As shoppers, it is fantastic to see a higher Canadian dollar. Even with the price of food rising, it’s nice to be able to take advantage of the deals just over the border. However, while the average consumer may find joy in our now-powerful dollar, economists say that the higher dollar, while a friend to some, is a foe to others living in Canada.
The cons of the high loonie
While shopping may be great, international manufacturers who use Canadian labour have to cry foul. Manufacturers say that a high Canadian dollar will wreck business as the exports of goods will decline and labour prices go up.
Why pay more for something when you can pay less? Wasn’t that our thinking when going to buy items in the States? That kind of thinking goes the same way for buyers in the States looking at what we have to offer on the market, or companies looking for cheaper labour to produce their goods.
It’s the good ol’ theory of supply and demand. When the price is high, the demand goes down. Canadians trying to sell goods or commodities will find their goods increasingly uncompetitive against international products that can be obtained for cheaper. That’s bad news for the boys working in factories.
We’ve seen a recession over the last two years, (we’re actually doing a bit better now) where plenty of people, especially those who worked in factories without their Grade 12, lost their jobs.
The unfortunate reality about that particular job loss is those jobs aren’t coming back. It is even less likely for new factories to start up when the Canadian dollar is high, because why pay higher costs to manufacture?
It is considerably cheaper to build factories in poorer countries where products are less expensive to make and then sell them for a killing in another country where there people have the money to spend, spend, spend.
Pros of the higher Canadian dollar
A higher dollar is like an instant raise for consumers. Because the Canadian dollar is worth more, the price of everything you buy from another country, like most of the products in Wal-mart or those European chocolates the ladies love, will become cheaper, while the prices on products produced in Canada will remain the same.
Extra wealth means extra spending power. Book that international vacation. Go with ease: you will not be spending what you normally would. Looking for a more European trip in the summer? With our dollar higher against, but not higher than, the Euro, we are paying less.
Friend or Foe?
It is easy to the see the glass as half empty when we see a change in the economy. A lot of people worry over what may be. Isn’t that equivalent to life in general? Kudos to the people who are not tempted by the green grass on the other side. It is important to recognize the negative aspects, but also embrace the positive.
Okay guys, where are you planning your next vacation? In this hot weather, I’m thinking Alaska.