betplom
( ͡❛ ͜ʖ ͡❛)
- Since
- Jan 27, 2010
- Messages
- 28,559
- Score
- 1,471
- Tokens
- 0
http://www.thestar.com/business/art...st-in-class-among-globe-s-top-currencies?bn=1
There are, it turns out, reasons to be happy about being hewers of wood and drawers of water, long said to be the curse of Canada's resource-based economy.
The loonie's ascent to effective parity with the U.S. dollar – an encore performance to the last loonie-greenback equivalency in 2007-08 – has closely tracked the recovery in world oil prices. (The loonie closed yesterday at 99.72 cents against the U.S. dollar.)
Oil plummeted to a low of $34 (U.S.) last year as global economies contracted in the worst economic downturn since the Great Depression.
But oil has recovered smartly to the $80-plus range.
That's still far short of its record high of $147 in July 2008, which means the crude price has room to go still higher – and Canada is home to the world's largest politically stable oil reserves.
As erstwhile federal policy adviser L. Ian MacDonald wrote yesterday: "When Americans talk about ending their dependence on foreign oil, they don't mean oil from Canada."
A resurgent Chinese economy and a booming Indian economy that was largely bypassed by the global recession already are stepping up their demand for the energy, mineral and forestry resources that Canada has in abundance.
If nuclear power is once again embraced by the U.S., after an informal moratorium on new-reactor construction since the Three Mile Island accident of 31 years ago, a U.S. reliant on imported uranium will be looking to Canada in that piece of its energy puzzle as well.
But Canada has two high cards that explain the loonie's strength. The other is our fiscal soundness, especially at the federal level.
Simply put, the Western world is a fiscal basket case.
With isolated exceptions such as Canada and Australia, most of the world's richest nations are in varying degrees of fiscal distress – alarmingly so in the U.S., Britain and parts of the euro zone.
By contrast, after 11 consecutive federal surpluses beginning in 1997 – a record unmatched by any G7 nation – Canada has come through the global economic despond in much better shape than its peers.
Ottawa engaged in emergency deficit financing, or pump priming, along with all other Western nations and China to cushion the blow of the economic collapse of 2008-09.
But because of our sound finances going into the downturn, Canada is emerging from it with a $53 billion (Canadian) deficit equal to just 3.5 per cent of GDP. Ottawa is on track to reduce that ratio to 0.10 per cent by 2015.
For the U.S., that ratio is 11 per cent, and for Britain, a disturbing 13 per cent.
Montreal's La Presse reported Monday on speculation that Ottawa likely overstated the federal deficit in the 2009-10 fiscal year just ended.
Which means even the modest 3.5 per cent official calculation may end up higher than the reality, as the feds are believed by economists to have reaped some $5 billion in unanticipated tax revenues in recent months with the stronger-than-expected rebound in the Canadian economy.
The forecasters are looking for an even better fiscal performance next year.
On the debt side, the Canadian numbers are again first in class. Despite its deficit-financed stimulus to a flagging economy last year, Canada's debt as a percentage of GDP is just 31 per cent.
That ratio is far higher in Italy (117 per cent), Japan (115 per cent), Germany (76 per cent), Britain (75 per cent), France (73 per cent), and the U.S. (67 per cent).
Not that long ago, at the dawn of the Chrtien era in the 1990s, Canada had the worst debt-to-GDP ratio in the G7, at about 70 per cent.
The strong loonie, of course, will hurt exporters who lose the competitive advantage of a weak currency.
Then again, the loss of that prop in the parity scare of 2008 was a prod to greater productivity gains. Our most successful exporters, like Magna International, Bombardier and BlackBerry-maker Research In Motion, must sell on technological prowess and not on price alone.
When the G7 plus Russia and, days later, the G20 convene in Canada in June, much of the talk will be of a global debt crisis and reforms to financial markets whose malfunction triggered the latest worldwide economic decline.
The venue is an apt one.
A nation with a banking system that has proved itself a model of regulatory effectiveness and a federal fiscal probity that has few equals. We'll encourage our guests to spend freely, since our tourism sector will also be hit by the loss of a weak-dollar advantage.
