Welcome to the second, less frequently-posted decade of RevMod.

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Friday, September 21, 2007

Welcome, Canadian Tourists! We accept Canadian Dollars at par!

There's been a lot of ink wasted talking about this, so let me hop in with a little of my own. One question that arose from the story isn't being answered very well.

How did this happen?

The basic answer in the media to the first has been that the US dollar has collapsed. That answer, while true, is not the whole story by any stretch. On the last solstice, March 21, as well as buying 86.37 US pennies, a single Canadian Dollar bought 22.48 Russian roubles, 101.77 Japanese Yen, 64.92 Eurocents, 1.05 Swiss Francs, and 57.74 Icelandic kronas. Against every one of these currencies today, the Canadian dollar buys more: 25.03 Roubles, 115.50 Yen, 70.98 Eurocents, 1.17 Francs, 62.46 Kronas. For the record, that's increases of 11.34%, 13.49%, 9.33%, 11.43%, and 8.17%, in the same time as we've gained 15.78% on the US dollar. Pick a currency, and you'll find this same approximately 10% gain in a loonie's buying power in the last six months.

I personally think this has more to do with the fact that we've spent the last few years discovering that no matter how much turmoil our government is in, no matter how many minorities we elect, no matter what stripes our provincial and federal governments are, things are going to be generally managed competently. We're not going to play out any extreme weird theories either of central planning or of extreme laissez faire barbarism. We're predictable, and money markets love predictable. It hasn't hurt that the United States has put themselves deeply into hock to the Chinese in order to "fight them over there" ("over there" being anywhere bin Laden isn't, apparently), but that hasn't been the driving force of our own gains.

Peace. Order. Good government. Money markets love that stuff!

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