Goodbye loonie, hello 'amero?'Last Updated: Tuesday, October 5,
1999 | 9:48 AM ETCBC News
A common North American currency would bring about lower
long-term interest rates, greater price stability and improved
trade, says a new report from the Fraser Institute.
The study calls for a North American Monetary Union that
includes Canada, the United States, and Mexico. It proposes a
common currency, called the "amero," which would have its own
distinctive emblem on one side and national symbols on the other.
The study's author, Herbert Grubel argues that flexible exchange
rates have not brought Canada the benefits promised by its
advocates. Instead, he says, they have reduced labour market
flexibility and delayed Canada's adjustment to declining world
prices for natural resources. "This system has contributed to
Canada's high and excessive reliance on the production of natural
resources," says Grubel, a senior fellow at the institute. "A
monetary union will ensure that we move to the high-tech and other
profitable and expanding industries at a more optimal pace, and
Canadians' productivity and living standards will increase
correspondingly."Continue Article
The study says Canada's cultural sovereignty and political
independence would not be affected by monetary union, arguing that
monetary union would not inhibit Canada's ability to pursue its own
tax, spending, social, regulatory and foreign policies.
Consider a continental currency, Jarislowsky saysRenowned money
manager says Canada should peg loonie to greenback or adopt a
common dollarSTEVEN CHASE November 23, 2007 OTTAWA -- Canada should
replace its dollar with a North American currency, or peg it to the
U.S. greenback, to avoid the exchange rate shifts the loonie has
experienced, renowned money manager Stephen Jarislowsky told a
parliamentary committee yesterday. "In a country like Canada we
cannot permit ourselves to have a dollar that goes through these
kind of gyrations," Mr. Jarislowsky told MPs on the Commons finance
committee. " I think we have to really seriously start thinking of
the model of a continental currency just like Europe." MPs on the
finance committee are probing the consequences of the strengthened
loonie - which has risen more than 20 per cent against the U.S.
greenback this year. Mr. Jarislowsky, a former Canfor Corp.
director, said the loonie's rise to above par with the U.S. dollar
is destroying manufacturing and could devastate the forest
sector.
"We don't have a single mill in Canada which isn't losing cash
at the current exchange rate despite the fact we invested hundreds
of millions in dollars into new equipment when we had the money,"
said Mr. Jarislowsky, chairman of Montreal investment firm
Jarislowsky Fraser Ltd. "I believe that if we stay at the present
levels the entire forest products industry practically is going to
be in liquidation-bankruptcy and there's going to be an enormous
loss of employment." He scorned suggestions that now is a great
time to invest in new equipment because the stronger loonie can buy
more. "Very often we are being told that this is a wonderful time
to invest but if you are going to go bankrupt anyhow, and if the
dollar keeps shooting further up, I would say it would be throwing
good money after bad," he said. You may as well go bankrupt and try
to save as much of your money by pulling it out of there before you
go bankrupt rather than putting additional capital into the
company."
Mr. Jarislowsky said Canada could either aim for a common North
American currency or peg the loonie to the U.S. greenback at about
80 cents (U.S.), allowing it to float within a small band. "There
could be a 5 per cent margin on either side and this would make
sense for the Canadian dollar which in my opinion should be worth
about 80 cents [U.S.] so it should go up 5 per cent or down 5 per
cent from that benchmark." Mr. Jarislowsky noted that other
countries such as China peg their currency. However the federal
Finance Department is cool to such ideas. It resolutely opposes the
notion in briefing notes prepared for Finance Minister Jim Flaherty
and obtained by The Globe and Mail under access to information law
earlier this year. Finance officials told Mr. Flaherty that a
common currency would mean an erosion of sovereignty for Canada.
They say it would ultimately mean Canada abandoning an independent
monetary policy and therefore its ability to directly influence
economic conditions within its borders. "A North American common
currency would undoubtedly mean for Canada the adoption of the U.S.