But we'll cope: Our stronger dollar makes imports more affordable, reducing our cost of living.
Yes, internationally our currency is still the one with the funny name. It's also the strongest major currency in the world.
There are, it turns out, reasons to be happy about being hewers of wood and drawers of water, long said to be the curse of Canada's resource-based economy.
The loonie's ascent to effective parity with the U.S. dollar – an encore performance to the last loonie-greenback equivalency in 2007-08 – has closely tracked the recovery in world oil prices. (The loonie closed yesterday at 99.72 cents against the U.S. dollar.)
Oil plummeted to a low of $34 (U.S.) last year as global economies contracted in the worst economic downturn since the Great Depression.
But oil has recovered smartly to the $80-plus range.
That's still far short of its record high of $147 in July 2008, which means the crude price has room to go still higher – and Canada is home to the world's largest politically stable oil reserves.
As erstwhile federal policy adviser L. Ian MacDonald wrote yesterday: "When Americans talk about ending their dependence on foreign oil, they don't mean oil from Canada."
A resurgent Chinese economy and a booming Indian economy that was largely bypassed by the global recession already are stepping up their demand for the energy, mineral and forestry resources that Canada has in abundance.
If nuclear power is once again embraced by the U.S., after an informal moratorium on new-reactor construction since the Three Mile Island accident of 31 years ago, a U.S. reliant on imported uranium will be looking to Canada in that piece of its energy puzzle as well.
But Canada has two high cards that explain the loonie's strength. The other is our fiscal soundness, especially at the federal level.
Simply put, the Western world is a fiscal basket case.
With isolated exceptions such as Canada and Australia, most of the world's richest nations are in varying degrees of fiscal distress – alarmingly so in the U.S., Britain and parts of the euro zone.
By contrast, after 11 consecutive federal surpluses beginning in 1997 – a record unmatched by any G7 nation – Canada has come through the global economic despond in much better shape than its peers.
Ottawa engaged in emergency deficit financing, or pump priming, along with all other Western nations and China to cushion the blow of the economic collapse of 2008-09.
But because of our sound finances going into the downturn, Canada is emerging from it with a $53 billion (Canadian) deficit equal to just 3.5 per cent of GDP. Ottawa is on track to reduce that ratio to 0.10 per cent by 2015.
For the U.S., that ratio is 11 per cent, and for Britain, a disturbing 13 per cent.
Montreal's La Presse reported Monday on speculation that Ottawa likely overstated the federal deficit in the 2009-10 fiscal year just ended.
Which means even the modest 3.5 per cent official calculation may end up higher than the reality, as the feds are believed by economists to have reaped some $5 billion in unanticipated tax revenues in recent months with the stronger-than-expected rebound in the Canadian economy.
The forecasters are looking for an even better fiscal performance next year.
On the debt side, the Canadian numbers are again first in class. Despite its deficit-financed stimulus to a flagging economy last year, Canada's debt as a percentage of GDP is just 31 per cent.
That ratio is far higher in Italy (117 per cent), Japan (115 per cent), Germany (76 per cent), Britain (75 per cent), France (73 per cent), and the U.S. (67 per cent).
Not that long ago, at the dawn of the Chrtien era in the 1990s, Canada had the worst debt-to-GDP ratio in the G7, at about 70 per cent.
The strong loonie, of course, will hurt exporters who lose the competitive advantage of a weak currency.
Then again, the loss of that prop in the parity scare of 2008 was a prod to greater productivity gains. Our most successful exporters, like Magna International, Bombardier and BlackBerry-maker Research In Motion, must sell on technological prowess and not on price alone.
When the G7 plus Russia and, days later, the G20 convene in Canada in June, much of the talk will be of a global debt crisis and reforms to financial markets whose malfunction triggered the latest worldwide economic decline.
The venue is an apt one.
A nation with a banking system that has proved itself a model of regulatory effectiveness and a federal fiscal probity that has few equals. We'll encourage our guests to spend freely, since our tourism sector will also be hit by the loss of a weak-dollar advantage.
But we'll cope: Our stronger dollar makes imports more affordable, reducing our cost of living.
Yes, internationally our currency is still the one with the funny name. It's also the strongest major currency in the world.
