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The Invasion Of The Loonie

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The Tampa Tribune

Published: November 3, 2007

After the U.S. dollar this week broke a 50-year low against the Canadian dollar, researchers had to dig deep into history books to find a lower exchange rate.

The last time the dollar was worth less, CBS News discovered, was in 1864, when "the Confederate Army approached Washington during the U.S. Civil War and the Union government temporarily shut down gold trading."

Today the falling value of the dollar is caused not by an invading enemy but by too many dollars. A newspaper from India, Business Standard, explains: "Whether it is metals, agricultural commodities, oil, or a variety of assets ranging from real estate to gold and stocks, the global story is of price inflation in dollar terms - indeed, the global liquidity surge is another way of saying that far too many dollars have been printed in recent years, to pay for American imports."

The good news is that the imbalance is self-correcting as lower relative prices make U.S. exports a bargain.

No one is attacking Washington, but Canadians are invading eBay. One Internet shopper in Canada shared her reasons for buying her clothes in the states via online auction: One loonie spends as if it were $1.05 in U.S. currency. Last year it was worth 89 cents, and five years ago, only 64 cents. Today's high value, the Canadian said, "is pretty cool."

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