The Almighty (Canadian) Dollar....No Really!

Naively, I thought as a young adult that I wished our dollar was worth more so that if I visited the US I would be able to buy more. I didn't give it too much thought, I just wished it was worth more. Seemingly my wish has come true with the dollar at a 28 year high, but as the saying goes 'careful what you wish for.'

The dollar is approaching 90 cents US which is great for importers I suppose, as well as the travel industry but there could be serious consequences if it travels too much higher.

The benefit to having a low dollar is that it enables us to export our goods to the US which if you didn't know is our largest trading partner. With a low dollar the Americans get a great deal when they purchase goods from us. This also applies to raw materials. When our dollar rises then we are less competitive and we start to lose business to other countries. Have you ever wondered why China does so much work? Low cost.

So how bad could it get? Some economists are predicting us being at par with the US dollar within a year. Far fetched maybe but if it happened it would very likely trigger a recession. Work would dry up in the export sector and the carryover would effect other businesses. Unemployment would soar and all sorts of nasty things would follow.

Yes a low value hurts us too but not nearly as muchas a high value. Our economy depends on a dollar trading in the range of 70 - 75 cents US. When we move outside that range we get into trouble.

If it stays high one of two things will happen; Either a market correction, where we plummet quickly to a more acceptable level. Or our economy has to adjust and position itself to cope with the new economic reality.

It's a lot to think about and I am no economist. If you want to know more feel free to click the 'Wealth Financial' link on the right there and that guy could probably explain it better. In the meantime I think I will go make plans for a shopping trip to Fargo! Until next time remember, no Payne no gain.