2002

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Tuesday Jun 4, 2002 rci
TORONTO: AMERICANS REJECT COMMON CURRENCY NOTION
A public opinion survey indicates that a strong majority of Americans disagrees

Also please Chris Ragan

Saturday, November 10, 2001 It's time to ditch dollar: expert
Currency sinks to 62.37 cents U.S.
"To what level will the finance minister allow the Canadian dollar to fall before admitting that his narrow view is weakening the Canadian economy -- at 50 cents, at 40 cents, or at 35 cents?" Bloc Québécois critic Yvan Loubier asked during question period.

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From: A Student at Western
Sent: Friday, October 12, 2001 1:14 PM
To: Wednesday-Night
Subject: Student Inquiry, Should Canada adopt American dollar?

I am studying first economics at Western Ontairo. I have chosen the case on, "Common Currency in Canada."

I was impressed with the knowledge and information on your website. If I was more educated I would be honored to seek membership.

I would greatly appreciate if you could help me out with this difficult case, by offering short term and long term affects on the Canadian economy from both sides of the fence. Right now I'm sitting on the fence. Your consideration and reply would be so very helpful.
Thank you

from Christopher Goodfellow MBA

Before discussing a "common currency", it may be constructive for the young man to ponder the following with regards to North America as a "geographic entity".

With respect to economic and population growth, why are there 300 million people below the 49th parallel and 30 odd million above it? The easy answer is climatic but it is not the correct answer. The answer lies in the differences in the government and cultural environment. Canada never attracted immigrants at the same rate as the U.S.

Why?

I've given a lot of thought to this over the years. This is a great country...actually much of the geography is much more habitable than the US and the resources are here to support huge population.

People migrate to perceived economic opportunity first and foremost when they move.

Canada has historically offerred a lot less economic opportunity for several reasons but one overriding factor has always stood out for me. The overhead of government in Canada has cost us dearly in terms of economic development. Nothing illustrates this more starkly than the fact that just over 50% of economic activity in Canada is government related versus 30% in the United States. Despite all the rhetoric of the last ten years about "restructuring", nothing really has changed. It is an attitude, a deeply ingrained attitude, that the role of government is accepted as more encompassing in Canada. In the U.S. there is an inherent mistrust of big government, In Canada, it is simply accepted. It is suffocating and we all know it. But do we vote for the party that will change it?

No, Canadians are caught up more than ever in an attitude of "poor pride" or "well we don't have everything the US has but we have less crime and we have medicare". The fact is medicare is rotten and although we lock up fewer people here, we were perhaps blessed by not having the legacy of slavery and therefore my conclusion is that we should be even further ahead in development not having had to deal with it!

The opportunity presented by free trade with the U.S. has not been mutually beneficial to Canadians. The differences in tax structures have led to a further huge migration of talented people to the U.S.

I'll say it again, people migrate to economic opportunity.

The fact a free trade agreement was negotiated without a corresponding restructuring in government overheads in Canada and a relative levelling of tax rates placed Canada in a no win position from day 1.

You had to be blind not to see this.

The end result of all this is a 63 cent dollar. Why?

Our government has relied on the one instrument available to remain competitive. A constant sliding devaluation of our currency...over the past 30 years we have seen our dollar move from par to 63 cents. It is the price we have paid for excessive and costly government we simply cannot afford. But ecomic history is replete with countries that tried to devalue their way to prosperity and end up bankrupt anyway. Canada will be no different. Those "in power" in Canada, the government bureaucrats largely at every level, have impoverished the rest of us under a system of direct and indirect taxation that is not only astounding....but makes it impossible for most Canadians in the private sector to get ahead. By and large the standard of living hasdeclined in Canada along with this sliding devaluation. On a per capita basis we are the most indebted people in the world.

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"common currency"

Remember, the business of America is business. What's good for business carries the day. In Canada, what's good for business is attacked. The misconceived notion that wealth flows from government is all too pervasive in Canada. It simply isn't so.

I know I have been a voice wailing in the wilderness for many years about the dollar but I have been right both about the dollar and the debt. The crisis is still over the horizon but it will come as surely as day follows night. The simple fact is the level of debt in Canada - federal, provincial, municipal, corporate and personal - can no longer be serviced by the DOMESTIC economy - a very dangerous development for any country....I haven't heard that widely discussed...but if internal economic activity is not sufficient to service the debt then any external event could potentially control our destiny. So much for sovereignty.

In truth, the only thing that carried us through the Nineties was our strong exports to the U.S. and we had to devalue to keep those exports flowing. Without the US economic boom we would have sunk long ago...

Canadian business is seeing the crown jewels now being sold off for a pittance to the Americans. Every day we see more and more assets ending up in U.S. hands. It will only become worse. As the U.S. economy contracts and it surely will with the events of September 11, the Canadian economy will see exports contract and a crisis will result as it becomes clear a deficit will come roaring back and unemployment soars. Federal deficit developing in 2002 and crisis in 2003.

Adopting the U.S. dollar will not take place without a fight by those with a vested interest in continuing the present squandering of our national wealth. In my humble opinion it would of course be a good thing simply because it would bring about the conditions to force a recognition that Canada must restructure it's government overheads. The Canadian government could no longer rely on a sliding devaluation to remain competitive. An adoption of the U.S. Dollar of course would mean the Bank of Canada and the large banks in Canada would lose their control over interest rates and the creation of new money.

Gees, they might have to get competitive and be creative for once.

Liquidity would be determined by the Fed. A country without sovreignty over its money is not really a country...but hasn't Canada been slowing disappearing since Pierre Trudeau began raiding the treasury in 1970?

One other thing...just an observation about Canadian government. No matter who is president in the U.S., the U.S. Senate is full of many successful men and women who have made their mark in business and other fields. We can joke about the odd one but the level of talent, experience and knowledge is very high and they by and large understand the business of America and generally move the country in the direction of favouring business and creating conditions for growth and prosperity. Contrast that to the 102 senators here in Canada who basically are made up of old party hacks and live off the rest of us while perpetuating this enormous government overhead. As I've said elsewhere, a parliament of 100 and an elected senate of 2 per province could get as much done!

I hope you are both well...difficult days. This Bin Laden is a smart and cunning man. I expect these anthrax letters and such are only a small taste of what we face until we get rid of him and the world settles down. The world is in a precarious state. I fear the winds of war are blowing....

Chris.
& www.laurentian.com Christopher C. Goodfellow [goodfellow@tremblantweb.com]

August 15, 1999 wrote to W-N on Banks

See Also Would a fixed rate make markets more flexible? by Christopher Ragan MBA teaches in the Department of Economics at McGill University.

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