The stability of Canada will become a safe haven for currency investors as capital flows out of the US. We are headed to $1.15 in 12 months according to economist Patricia Croft. This would represent an unprecedented high against the greenback. Whether it gets that high or not hardly matters, as the trend and fundamentals seem to be in place for the dollar taking a quick trip in the upward direction. Declining and low interest rates and looser monetary policies in the US and the industrial world, will flow investors to the C$. No surprise after our banking system came through the crash of 2008 with (relatively) flying colours. Also not surprising as energy prices and supply have made the C$ a petro-currency: no longer driven by the fundamental forces of labour productivity and value-added exports.
A high dollar is good right? Yes it is if the population is employed at something that earns more of them. A high dollar is well known to cheapen imports and push manufacturing, and even services, to off -shore competitors. If our population's productivity and ingenuity did not 'earn' the dollar's increase, and our prosperity exists only because of the world's insatiable demand for non-renewable energy and resources, then we better buckle up for higher unemployment and more McJobs.
Producers in Canada need to adjust faster than ever. In the next 12 months we could see the dollar increase at about 3 times the rate of the magnificent climb we witnessed in the last 8 years. Like never before the time is now.
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