Canadian dollar

Herbert Grubel – the Canadian economist who developed the concept of a North American currency comparable to the euro – laments that politics prevents the U.S. from agreeing to the creation of the amero right now.

In an op-ed piece entitled “Fix the Loonie” in Canada’s National Post, Grubel expresses concern about the current relative strength of the Canadian dollar, or “loonie,” in comparison to the weakening U.S. dollar.

The strength of the loonie, now trading more than par ($1.02) to the U.S. dollar, has caused Canada’s exports to be more expensive in the U.S. market.

About 85 percent of all Canadian exports are headed to the U.S. and a more expensive loonie threatens to harm the Canadian export market.

Grubel wrote that Canada “has a bad case of the dreaded Dutch disease, which is named after the problems that developed in the 1960s when the Netherlands sold natural gas that had been discovered on its coast.”


The resulting increase in Dutch exports caused a strong appreciation of exchange rates which in turn caused the loss of Dutch manufacturers’ ability to compete abroad with their imports.

Grubel noted in Europe the problem was solved when the euro eliminated national currencies, forcing all countries to operate under interest rates set by the European Central Bank.

“The analogous creation of the amero is not possible without the unlikely co-operation of the United States,” said Grubel, an economics professor emeritus at Simon Fraser University in British Columbia.

Instead, Grubel called upon Canada to create a new Canadian dollar to replace the loonie. The new currency could be valued at par with the U.S. dollar, with the possibility that the Bank of Canada might peg the new Canadian dollar to $0.90 on the U.S. dollar.

“The public would readily use the new Canadian and the U.S. dollars interchangeably and enjoy savings in the conversion of one currency into the other,” he wrote. “The present exchange risk premium on Canadian interest rates would be eliminated completely.”

WND has previously reported Stephen Jarislowski, a billionaire money manager and investor, called on the Canadian House of Commons’ finance committee in November to create a peg on the U.S. dollar that would allow the Bank of Canada to adjust the Canadian dollar in a 5 percent plus or minus range, based on the fluctuation in value of the U.S. dollar.

Jarislowski further argued Canada and the United States both should abandon their national dollar currencies and move to a regional North American currency as soon as possible.

Grubel and Jarislowski’s arguments belie an article published in the Boston Globe Nov. 25 arguing the call for the amero to become the new North American regional currency was “purely theoretical.”

The loonie became slang for the Canadian dollar when the common loon appeared on the back of the dollar coin that replaced the bill in 1987.

 


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