Friday, November 23, 2007

More on Exchange Rates

I'm sorry but this really can't be said enough, here's an excert from the Progressive economics forum:

The unprecedented surge in the Canadian dollar from 85 cents US in early 2007 to as high as $1.10 in early November is deeply disturbing in terms of its implications for the health of the economy and the job market. Very rapid exchange rate appreciation is bad news for most enterprises exporting abroad, or competing with US and Asian exporters in the Canadian market. The especially vulnerable manufacturing sector has already lost another 82,000 jobs this year, and is widely expected to cut more jobs and close more operations in 2008.

An exchange rate at or above parity will destroy cost competitiveness for large and important portions of the Canadian economy, notably manufacturing, but also tourism, cultural industries and those selling services into the US and Asian markets. Parity raises the fundamental question of whether the resource boom will destroy a significant part of our current economic base, greatly exaggerating regional differences.

Exchange rates can and do ‘over-shoot’ the level justified by fundamental factors, with permanent structural damage being inflicted if a serious over-valuation persists.

--there you have it, stop gloating and start hoping the loonie goes down! Get the full version here

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