Gonna Need MJD On This

[MJD]

I don't know where to look it up but when I lived in Canada 1968-69 the Canadian dollar was about US$1,08, as I recall...

The record is from 1957 and it was 1.06.

[eldrick]

97.19 close today.

people are probably all aware of this, but it's worth reminding them :

with american interest rates slashed by 0.5% ( from 5.25 to 4.75% ) & presumably canadian rates unchanged, the $ is going to weaken a helluva lot as people will sell dollar-dominated assets ( as you can now only get 4.75% interest at best in those american $ deposit accounts, whereas, there must be other solid countries with interest rates above this - gb interest rate is 5.75% !!! )

regardless of whether canadian rates are above/below 4.75%, the tendency know will be from money to gravitate from $ accounts to canadian currency accounts & you are going to see the canadian currency appreciate - you've got to believe it will go well above parity in near-term

[MJD]

Ha! There are a couple of other threads you better look at el. That is old news and that was a self-evident truth a long time ago so nice to see you finally on board. It isn't just an interest rate story. It's a commodity story. It's a China story. It's an inflation story. All this interest rate adjustment did was shift money from the less rich to the more rich even though many think that it was good for their portfolio-sorry, not in a global marketplace. Speaking of same, how would you like to be in this business?

""Our customers right now are on allocation. We're having a hard time meeting demand in 2007," Wayne Brownlee told analysts at a Bank of America investment conference in San Francisco.

"We expect that allocation process is going to continue in 2008, and even into 2009," Brownlee said, noting potash buyers currently have to wait about two months longer than usual to receive fertilizer because of strong demand."

http://tinyurl.com/399rfv

[eldrick]

i shoud amend that fairly simplistic post of mine :

knee-jerk reaction shoud be that canadian $ appreciates due to yanks slashing their rate, but in time, this is good for yank exporters, who will export more to canada ( as yank goods become "cheaper" )

the yank exporter will then have more canadian $ in her pocket

what to do with all this canadian money ?

- obviously, main thing is to convert it back to yank $, as that's their home currency : therefore : the exporters will sell canadian $ & buy yank $

this has affect of weakening canadian $ & appreciating yank $, therefore offsetting to some degree, the weakening of the yank $ due to slashing rates

how much this offsetting is worth, i have no idea ( you have to ask an economist ( 26'er, sir ? ) / currency trader ), but it will provide some conter-balance to initially weakened dollar

- more deeper thinking yank exporters may keep those canadian $ & use them to buy into blue-chip canadian companies/prime real-estate & perhaps better get returns there from stock rises/divi payouts/top rental income/property price rises, than from simply converting those canadian $ back into yank $ & ploughing back into their own business - overall effect of this is for yanks to "own" substantially more canadian "prime assets"

swings & roundabouts...

as for commodities, oil & gold spiked on them slashing rates - my head was spinning too much after that rate-cut to figure out why then, but the rate cut meant a boost for economy - businesses will expand as a result & will require more commodities ( oil ) to fuel this expansion, therefore more demand for oil & therefore price rises

however, i still can't figure out why gold spiked - it is of no economic use ?!

[eldrick]

may i recommend these 2 books from a library ( mixed reviews ) - i bought them a while back, but not got round to reading them :

http://www.amazon.com/Greenback-Jason-G ... 406&sr=8-1

http://www.amazon.com/Power-Gold-Histor ... 697&sr=1-1

well worth a browse - but perhaps borrow from a library rather than buy

[MJD]

however, i still can't figure out why gold spiked - it is of no economic use ?!

Gold isn't spiking. That is a dollar story. And the problem with your theory is that almost everything(at least for now) that Canada sells is priced in US dollars and will keep rising. That will offset whatever gains are made by the US exporters.

[eldrick]

Gold isn't spiking. That is a dollar story

bloomberg explained it - it was so simple, that i shouda seen it

cutting rates raises the spectre of inflation & less worth of the $

in these cases, investors tend to drift to investments which are considered a hedge against inflation - gold

And the problem with your theory is that almost everything(at least for now) that Canada sells is priced in US dollars and will keep rising. That will offset whatever gains are made by the US exporters.

apply my argment to gb & the £ - we don't price our goods in $

[MJD]

Nice not to have to do any currency conversions, by the way.

Are the prices of goods still inflated about 1.5 times over the US? If so, you're getting the short end of the stick (unless you shop south of the border).

50% is too high. Pretty sure if you factor out our "free" health care, our cost of goods are much closer. Rough calculation-we spent 56 billion in 1999/2000-call it 100 billion now-multiply that by 10 because of the population difference and you are up to 1 TRILLION DOLLARS. US GDP is about 14 trillion dollars. Therefore, there has to be a 7% price difference just based on that.

[eldrick]

mjd

are you saying that 7% cost of your health care, paid for by the govt is claimed back by the govt as a 7% higher sales tax/VAT,etc compared to the americans ?

[MJD]

It has to come from somewhere and be built into the costs of things somehow. We pay a 6% federal tax on most things but health care is primarily a provincial thing and in Ontario, we pay 8% on most things. That rate varies from province to province.

[eldrick]

thanks

but woudn't this therfore mean that the yanks have 0% federal tax on most things, in order to keep the ~7% differential between you & them ?

[MJD]

That is a sales tax-kind of like your VAT? I don't think the US has such a thing.

[JRM]

That rate varies from province to province.

I thought most provinces were moving to a 15% flat tax that covers both. I know New Brunswick has that.

[eldrick]

That is a sales tax-kind of like your VAT? I don't think the US has such a thing.

britain has VAT ( value added tax ) on most goods & services, which for years has been a ridculous 17.5% !!!

if america doesn't have such, then they are very fortunate !

[MJD]

The uninsured types might disagree.