The Loonie At Par: Bad News For Everybody
Let’s be honest. The loonie at par is killing us. The only way it isn’t killing you is if you are member of the public service or in the American import business. It’s not rocket science. From a low of just under 85 cents in January of 2007 to par today and that isn’t good for anybody.
You would have thought the national media had declared Canada Day in September when the loonie hit par with the American dollar. It wasn’t anything to celebrate as far as I’m concerned. Anybody can figure out what economic carnage a par loonie causes in Ontario. That whooshing sound you hear is jobs evaporating. It would seem as Canadians we have a lot more to celebrate than simply having a thinly traded currency reach par with our American friends.
It might be insecurity run wild. Or it might have been a slow news day. Seeing Canadians on CBC’s “The National” in Detroit telling Americans their money was now worth the same as the greenback shows just how insecure some Canadians can be. I think most people shuddered at the news. I know I wish the dollar would go back to 75 cents. It would mean more jobs for everybody in Chatham-Kent and better food on the dinner table. Believe me, we’re not Alberta.
If you read last week’s column, you’ll know I make a career out of writing about the dollar. That fact alone had me thinking this past week. It is one thing to comment on our economy when the dollar moves fro m 65 to 70 or 75 to 80 or even 85 to 90. However, what do I do know? Do I talk about the loonie going to $1.05, or Lord help us $1.10? I dunno. Simply put the loonie from my perspective is in some pretty rare air. It’s dangerously high for the good of the Ontario economy. Adjusting to it can be very painful.
Case in point is local agriculture. Chatham-Kent is dominated by agriculture almost like any other area in southern Ontario. The cash prices local farmers receive for their commodities is all based on US replacement prices. In other words with the Americans dominating world agriculture, prices are determined by what happens down there. Our Canadian government maintains this because they want to keep a cheap plentiful food supply on grocery store shelves.
For the most part farmers chafe under this policy commonly called the “Canadian cheap food policy”. However, over time they have adjusted and with the loonie valued less than the greenback, Canadian agricultural commodities had a cost advantage going into the US. Much was exported; farmers were paid in Canadian dollars converted from American. It’s never worked really well, but farmers through the years have found a way.
That’s all over now whether local farmers realize that or not. Beef, pork, grain or any other agricultural commodity which was shipped to the US is now much more expensive cutting off demand. To add insult to injury the par dollar is now doubling back with more American agricultural commodities coming north undercutting local farmers. When the Americans open the border to Canadian beef over 30 months in November, we won’t be celebrating on this side. Yes, it’s been a long haul, but now the demand has all but dried up.
The carnage of the hot loonie doesn’t stop there. How about if you are employed within the auto industry here in Chatham-Kent? If you sell cars here, the same cars are much cheaper across the St. Clair River. It was true when I bought a new truck last winter when the dollar was at 85 cents but now it’s a fire sale. If you work at an auto related parts plant, GM is on strike in the US putting 73,000 people on the picket line. This will surely back up into southern Ontario forcing layoffs. Needless to say that par loonie only makes the security of those jobs less so.
So does the law of gravity apply here? In other words does “what goes up must come down” apply to the loonie. I think so. However, I wasn’t one of these high priced economists who thought the dollar was going up, up, up. That to me was going to be our economic nightmare and here we are living it.
But hey, you can cross the border and eat cheaper now! You can go to “Best Buy” and get the latest gizmo tens cents cheaper! Hmmmm, does that sound like fun? It might be if you can maintain your standard of living at a par loonie. However, I think I’d rather go to Stargazers or Pranovis or any other wonderful restaurant in Chatham-Kent. Here’s to a 75-cent loonie. Let’s be honest. We’d all be better off there.