dollar and U.S. monetary policy," Finance officials say in the
briefings. "Canada would have to give up its control of domestic
inflation and interest rates." Finance also believes that
alternatives to a common currency, such as pegging the loonie to
the greenback, are even worse ideas, notes show. Separately,
tourism officials warned MPs that the stronger loonie will only
worsen the outlook for their sector. "In five years, we have seen
the number of inbound customers from the United States drop by an
astounding 34 per cent," Tourism Industry Association of Canada
vice-president Christopher Jones said in a statement prepared for
the financePREMEDITATED MERGER
Billionaire to Canada: Time for amero is nowWants euro-style
currency to avoid exchange problems
Posted: November 27, 2007 1:00 a.m. Eastern
By Jerome R. Corsi 2007 WorldNetDaily.com
Stephen Jarislowsky, a billionaire money manager and investor
the Canadian newspaper Globe and Mail bills as the Canadian Warren
Buffet, has told a parliamentary committee Canada and the United
States both should
abandon their national dollar currencies and move to a regional
North American currency as soon as possible. "I think we have to
really seriously start thinking of the model of a continental
currency just like Europe," Jarislowsky told the Canadian House of
Commons' finance committee, according to the Globe and Mail in
Toronto. Jarislowsky's call for immediate action belied an article
published in the Boston Globe on Sunday that said the call for the
amero to become the new North American regional currency was
"purely theoretical." In an exclusive telephone interview with WND,
Jarislowsky repeated his call for a European Union-style currency
to be created between Canada and the United States. "The idea would
be a European Union-type set-up," Jarislowsky said, "with a North
American Central Bank that would issue the new currency and sit
over the Bank of Canada and the Federal Reserve Bank in the United
States." (Story continues below) "An alternative would be to create
a peg on the U.S. dollar which would allow the Bank of Canada to
adjust the Canadian dollar in a 5 percent plus or minus range,
based on the fluctuation in value of the U.S. dollar," he
explained. Still, Jarislowsky was less confident the U.S. dollar
peg would work. "The Bank of Canada only pinpoints inflation," he
told WND. "My idea would be to have the Bank of Canada manage the
Canadian dollar with a view both to inflation and the U.S. dollar.
The Bank of Canada has never been very receptive to this idea."
Jarislowsky insisted Canada was going to be forced to do something
because the increased value of the Canadian dollar vis--vis the
U.S. dollar was likely to depress business activity in Canada and
cause a recession. "Two-thirds of the Canadian economy is tied to
the U.S. economy," Jarislowsky pointed out. "Some 85 percent of our
exports are headed for the U.S. market. Our economy is tied to the
U.S. dollar, whether we like it or not." In an interview published
with the Globe and Mail, Jarislowsky emphasized the likely adverse
impact on the Canadian economy triggered by the rise in the value
of the Canadian dollar.
"We don't have a single mill in Canada which isn't losing cash
at the current exchange rate despite the fact we invested hundreds
of millions in dollars into new equipment when we had the money,"
Jarislowsky said. "I believe that if we stay at the present levels,
the entire forest products industry practically is going to be in
liquidation-bankruptcy and there's going to be an enormous loss of
employment," he continued. Jarislowsky told the House of Commons
finance committee that a regional North American currency would
reduce the adverse currency exchange risk being experienced in
Canada since the Canadian dollar has risen more than 20 percent
against the U.S. dollar this year. Jarislowsky brushed aside stated
opposition from the Canadian Finance Department, including a
negative recommendation to Finance Minister Jim Flaherty because of
concerns a common North American currency would mean an erosion of
sovereignty for Canada. "I know Finance Minister Flaherty quite
well," Jarislowsky told WND. "Sure, first he will have to deny he
is taking seriously the idea of a new currency, then later he will
come out and say he was forced to create one anyway." Jarislowsky
insisted he made very seriously the suggestion to create a
eurostyle currency for North America. "Pretty soon, the Finance
Ministry will have no choice but to create a new currency,"
Jarislowsky argued, "unless the Canadian dollar all of a sudden
changes course and reverses against the U.S. dollar all on its
own." "In the provinces we are already seeing economic activity
slowdown because of the rise in value of the Canadian dollar," he
insisted. "If our automobile and lumber industries begin to
decline, we will have a serious recession as a result." "The
Finance Ministry knows how closely our economy in Canada is tied to
the U.S. market," he continued. "A common currency would avoid the
problems we are now facing with currency exchange risk added to the
normal risks of doing business." Jarislowsky currently heads the
Canadian investment firm Jarislowsky Fraser Limited, headquartered
in Montreal. According to Canadian Business, Jarislowsky has
amassed a personal fortune of $1.2 billion, ranking him as the 25th
richest person in Canada.
