canadian dollar en-US The sinking dollar, as viewed from overseas <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-sinking-dollar-as-viewed-from-overseas" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="Foreign currency and coins" title="Foreign curency and coins" class="imagecache imagecache-250w" width="250" height="165" /></a> </div> </div> </div> <p>To someone in the US, the decline in the value of the dollar has mainly made itself felt up to now in the form of increases in the prices of globalized commodities--everything from <a href="/plan-for-expensive-fuel">oil</a> to <a href="/nonfat-dry-milk-no-longer-a-frugal-alternative">nonfat dry milk</a>. Consumer goods, even though many are imported, have only just very recently begun to show price increases. When you look at the picture as viewed from overseas, though, it&#39;s not as simple as just seeing the reverse.</p> <p>The most straightforward effect of of a lower dollar is that stuff manufactured in the US would be cheaper overseas.</p> <p>What, you may ask, is manufactured in the US anymore? Actually, quite a bit. The <a href="">US still exports</a> hundreds of billions of dollars worth of jet airliners, computers, telecommunications gear, and industrial machinery (together with parts for all those things). There are also thriving US industries selling things like chemicals and plastics. There&#39;s even good sales of consumer goods--especially medicines, but also toys, games, sporting goods, musical instruments, etc.</p> <p>All that stuff, together with agricultural goods, has added up to some $850 billion so far this year. Which means, since those dollars are down from €1.00 for a dollar to just €0.67 over the past 5 years, all that stuff is on sale. (The dollar is down similarly against the Canadian dollar over the same period from close to $1.60 Canadian to about $1.00 now.)</p> <p>So, on the one hand, with all that stuff on sale, you&#39;d expect to sell more. And we <strong>are</strong> selling more, but only to a modest extent, due to the many delays and complications inherent in trade. (How many jet airliners that US companies sell depends more than anything else on how many were ordered over the past couple of years. Drug sales are mainly a function of the latest medical research on the best treatments for various conditions and how many people have those conditions.) Being able to get them with cheap dollars will change things around the margins, but even for things where price changes make an immediate difference in how much people want to buy, there are still manufacturing constraints, shipping constraints, and so on. </p> <p>Even so, to the extent that US companies still make stuff--and that&#39;s a considerable extent, despite globalization and outsourcing--those companies can now sell stuff cheap enough that they can really compete.</p> <p>What that means is that, where there&#39;s a direct foreign competitor, that competitor is now comprehensively screwed. Just like US companies, those companies have already outsourced as much as they can. Any work that hasn&#39;t been outsourced has only been kept because the skill set just doesn&#39;t exist overseas or national policy requires that it be kept. So, with US companies being able to pay their workers with dollars that are only worth €0.67, European, Canadian, and other manufacturers are facing some serious competition.</p> <p>Of course, this requires that the US company actually be a competitor. This means, for example, that Airbus is in more trouble than, say, Toyota. (The yen is actually not up nearly as much against the dollar.) </p> <p>To the small company that&#39;s providing goods and services for the local market, this isn&#39;t so bad. They were already competing with all the usual globalized suspects; giving the US an extra 30% edge doesn&#39;t help, but any market where it would make the difference has probably already been grabbed by some much cheaper global player.</p> <p>For the major European and Canadian companies doing business in global markets, though, this is very bad news. </p> <p>Of course, major companies have large tax bills and large workforces. A drop in business would lead to lower tax revenues for the countries. It would also lead to layoffs--layoffs of voters. Those realities are going to put serious pressure on governments to &quot;do something&quot; about the value of the dollar. </p> <p>What can be done? Well, any central bank can hold the value of its currency down as low as it wants, if it&#39;s willing to buy an arbitrarily large amount of the other currency. That&#39;s what China has been doing for years now. The result, though, is inflation. The other central banks can join the game, if they want. They probably don&#39;t. In fact, even China is getting out, having decided that it&#39;s really got all the dollars it wants.</p> <p>Beyond that, there will be political pressure brought to bear, but it&#39;s hard to bring that sort of pressure to bear on the US. A falling dollar makes Americans poorer in some sense, but not in ways that prompt ordinary people to demand better from their government. In the old days of the gold standard, the pressure would appear in the form of foreign sellers demanding actual gold instead of mere paper, the excess paper money that leads to a collapsing currency would be automatically curtailed. Nowadays, though, the pain of a falling currency is very much spread around--foreigners suffer about as much as Americans, and neither suffers so very much as to make the value of the dollar a major political issue.</p> <p>Things will likely go on as they have, with people who have dollars trying to find something of value to spend them on. Once you&#39;ve bought all the jet airliners, network switches, and soy beans that you want, you&#39;re pretty much down to buying stuff for investment. <a href="/treasury-bills-for-ordinary-folks">US treasury securities</a> have been a popular choice, but US interest rates are now low enough that they wouldn&#39;t seem particularly attractive, even if they didn&#39;t face the obvious problem that your investment would still be in US dollars. US companies, with the credit problems stemming from the housing bubble and subprime loan debacle, should only be bought with a keen understanding of the underlying business. Still, there&#39;s plenty of other stuff worth buying in the US--land, for example. There&#39;s lots of that going on.</p> <p>There&#39;s a lot of anxiety about this issue. The US dollar is important enough in world trade, that if it keeps going down, trade will become disordered. There are enough dollars in the hands of people all over the world--foreign governments and their central banks, major corporations, wealthy individuals--that there&#39;s a serious incentive for them to get their governments to do something. And there are plenty of theories about just how bad that something could turn out to be. Personally, though, I don&#39;t find any of the doom scenarios very compelling.