It Hurts

As a Canadian exporter, the strong Canadian dollar hurts me. A strong Canadian dollar also hurts Canadians:

-- fewer tourists, because things cost more here, especially when the sales tax is added, which varies from 6% to 18%, depending on which province you are visiting.
-- less income for exporters, who then have to lay off employees, and add less cash flow to the Canadian economy.

There are some benefits, but they don't outweigh the drawbacks:
-- it's cheaper for Canadians to shop in the USA, either by crossing the border (some 90% of us live within 100km of the US border) or through eBay. But then you have to endure the hours-long waits at border crossing -- or pay shipping costs.
-- some prices have come down in Canada, like electronics. (BestBuy was offering $499 notebook computers last month.) But most businesses take advantage of the exchange rate by keeping prices artificially high, notable the nearly-monopolistic Chapters bookstore chain (Canadian equivalent to Borders).

This morning, the dollar crossed the line:

US dollar - Cash 0.9985

If you were to exchange a US$100 bill in Canada today, you would receive CDN$99.85 from the bank.

With the US expected to continue lowering interest rates and the spot price of oil increasing, the Canadian dollar is expected to get stronger yet. It's not the strength that's the bad news for exporters like me, but the speed at which it occurred. In August 1998, the Canadian dollar bottomed out at 0.6309, meaning that the US$100 bill was worth CDN$156.50. For me, the change represents a 38% wage cut over the last nine years.

Thus, it was painful to hear on the news this morning a self-described financial expert saying, yes the dollar will get stronger, but it won't cause any more pain. The very next news item is of a local tourist attraction noting that visits by Americans was down 50% this year. As word gets out that Canada is too expensive, next summer's visits will be fewer yet.

I'd sooner make 40% more income than pay $200 less for a notebook computer.

Comments

[Paul Marsh]

Is it a strong Canadian dollar or a weak US dollar? I suspect it is the later as our position relative to EU, GB and other European economies is not that different over the same time period. The weak dollar is a result of the US policy of favouring an oil consumption economy and various other bad economic policies, (like a war they can't really afford let alone win.)

Your problem is a very Canadian problem. If your contract stipulated that you were paid in Canadian dollars, then nothing has changed. When you get paid in US dollars, the extra 40% is gained by playing the money markets and is a false gain. You did nothing to deserve the extra money and only gained by exchanging a paycheck into Canadian currency while it was in your favour to do so.

As long as your income is dependent on American buyers, you are dependent on US economic policy. Read the tea leaves and start marketing to new markets and wean yourself off a US market dependency. Like farmers and other resource industries all over Canada in the 80s, it is time to embrace market diversity to reduce your exposure to a single market venue.

I know the advice is more easily given than followed.

[Mike]

The story could be the same if you change Canada to US and US to Mexico. Welocome to our world for the last 10 years.

[David Koch]

While this is small comfort for you, while I was vacationing at the New Jersey shore last month, there was a big write up in one of the local papers noting how thrilled the shore communities were to have a large influx of Canadians arrive this year.

Many had vacationed at the New Jersey shore when they were children some years back when the Canadian dollar was similarly strong relative to the US dollar, but found the cost prohibitive when the US dollar strengthened. Now they are bringing their children. Local merchants and motel operators were anticipating even more Canadians next year. Only time and exchange rates will tell.

[Sergey S.]

Here in Russia it really hurts too. And much worse than in Canada. I'm an outsource software developer for 10 years working mostly for American CAD companies. Currently we have the same ruble/USD exchange rate as we had in 1999. But our local ruble prices grow by 10-12% per year. During last 6 years the cost of living (in USD) here increased by the factor of 2.5.
Unfortunately CAD software development greatly depends on US market.

[Kevin Quigley]

Pity the USA software companies take the opportunity to make even more money out of non USA markets. I get $2 to £1 now, yet the software for MCAD here is always priced pound for dollar, so SolidWorks here starts at £3995 plus £995 subs, making the purchase and subs package for the basic version the equivalent of $8000.....how many in the USA would stand for those prices.....and Autodesk, PTC etc are all the same if not worse.

[Tim Zinkgraf]

After going to Canada for a quick vacation and paying significantly higher hotel bills literally across a bridge, I come back home to a email from my Canadian Domain Hosting firm increasing their rates by 50-60% mainly citing the exchange rate. Unfortunately, its going to be awhile before I head back over the border & my hosting firm will be changing to someone south of the border after being with them for eight years.

[Tony]

Well, not everything is more in Canada. Check out the prices for a book I'm thinking about buying:
Amazon Canada
Amazon US

I might be buying from Canada.
BTW, some places are trying to sell for above list!