Fat America
Posted: October 31st, 2007 | Author: supafamous | Filed under: Uncategorized | 1 Comment »
Before I talk about the Canadian dollar I’ll pass on this article about fat Americans as this article got passed to me the day after TMQ reports that Dayjet, an Air Taxi service is doing weigh-ins of its passengers as they have to report the exact weight of their flight prior to takeoff. Americans are FAT.
Anyways, I’m here to talk briefly about the dollar which has now exceeded parity with the American dollar. That it is worth more than the American dollar is more a reflection of global commodity prices and the horrific mismanagement of the American economy by George Bush and friends than it is the strength of the Canadian economy.
But that’s not what I’m here to harp about. I’m here to harp about how Canadians should really stop whining about how stuff still costs more here than they do in the states and that it’s the fault of the retailers who are “gouging” us.
The truth is that the American economy represents so much business to these companies that these companies are biting the bullet and are not raising prices like they should because they’re afraid of the lost business.
Take the European companies as an example, they build their products in Europe and pay their employees in Euros. Two years ago one Euro bought you $1.20 USD. Today that same Euro buys you $1.44 USD. All things equal a 2005 $30k BMW should now be a $36k BMW (20%) but it’s not, it’s still the same price (inflation adjusted). BMW and their cohorts have swallowed the loss (for the most part).
In contrast the Euro would have bought $1.44 CAD 2 years ago and today it buys $1.37 CAD. That’s a change that has taken place largely in the past month or two, on Sept 1st it was still $1.44 and on Oct 1st it was $1.42. In other words prices should have been largely stable between Europe and Canada which is exactly what’s been happening. That Mercedes ain’t coming down in price here, it should be going up in the US.
The Yen hasn’t quite gone this way, it’s gone from .0101CDN to .0083CDN which is roughly what’s happened to the US dollar (i.e. the Yen has fallen 20% to the CDN dollar like the US dollar has). Canadians should be able to buy cheaper Japanese goods so you’d be right to be upset that Japanese made goods aren’t cheaper.
I suspect the Yen’s weakness is because investor aren’t storing their money in the Yen yet and are choosing to store it in Euros which is leading to inflated value for the Euro. This is also why the US dollar isn’t worse than it is because Japan, China and Saudi Arabia hold massive amounts of US currency in their national banks. They’re getting screwed by the decline of the dollar and at some point I suspect one of them will declare that they are moving their currency holds to another currency (probably the Euro) at which point the markets will get flooded with American currency and the dollar will drop further.
Fortunately the global economy no longer depends so greatly on the American economy that would cause this situation to turn into a global meltdown but Canada *IS* pretty dependent on stupid American spending. We’d see a slowdown in our services industry pretty quickly but would probably weather the storm because our commodity markets are so strong. However, neither you nor I are working in the commodity markets so this won’t help us.
In any case don’t complain that things cost too much here compared to the states, complain that Americans are paying too little.
P.S. The GST cut is nice but wrong headed. Don’t cut consumption taxes Mr. Prime Minister when we need Canadians to save. Cut income taxes instead.
