www.reportonbusiness.com/servlet/story/RTGAM.20070920.wdollarvoices0920/BNStory/robNews
As is usually the case in Canada, whenever the dollar soars, various industry people suggest the government steps in to "narrow this gap and that deficit" to protect one industry at the expense of another. All for the "betterment" of the nation of course.
What this accomplishes is arguably superficial at best. It's like when you push down one bubble with one hand but another pops up so you cover that one with your second hand. What happens when the third bubble comes up?
Look, I don't know exactly what the long term trends of the Canadian dollar are like. Heck, I rarely comment on economics given my limited knowledge with this elusive art. Though I would not be surprised to see the dollar inch higher. Trends do seem to be in its favour. Still, I leave the big boy stuff up to currency traders since exchange rates can be notorious to figure out.
However, my layman observations lead me to two simple conclusions. One is that the dollar is buoyed by the demand for resources and commodities. Duh. Canada is a semi-diversified economy that still relies on resources to drive large parts of its stock markets and economy. Which ties into my second point, the rise may have little to do with our ability to be cutting edge or competitive.
Canadians at large may not see any real advantages to a strong dollar unless they are nationalists and take great pride in having a stronger dollar than the United States. This sort of thing effects different people and industries in a multitude of ways.
One thing people complain about is how retail prices don't adjust to a rising dollar. Again, many factors play into this. Off the top of this mediocre head one possible reason that jumps out is that products are bought at different points in the cycle (hence different exchange rates) and retailers can't just change prices at the whims of a dollar's behaviour. The impact can be limited especially if they are buying their products for retail in Canada.
Just as it rose it can just as easily come tumbling down because, well, as I mentioned, we don't have a deep economy to keep a sustained rise.
On the other hand, the discrepancy should not persist. The invisible economic iron should steam over the wrinkles in due time.
If you're one of those people who are creeped out by the alleged gouging of retailers there are two things you can do: cross the border and go buy a book on business. Or you can go online to buy the book - or that plasma you're dying to have - you know, since it's a necessity.
And for the love of God, keep the government out of this for once! They only confuse things. Let the economy and market unfold naturally and as designed by the forces and individuals who drive it.
Look, I don't know exactly what the long term trends of the Canadian dollar are like.
ReplyDeleteIt's actually pretty easy to find out.
FRED II
(link goes to the relevant graph at the St. Louis Federal Reserve, which posts this stuff)
Longer term: the historic trend (i.e., since 1867) is for the two currencies to move within very close range, with the period since the 70's being an historic anomaly.
Though I would not be surprised to see the dollar inch higher. Trends do seem to be in its favour.
That's a common misapprehension about market movements like FOREX. The trend tells you ABSOLUTELY NOTHING about future movement. Present market conditions reflect all data available to the markets, let alone you or me. If the trend contained some additional information, that would allow arbitrage opportunities. Efficient markets do not allow arbitrage opportunities, and FOREX markets are definitely efficient.
Which ties into my second point, the rise has little to do with our ability to be cutting edge or competitive.
Opinions differ on this subject. You say it doesn't. Every economist or market analyst on the planet says it does. (With apologies to Black Adder).
And for the love of God, keep the government out of this for once! They only confuse things. Let the economy and market unfold naturally and as designed by the forces and individuals who drive it.
My God, you can't be serious can you? FOREX has been a zone of intense national and international state action for about 600 years. You're talking about, you know, MONEY. Central banks, exchequer reserves, and postal savings bank reinvestments (for the largest holder of foreign currency reserves in the world, Japan) are just the most trivially obvious examples of state intervention.
Thanks for this. Informative and appreciated.
ReplyDelete"The trend tells you ABSOLUTELY NOTHING about future movement" Quoted for truth. Might I add neither does the past?
I'll stick to my suspicion, stubbornly of course, that the Canadian dollar's rise is more commodity driven and less to do with anything in innovation. Besides, never watched Black Adder.
It may also be taking advantage of the fact that the U.S. dollar is over valued but you're in a better position to comment on this matter.
And yes, less government intervention. What do you think of Ludwig von Mises?
Come back soon.
It may also be taking advantage of the fact that the U.S. dollar is over valued but you're in a better position to comment on this matter.
ReplyDeleteDepends on how you define overvalued. According to orthodox economic theory, nothing is overvalued; it's a meaningless term made up by journalists.
Or you could say the dollar is "overvalued" in terms of real purchasing power parities. The OECD keeps statistics on such matters; it says the opposite.
Alternatively, you could ask about the plausible ability of the USA to repay its foreign obligations without a devaluation. Here, seriously, scholarly opinions differ.
I'll stick to my suspicion, stubbornly of course, that the Canadian dollar's rise is more commodity driven and less to do with anything in innovation
Let me put this another way:
"The rise [in the CND] has little to do with our ability to be cutting edge or competitive."
Of course it does. If the CND rises, value added in Canada goes up. That affects competitiveness like mad.
And yes, less government intervention. What do you think of Ludwig von Mises?
I'd rather not say.
First, of all I hate it when someone brags about their espresso and how it produces "la crema" (the golden cream an enthusiast strives for) and it turns out to be a meek cream.
ReplyDeleteThat's is off my chest.
