Evidence of de-coupling in Canada

February 8, 2008

Despite a several decade high in the value of the Canadian dollar and declining consumer demand in the United States, the unemployment rate dropped to a 33 year low of 5.8%. It’s probably too early to say Canada has officially de-coupled from the United States, but this evidence can not be ignored.

I never bought the argument that a surging Canadian dollar would hurt the Canadian economy. Of course certain manufacturing companies will suffer, but in general Canada is an exporter of primary goods, many of which are priced internationally in US dollars. A rising Canadian dollar may hurt the profitability of some companies that earn revenue in US dollars and pay costs in Canadian dollars, but it won’t result in anybody losing customers. It’s also important to note that commodity prices have been rising faster than the dollar, so despite the rising looney many companies may actually see profits go up.

When the world realizes America is a dead weight holding them down and stops subsidizing American extravagance, the global economies will leave America in the dust. Canadians should embrace the strong deflationary pressures created by a mighty looney and stop worrying about American problems. In the worst case scenario, there are plenty of customers in Asia.

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