Beggars *Can* Be Choosers
It really does seem like the world is having a collective allergic reaction to the greenback, and trends seem to be pointing to full blown anaphylactic shock sometime in the near future. You know it is bad when you try to give away greenbacks and people turn up their noses and ask for Euros. I am at best an armchair historian and economist, but I seem to recall that the last time the world saw a loss of confidence in a reference currency (the Pound Sterling), we had a depression that lasted a decade! Here’s hoping we get a smoother ride than that.
Loonie Spanks the Yank 1
Apologies to those of you who thought that title was referring to something more lurid, but for a brief moment today, the Canadian dollar achieved and then exceeded parity with the US dollar. For those of you playing the home game, this means prices on Canadian imports to the US are going to shoot up (and the Euro and the Yen haven’t exactly been lying fallow either), producing added inflationary pressures in the US, or simply: “things are gonna get more expensive, and all those baby boomers who are retiring are going to find their savings doesn’t quite stretch as far as they thought”.
To put this all in perspective: in 2002, the Canadian dollar was below 62 cents US. Wikipedia has the full tale of the tape. You remember what happened in 2002? That’s right, our new congress and president decided to try out the combination of trickle-down economics and “don’t tax and spend” policies that worked out so well in the 80’s (note a similar, less dramatic climb in CDN$ valuation during that era). That’s also around when we started spending massive amounts of money invading “terrorist countries”. At the same time up in Canada the notion of cutting spending and paying off the debt suddenly became fashionable along with repatriation of the national debt. Now, I’ll be the first to admit correlation is not causation, but you might think there is some kind of a linkage between economic/monetary policy and currency valuations, right?
Now, there is a strange tendency to give the President too much credit and the Congress too little when it comes to budget management (as indicated by one of the graphs I link to tracking who was President when). In reality, the folks in government who probably deserve the most credit for the brief period of budget surpluses the US had in the 90’s would be the “Contract with America” Republicans who took over the House of Representatives during that era. They got an added boost from an explosively growing economy (credit for that is always difficult to assign, but probably should be spread thinly over congress, the president, Mr. Greenspan, and just about every working American from that era), but you have to give them credit for not seeing it as an opportunity to secure easy reelection by boosting spending.
Anyway, as a Canadian with some retirement investments up north, I thought I’d just hand out a big “thank you” to the US Congress. As an American living and working in California who likes to travel abroad (particularly to Canada) for vacations… the things I’d like to say are too expletive laden for me to print.