The Economist uses the "Big Mac" Index to judge if a currency is overvalued or not.
So von Mises treads towards anarcho-capitalism? Is this what he wrote and advocated or is this the logical end to his writings?
Since you sent me to wiki here's a quote form here I shamelessly copy/pasted: "The usual terminology of political language is stupid. What is 'left' and what is 'right'? Why should Hitler be 'right' and Stalin, his temporary friend, be 'left'? Who is 'reactionary' and who is 'progressive'? Reaction against an unwise policy is not to be condemned. And progress towards chaos is not to be commended. Nothing should find acceptance just because it is new, radical, and fashionable. 'Orthodoxy' is not an evil if the doctrine on which the 'orthodox' stand is sound. Who is anti-labor, those who want to lower labor to the Russian level, or those who want for labor the capitalistic standard of the United States? Who is 'nationalist,' those who want to bring their nation under the heel of the Nazis, or those who want to preserve its independence?"
The school that always intrigued was the Chicago school.
Thanks again for dropping bt Mr. Maclean. Comments only enhance the post.
First, of all I hate it when someone brags about their espresso...
ReplyDeleteHuh? Sorry, I don't understand.
Since you sent me to wiki...
Actually, that was not a link to Wikipedia. That was a link to my own private website. It LOOKS like Wikipedia, because it's the same content management software (CMS).
Since Hobson's Choice wiki is not quite a month old, there are a lot of important gaps in the terminology. I'm putting up new entries as fast as I can. So far I haven't put up definitions for left and right but give me a few days, tops. Work is progressing rapidly.
So von Mises treads towards anarcho-capitalism? Is this what he wrote and advocated or is this the logical end to his writings?
Actually, my essay includes a link to an anthology of anarcho-capitalist philosophers. Either LvM or Murray Rothbard was included. I think Rothbard had no objection to the term; I'm pretty sure von Mises was OK with it. Perhaps I'm mistaken, though. Usually it's US nationals who make a fuss about it.
The Big Mac index
I'm familiar with it. But no one takes it seriously. Pointy-headed academic that I am, I'm obligated to use respected, peer-reviewed sources, so, OECD it is.
What is 'left' and what is 'right'? Why should Hitler be 'right' and Stalin, his temporary friend, be 'left'?
Good question. The formal, standard response is: Hitler had to win control over the NSDAP from the Strasserist-Röhm wing of the party to become the Führer (of the party); because of his creation of the SS, and the SS's alliance with the industrial/financial bougeoisie, Reichschancellor von Papen agreed to prevent a KDP victory by allowing the NSDAP form a government.
(Weimar was already under a "state of exception," so Hitler had the tools he required for the imposition of absolute power.)
The NSDAP's so-called "left wing", the Strasserists and the SA, were liquidated by the SS with the assistance of the German Army. Hereafter, the usual drivel about "socialism" was irrelevant. Under the Hitler-Göbbels faction, the Nazi regime implemented a wholly pro-business agenda. Hence, the lavish financial assistance from Aryan industrialists like Hjalmar Schacht, Karl Blessing, and so on.
Unimpeachable evidence of Hitler's rightwing credentials would be his party's protracted violent struggle with the KDP and the SPD prior to '33; the mass arrests and jailings of all conventional leftwing political activists, and the merger of all conservative, i.e., pro-bourgeois, parties into the NSDAP.
Further evidence would be the liquidation of all labor unions, the abolition of all worker rights, all pro-worker legislation, and so forth. Women were disenfranchised and, of course, there was the antisemitism.
Stalin is also a figure of the right. Evidence of this amounts to the same thing: in the Communist movement, there had been leftwings and rightwings. The right favored totalitarian regimentation of production for defense and rapid industrialization. The social goals of the Revolution were all put on hold, and Nazi-style labor conditions replaced the promises of Lenin. The leftists were all executed.
However, the USSR is considered to be leftist (not by me) because it was anti-bourgeois; and Stalin's excesses were defended by his apologists in the light of the attack on the Workers' State. (Again, not by me). My counterargument is that Stalin's political orientation may only be adjudged in the light of objective conditions within the Soviet Union.
Who is 'reactionary' and who is 'progressive'? Reaction against an unwise policy is not to be condemned. And progress towards chaos is not to be commended. Nothing should find acceptance just because it is new, radical, and fashionable.
Absolutely. That's why there's Renaissance European art all over my site. Oh, and Marlowe, and Shakespeare, Milton, and Adam Smith, and the whole lot. I have to get around to defining those terms also.
Let me begin by thanking you for engaging me. The espresso bit is an introduction to my ADHD form of logic and tangents. Just enjoy it, will ya?
ReplyDeleteYes, not even The Economist takes it seriously.
Thanks for the clarification about Wiki. I will most certainly visit your site.
I get the feeling von Mises was comfortable - or would have been comfortable with it.
"My counterargument is that Stalin's political orientation may only be adjudged in the light of objective conditions within the Soviet Union."
Could not agree more. Reminds me of how we should treat a country like Italy.
As for the Renaissance, further thanks for rekindling my inner-historian and some topic ideas. I've been meaning to insert Leon Battista Alberti on this site for some time now.
"Yes, even The Economist doesn't take it seriously." I was referring to the Big Mac Index.
ReplyDelete