic factors that have led to the decline in our dollar versus theirs. Until the United States is able to correct these imbalances, we can expect more and more Canadian snowbirds coming south of the border in the winter to take advantage of the weak peso — I mean, dollar.

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