Troy Media – By Will Van`t Veld
American financial innovation might have had a bad ending, but other areas of the U.S. economy have been far more successful. Trends in productivity levels in the U.S. have improved markedly, especially vis-à-vis Canada, and this is a big reason why an exchange rate above par causes serious concerns.
Producing more with less is ultimately what we refer to when talking about productivity growth. Trade then allows production to gravitate towards the most productive sources. Specialization between countries begins to occur and trade renders everyone better off. Shifting productivity differentials then change the terms of trade over time, altering this balance.
Foreign currency is needed in order to facilitate trade, meaning its price, the exchange rate, will be influenced by whether or not the trade balance is positive or negative.
For instance, as energy generates so much of Canada’s net exports, it’s pretty intuitive to see why there tends to be a rush to purchase Canadian currency when the price of crude increases.
Countries also trade in securities, such as national debt, for which currency has to be purchased, but here its interest rate differentials and other investment concerns that matter more.
Much is going wrong in the U.S. economy, but manufacturing isn’t one of them. In fact, the Institute for Supply Management has export orders at 20 year highs. In fact, Ontario has even become a net-importer of U.S. lumber.
There’s a lot going on right now working in the loonie’s favour, but at least one important factor – productivity – will provide some headwind for the high flying loonie going forward.
Troy Media - By Will Van`t Veld
The low Canadian dollar might have cost Canada two NHL franchises back in the late 90s, but in the bigger scheme of things the ...
Troy Media - by Dan SumnerIt’s a bird . . . It’s a plane . . . It’s the loonie!Look out! The Canadian dollar reached a three-year high last week, ...
BMO Economics has issued a report projecting a resumption of interest rate hikes by the Bank of Canada in October. This follows an outlook for above-potential economic growth for the ...
By William Kimber
On the face of it, Australia and Canada have much in common. The two countries are rich with vast natural resource endowments and economic structures which are ...
Troy Media - By Benjamin Gillies
Much has been written in the past few weeks about the Government of Canada’s move at last month’s Rotterdam Conference to keep asbestos off ...
Troy Media - By Bryan Yu
High Vancouver housing prices have recently been making headlines with reports that, relative to income, affordability has declined sharply.
This is not surprising, given the level ...
The Indigenous Bar Association, the national association of First Nation, Inuit and Métis lawyers, is urging Stephen's Harper's Conservative government to appoint an Aboriginal justice to the Supreme Court of ...
Minister of State for Western Economic Diversification Lynne Yelich outlined recently the Government of Canada's continued commitment to fostering the growth of Western Canada's aerospace and defence sectors.
"Our Government recognizes ...
Loonie flying high, but is there turbulence ahead?
Canada’s currency flexes its muscle
Bank of Canada rate hikes predicted to resume
The same but poles apart – climate policy
Canada’s asbestos industry is not worth the effort
Better data yields a lower price-income-ratio for buying
Indigenous Bar Association appeals to Government of Canada
Government commits to Western Canada’s aerospace and defence