</p> <p>A complete collapse in the dollar is unlikely, because there&#39;s so much stuff you can buy with dollars that the currency will continue to have some value--it won&#39;t go straight to zero. Further, its slide in value is self-limiting because eventually both voters and the wealthy elite in the US will insist that it not fall further.</p> <p>The individual outside the US is really a bit player in this. You&#39;re mostly not in a position to buy farmland in the US or hedge your future purchases against currency fluctuations. If you work for a multinational corporation that pays its workers in some currency other than the dollar, but which competes with companies that do pay their workers in dollars, you might want to be a bit worried about your job; even if jobs aren&#39;t lost, raises and promotions are going to be harder to come by. Beyond that, enjoy the occasional cheap thing you can get that&#39;s made in the US.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="">Philip Brewer</a> of <a href="">Wise Bread</a>, an award-winning personal finance and <a href="">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="">The sinking dollar</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="">Nonfat dry milk--no longer a frugal alternative</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="">8 World Currencies That Took a Hit in 2016</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="">Don&#039;t Get Taken: How to Evaluate an Exchange Rate</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="">3 Easy Ways to Improve Your Credit Score During the Holidays</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance canadian dollar dollar euro exchange rates globalization Sun, 25 Nov 2007 13:39:39 +0000 Philip Brewer 1425 at Canadians are Getting Fleeced by Their Own Dollar <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/canadians-are-getting-fleeced-by-their-own-dollar" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src=" dollars.jpg" alt="Canadian dollars" title="Canadian Money" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p class="MsoPlainText"><span><em>First of all, I must confess: I am Canadian. And although much of Wise Bread&#39;s readership is based in the United States, I know there are a number of readers from other countries, including Canada. This article is written from a Canadian consumer&#39;s perspective.</em> </span></p> <p class="MsoPlainText"><span>For the first time in over three decades, the Canadian Dollar ($CDN) has surpassed the U.S. Dollar ($USD). And by the end of this year, predictions are that the $CDN will hit $1.05 US. This is certainly a double-sided coin (or bill, as the case may be). </span></p> <p class="MsoPlainText"><span>Canadians have been on quite the roller coaster ride, as only five years ago, the $CDN was trading at $0.62 US. That was great for Canadian businesses, as it enticed many Americans to visit and shop in Canada. Border towns were crowded with shoppers from the States. </span></p> <p class="MsoPlainText"><span>Now, it&#39;s the other way around. The viability of Canadian businesses in the border towns and Canadian tourism overall is in jeopardy, while many Canadian consumers are enjoying discounted shopping and accommodation rates in U.S. border towns. This is great news for Canadian snowbirds (retired Canadians who spend the winter in warm southern states), and those who live near the border who can hop across to shop. But what about the bigger implications for the average Canadian consumer? </span></p> <p class="MsoPlainText"><span>In my research about the many effects of the dollar disparity, I couldn&#39;t find much information about consequences for Canadian consumers every day. And there are indeed consequences. </span></p> <p class="MsoPlainText"><span>For example, when Canadians go to the bookstore, many books are published with a U.S. price, and beside it a corresponding Canadian price (which is inevitably higher). And the Canadian retailers are incredibly slow to alter their prices. </span></p> <p class="MsoPlainText"><img src="" alt="Book Prices" title="Book Prices" width="400" height="300" /></p> <p class="MsoPlainText"><span>Now, I understand that since currency changes are so fluid, prices can&#39;t be adjusted every day to reflect new rates. Stock must change over, and importers must be realizing lower rates before they can pass them on to retailers and ultimately consumers. </span></p> <p class="MsoPlainText"><span>However that book I very recently purchased (for which there was no price adjustment), reflects a Canadian dollar value of $0.68. The last time the Canadian dollar was at that value was in 2003. I can&#39;t believe that the importer of that book brought it in four years ago. And even if they did, Canadian consumers shouldn&#39;t have to pay for importers&#39; mistakes. It is the importer&#39;s and retailer&#39;s job to assume that sort of currency risk. </span></p> <p class="MsoPlainText"><span>I also like to order goods on a monthly basis through a U.S.-based company, but one that has a huge Canadian contingent and a special Canadian price list. However this price list is also extremely slow to be adjusted (despite the fact that there is no pre-paid product sitting on Canadian shelves), and as such if I placed an order today, I would pay over 6% more than I should based on the exchange rate. </span></p> <p class="MsoPlainText"><span>These are just a few examples of many, in which Canadian consumers are getting the short end of the exchange rate stick, and have been for years (just not as dramatically as recently). Importers are profiting, retailers are profiting, but consumers are still left to pay the difference in price. </span></p> <p class="MsoPlainText"><span>Our buck stops here. <span> </span></span></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="">Nora Dunn</a> of <a href="">Wise Bread</a>, an award-winning personal finance and <a href="">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="">How to Tell if That Home Business Opportunity Is Really a Pyramid Scheme</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="">How to complain and get a good result.</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="">netSpend: The Story of the Visa Debit Card We Did Not Apply For</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="">Herbal Supplements: Know What You’re Getting!</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="">Will A Dental Discount Plan Save You Money?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Consumer Affairs canadian dollar canadian importers canadian retailers exchange rate imported goods Sun, 07 Oct 2007 21:43:46 +0000 Nora Dunn 1261 at