Gold

So yesterday I went to convert American Dollars into Monopoly Money – sorry I mean Canadian Dollars.  For the first time ever in my life I lost money on the conversion.  WHAT IS GOING ON!  The Canadian Dollar, also known as the Petrodollar, due to increasing oil prices has gotten stronger, while the American Dollar due to the increase has gotten weaker.  This is due to the fact that Oil is denominated in US Dollars.  Because the majority of countries rely on oil imports, they are forced to purchase large sums of US Dollars.  Basic economics teaches us that high demand results in high prices.  Since Oil is denominated in US Dollars, causing demand to be so great, many still purchase US Dollars regardless of contingent economic situations.  Consequently, US interests rates on bonds are able to be lower than average, allowing the US government to run higher deficit spending.  Due to the fact that recent Oil prices have increased, the US Dollar has severely depreciated, compared to Canada (one of the greatest exporters of Oil), whose Dollar has seen drastic appreciation.

What does this all mean?  If Canada allows their Dollar to get any stronger, this could be troublesome to their economy.  Although the stronger Canadian Dollar gives them a better conversion to other currencies, with that comes massive imports.  When a currency becomes stronger to another country it is less expensive for that country to import than to locally produce and export.  If Canada allows the Dollar to become any stronger than par with the American Dollar, the economy will take a massive blow as Canada becomes a nation of imports not exports.  The Canadian Bank must do what is in the best interests of its citizens and its economy.  Yeah, Canadians can go on holiday or shop for cheaper in the United States, however, if they lose their job they’ll have no money to spend!