All Your Exchange Rate Are Belong To Us, Eh?

pO157.

Posted to Business on Sun Jun 17, 2007 at 08:39:13 AM EST (promoted by 1fastdog). RSS.

Canada, once "America's Attic" and the place to go for ridiculously cheap merchandise due to the once favorable exchange rate is now poised to take the upper hand on its southern neighbor.

Americans have always relied on cheap goods and services in Canada, such as strip clubs, movies, tourism, local wineries, duty-free shopping and furniture. Unfortunately, the falling exchange rate (which peaked at 1 USD: 1.62 CAN in Jan of 2002), coupled with the fears of passport requirements at the border have lead to what Chris Landsdale, general manager of the Mints Lounge (which sees 80% of its business from American customers) , describes as "It's a list as long as my arm, and they've [reasons not to travel] been accumulating since 9/11."

While the dollar is supposedly rallying, analysts say it is very possible that the tide could turn and the US could soon find itself on the wrong side of the exchange rate within 12 months, something that has not happened since 1976.

An interesting note, however, has been that while American traffic into Canada to purchase items has plummeted, more and more northerners are going south of the border to buy their everyday items, use the airports or take a vacation as the exchange rate goes in their favor: "We like Tops -- Tops and Target," said Loretta Del Duca, a Mississauga, Ont., resident who stopped by the outlet mall last week with her husband, Peter. "Plus, for us, it's just a nice break away. You come, and you browse, and you buy things you don't need."

Besides small luxury purchases, the exchange rate has had a negative impact on American industries which buy precursors from Canada. Rich Products buys raw materials such as flour and palm kernel oil as well as finished baked goods from Canadian sources, but the stronger Canadian dollar makes those products more expensive, and while Rich and other companies can try to negotiate a better exchange rate in their contracts, it increases the cost of doing business which gets passed on to consumers worldwide.

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Tags: written by pO157, edited by 1fastdog, Mints Lounge, Chris Landsdale, Rich Products, Canada, United States, Border security, Homeland security, law, passport, travel, vacation, tax, commerce, exchange, currency, strip club (all tags)

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1	irony of ironies wetkarma. Sun Jun 17, 2007 at 09:33:42 AM EST 4.00 (interesting)

Back at the end of 2005, my brother jbou and I had a conversation which touched on the declining value of the US dollar. Its a subject which has often been discussed on Plastic over the years. The best writeup on the problem as I recall was this one by Goatman.

Any rally in the dollar at this point is entirely attributable to currency fluctuations (dead cat bounces) since the underlying fundamentals have only created conditions for a further decline. Best thing to do? Move your assets out of America, abandon ship.

Course the fact that you see "man on the street" complaints like this writeup quotes probably means that its already too late.

Memory is a strange bell, jubilee and knell.

2 1	Re: irony of ironies pO157. Sun Jun 17, 2007 at 11:10:28 PM EST none

Is this serious? If so, how come you don't see much discussion even in the more savy trading advice type forums? Also, as I am genuinely curious, could anything stop this supposed impending doom from happening?

For some reason this just seems too similar to the old "ZOMGWTFBBQ buy GOLD BRICKS! AND SILVER! Call 1-900-OVERPRICED-CRAP" infomercials that run at like 3am.

I'm just saying.

4 2	Re: irony of ironies wetkarma. Mon Jun 18, 2007 at 04:34:11 AM EST none

Serious. Hmm depends on what you mean.

Speaking for myself -- my family and I have moved in large part because we don't see a good economic future for America.

Speaking for others -- all the major 'first world' central banks are reducing their dollar exposure in favor of the euro.

Currency Traders are piling into the chinese rembini while the dollar peg is still in place.

Finally and perhaps most persuasively to a layman -- Warren Buffet, one of the richest and most successful investors in the world has bet over $20b against the dollar by placing liquid assets in a basket of other countries. You can read articles from Forbes where he has been warning about the shit to come down for years. If you like read his 2004 shareholder address on american becoming a 'sharecropper society' - it lays it all out in stark terms.