Canadian Business also claims the average private client at
Jarislowsky Fraser typically has more than $10 million in liquid
assets to invest. Forbes put Jarislowsky's net worth at $1.5
billion, ranking him No. 512 in the list of the world's richest
people in 2006. Forbes estimates that Jarislowsky Fraser currently
manages $50 billion for a select list of institutional clients and
high-net-worth individuals. Jarislowsky's 2005 book, "The
Investment Zoo: Taming the Bulls and the Bears," was a business
best-seller in Canada. The Canadian dollar reached parity with the
U.S. dollar at the end of September. Since then, the Canadian
dollar has been trading above the U.S. dollar, at values not seen
since the 1960s. The Canadian dollar closed yesterday at $1.01 to
the U.S. dollar on major currency exchanges. Canada's Finance
Department did not respond to WND requests for a comment.
Comment: Globalization makes national currencies obsolete Benn
Steil, Special to the Financial PostBenn Steil is director of
international economics at the Council of Foreign Relations. This
is an excerpt from an extensive article by Mr. Steil in Foreign
Affairs last June. 2007, Council on Foreign Relations, publisher of
Foreign Affairs. All rights reserved. Distributed by Tribune Media
Services.
Published: Thursday November 08, 2007
Story Tools
Capital flows have become globalization's Achilles heel. Over
the past 25 years, devastating currency crises have hit countries
across Latin
America and Asia, as well as countries just beyond the borders
of Western Europe -- most notably Russia and Turkey. The economics
profession has failed to offer anything resembling a coherent and
compelling response to currency crises. International Monetary Fund
(IMF) analysts have, over the past two decades, endorsed a wide
variety of national exchange-rate and monetary-policy regimes that
have subsequently collapsed in failure. They have fingered numerous
culprits, from loose fiscal policy and poor bank regulation to bad
industrial policy and official corruption. The financial-crisis
literature has yielded policy recommendations so exquisitely hedged
and widely contradicted as to be practically useless.
Anti-globalization economists have turned the problem on its head
by absolving governments (except the one in Washington) and instead
blaming crises on markets and their institutional supporters, such
as the IMF -- "dictatorships of international finance," in the
words of the Nobel laureate Joseph Stiglitz. Is this right? Are
markets failing, and will restoring lost sovereignty to governments
put an end to financial instability? This is a dangerous
misdiagnosis. In fact, capital flows became destabilizing only
after countries began asserting "sovereignty" over money --
detaching it from gold or anything else considered real wealth.
Moreover, even if the march of globalization is not inevitable, the
world economy and the international financial system have evolved
in such a way that there is no longer a viable model for economic
development outside of them. The right course is not to return to a
mythical past of monetary sovereignty, with governments controlling
local interest and exchange rates in blissful ignorance of the rest
of the world. Governments must let go of the fatal notion that
nationhood requires them to make and control the money used in
their territory. National currencies and global markets simply do
not mix; together they make a deadly brew of currency crises and
geopolitical tension, and create ready pretexts for damaging
protectionism. In order to globalize safely, countries should
abandon
monetary nationalism and abolish unwanted currencies, the source
of much of today's instability. The political mythology associating
the creation and control of money with national sovereignty finds
its economic counterpart in the metamorphosis of the famous theory
of "optimum currency areas" (OCA). Fathered in 1961 by Robert
Mundell, a Nobel Prize-winning economist who has long been a
prolific advocate of shrinking the number of national currencies,
it became over the subsequent decades a quasi-scientific foundation
for monetary nationalism. Dr. Mundell, like most macroeconomists of
the early 1960s, had a now largely discredited postwar Keynesian
mindset that put great faith in the ability of policymakers to
fine-tune national demand in the face of what economists call
"shocks" to supply and demand. His seminal article, A Theory of
Optimum Currency Areas, asks the question, "What is the appropriate
domain of the currency area?" Dr. Mundell goes on to argue for
flexible exchange rates between regions of the world, each with its
own multinational currency, rather than between nations. The
economics profession, however, latched on to Dr. Mundell's analysis
of the merits of flexible exchange rates in dealing with economic
shocks affecting different "regions or countries" differently; they
saw it as a rationale for treating existing nations as natural
currency areas. Monetary nationalism thereby acquired a rational
scientific mooring. And from then on, much of the mainstream
economics profession came to see deviations from "one nation, one
currency" as misguided, at least in the absence of prior political
integration. Why has the problem of serial currency crises become
so severe in recent decades? It is only since 1971, when U.S.
president Richard Nixon formally untethered the U.S. dollar from
gold, that monies flowing around the globe have ceased to be claims
on anything real. All the world's currencies are now pure
manifestations of sovereignty conjured by governments. And the vast
majority of such monies are unwanted: People are unwilling to hold
them as wealth, something that will buy in the future at least what
it did in the past. Governments can
force their citizens to hold national money by requiring its use
in transactions with the state, but foreigners, who are not thus
compelled, will choose not to do so. And in a world in which people
will only willingly hold U.S. dollars (and a handful of other
currencies) in lieu of gold money, the mythology tying money to
sovereignty is a costly and sometimes dangerous one. Monetary
nationalism is simply incompatible with globalization. For a large,
diversified economy like that of the United States, fluctuating
exchange rates are the economic equivalent of a minor toothache.
