From: jmorriso@ee.ubc.ca (John Paul Morrison)
Subject: Re: The economic effects of the "referendum"
Organization: University of BC, Electrical Engineering
Distribution: can
Date: Mon, 28 Sep 1992 19:29:07 GMT

In article <Bv7BGq.5A9@watserv1.uwaterloo.ca> dbowman@shade (Don A. Bowman) writes:
>
>A low dollar == rising inflation. An unstable dollar == economic uncertainty,
>lack of long-term investment.
>

While I agree 0% inflation should be the mandatory objective of the Bank of
Canada, a low dollar at *this* point in the economy will do little to fuel
inflation.  Consumer prices over the past 3 months are up 2.2%, wholesale
down 2.4%, and wages up 2.0% (3 month average, annual rate, Economist,
Sept 19th-25th)

I think that with wage demands lowering, and unemployment at 11.6%, there
won't be as much inflationary pressure. And any currency scares are 
probably short term. Canada's economic and political difficulties
have to be taken in context with a lot of problems facing every G7
economy, and others too. Three years ago, 89 cents to 80 cents would have
caused massive inflation. Today, an 80-82 cent dollar has much different
inflation results, since demand is too weak.

>: 
>: A low dollar is a good dollar for exporting. It's an economic fact. And God
>: knows our exporters could use every possible advantage in this recession. I
>: read recently that if the dollar were to remain at its present level for two
>: years, the forestry industry alone would benefit to the tune of three
>: hundred million dollars and thirty thousand jobs. 
>
>A low dollar is also good for inflation. Inflation flourishes with it. I'm
>sure we all like inflation. I'm really disappointed with such a low inflation
>rate. Please Mr. Crow, bring inflation up to the 3rd world level.

True. By typical export only reasoning, if an 80 cent dollar is ok, why not
a 40 cent dollar? You'd double exports! On paper, you'd have twice the
profits, but those profits wouldn't buy anything. You'd also be giving
away Canadian resources twice as fast, and not even getting a fair
price for them.

I have a conspiracy theory for the anti NAFTA types: a low Canadian dollar
is part of a bargain with the US and Mexico. Canadians would be fooled
by surging exports, when actually their resources were being sold at 
fire-sale prices, to feed evil US expansion. a 90 cent dollar trimmed
to a 45 cent dollar would cause massive exports of cheap oil, gas, water,
wood, paper, electricity etc. Existing Canadian dollar export contracts
worth millions, would become trivial to pay back in US$. Canadians would
be distracted by non-existent unemployment, as workers struggled to
meet export demand!


I smell a Mel Hurtig book in the works!

>
>--
>Don Bowman                (519) 744-6154     dbowman@zeus.uwaterloo.ca


-- 
__________________________________________________________________________
 John Paul Morrison                     |  Just another "Enemy of Canada"
 University of British Columbia, Canada |  Say NO/NON to Constitutional
 Electrical Engineering                 |  hegemony and fear-mongering
 jmorriso@ee.ubc.ca                     |  by politicians/scum.
________________________________________|_________________________________