The decline in [the dollar's] value has already been substantial, but is nevertheless likely to continue. Without policy changes, currency markets could even become disorderly and generate spillover effects, both political and financial. No one knows whether these problems will materialize. But such a scenario is a far-from-remote possibility that policymakers should be considering now."

p.s. if you had bought gold bricks (or any commodites in the past few years) you would have made a return far greater than the market has performed.

Memory is a strange bell, jubilee and knell.

7 4	I don't think we're doomed just yet. pO157. Mon Jun 18, 2007 at 12:47:11 PM EST none

The national debt is a major issue that needs to be critically considered and should have gotten much more attention in recent election cycles. I don't buy the whole "If you have a small loan the bank owns you, but if you have a ton of debt outstanding you own the bank" theorem people bandy about.

However, as you broached that list of 4 points from that plastic sub, theoretically if the government got it together and a new executive decided a fiscal conservative policy was the way to go that would eliminate points #1 and #2 on the list. Sure, it would require years of austerity and a spending diet the likes of which the government had not yet seen, but it should be doable. Perhaps a constitutional amendment banning deficit spending barring a declared war would be in order?

6 2	Re: irony of ironies thefadd. Mon Jun 18, 2007 at 12:41:33 PM EST none

Notice, for one, the preponderance of "sell us your gold for cash" late night infomercials now on.

make it rain you nappy headed ho's

3	Re: All Your Exchange Rate Are Belong To Us, Eh? huxrules. Mon Jun 18, 2007 at 03:57:11 AM EST 4.00 (interesting)

I just don't buy it. While I'm sure wholesale prices for things must fluctuate with the power of the dollar it doesn't seem to matter at the retail level. I would like to start a new method for determining the power of currency- its called the PS3 Index. Basically it compares the magnitude of the cost of a 60gig PS3 in different countries. So far:

US $599
Canada 699 Canadian
Europe 599 euro

So really- what does it matter. This kind of comparison also works for cars, houses, and other electronics. In any comparison of the ground level day to day type stuff the dollar is by far the most powerful currency. My favorite comparison is between the cost of a Jeep Liberty in the Uk and in the US - effectively the magnitude of the cost of the vehicle is the same. But the pound is twice as strong as the dollar - WTF?

5 3	Re: All Your Exchange Rate Are Belong To Us, Eh? thefadd. Mon Jun 18, 2007 at 12:39:41 PM EST none

I generally agree with your take. However, if a European happened to be in America on vacation and have some extra US dollars, he/she could save themself $150 euro by buying the PS3 here in US currency.

make it rain you nappy headed ho's

This story: 7 comments (5 from subqueue)

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All Your Exchange Rate Are Belong To Us, Eh?

pO157.

Posted to Business on Sun Jun 17, 2007 at 08:39:13 AM EST (promoted by 1fastdog). RSS.

irony of ironies

wetkarma.

Sun Jun 17, 2007 at 09:33:42 AM EST

4.00 (interesting)

1

Re: irony of ironies

pO157.

Sun Jun 17, 2007 at 11:10:28 PM EST

none

2

Re: irony of ironies

wetkarma.

Mon Jun 18, 2007 at 04:34:11 AM EST

none

4

I don't think we're doomed just yet.

pO157.

Mon Jun 18, 2007 at 12:47:11 PM EST

none

2

Re: irony of ironies

thefadd.

Mon Jun 18, 2007 at 12:41:33 PM EST

none

Re: All Your Exchange Rate Are Belong To Us, Eh?

huxrules.

Mon Jun 18, 2007 at 03:57:11 AM EST

4.00 (interesting)

3

Re: All Your Exchange Rate Are Belong To Us, Eh?

thefadd.

Mon Jun 18, 2007 at 12:39:41 PM EST

none