They require fillings from time to time -- in the form of corporate
financial hedging and active global supply management -but never
any major surgery. There are two reasons for this. First, much of
what Americans buy from abroad can, when import prices rise,
quickly and cheaply be replaced by domestic production, and much of
what they sell abroad can, when export prices fall, be diverted to
the domestic market. Second, foreigners are happy to hold U.S.
dollars as wealth. But the U.S. dollar's privileged status as
today's global money is not heaven-bestowed. The dollar is
ultimately just another money supported only by faith that others
will willingly accept it in the future in return for the same sort
of valuable things it bought in the past. This puts a great burden
on the institutions of the U.S. government to validate that faith.
And those institutions, unfortunately, are failing to shoulder that
burden. Reckless U.S. fiscal policy is undermining the dollar's
position, even as the currency's role as a global money is
expanding. The U.S. current account deficit is running at an
enormous 6.6% of GDP -- about US$2-billion a day must be imported
to sustain it. The current account deficit is partially fuelled by
the budget deficit, which will soar in the next decade in the
absence of reforms to curtail federal "entitlement" spending on
medical care and retirement benefits for a longer-living
population. In the absence of long-term fiscal prudence,
the United States risks undermining the faith foreigners have
placed in its management of the dollar -- that is, their belief
that the U.S. government can continue to sustain low inflation
without having to resort to growth-crushing interest-rate hikes as
a means of ensuring continued high capital inflows. It is widely
assumed that the natural alternative to the dollar as a global
currency is the euro. Faith in the euro's endurance, however, is
still fragile-- undermined by the same fiscal concerns that afflict
the dollar, but with the added angst stemming from concerns about
the temptations faced by Italy and others to return to monetary
nationalism. But there is another alternative, the world's most
enduring form of money: gold. It must be stressed that a
well-managed fiat money system has considerable advantages over a
commodity-based one, not least of which that it does not waste
valuable resources. There is little to commend in digging up gold
in South Africa just to bury it again in Fort Knox. The question is
how long such a well-managed fiat system can endure in the United
States. The historical record of national monies, going back over
2,500 years, is by and large awful. At the turn of the 20th century
-- the height of the gold standard -German philosopher Georg Simmel
commented: "Although money with no intrinsic value would be the
best means of exchange in an ideal social order, until that point
is reached the most satisfactory form of money may be that which is
bound to a material substance." Today, with money no longer bound
to any material substance, it is worth asking whether the world
even approximates the "ideal social order" that could sustain a
fiat dollar as the foundation of the global financial system. There
is no way effectively to insure against the unwinding of global
imbalances should China, with more than a trillion dollars of
reserves, and other countries with dollar-rich central banks come
to fear the unbearable lightness of their holdings. So what about
gold? A revived gold standard is out of the question. In the 19th
century, governments spent less than 10% of national income in
a given year. Today, they routinely spend half or more, and so
they would never subordinate spending to the stringent requirements
of sustaining a commodity-based monetary system. But private gold
banks already exist, allowing account holders to make international
payments in the form of shares in actual gold bars. Although
clearly a niche business at present, gold banking has grown
dramatically in recent years, in tandem with the U.S. dollar's
decline. A new gold-based international monetary system surely
sounds far-fetched. But so, in 1900, did a monetary system without
gold. Modern technology makes a revival of gold money, through
private gold banks, possible even without government support.
Virtually every major argument recently levelled against
globalization has been levelled against markets generally (and, in
turn, debunked) for hundreds of years. But the argument against
capital flows in a world with 150 fluctuating national fiat monies
is fundamentally different. It is highly compelling -- so much so
that even globalization's staunchest supporters treat capital flows
as an exception, a matter to be intellectually quarantined until
effective crisis inoculations can be developed. But the notion that
capital flows are inherently destabilizing is logically and
historically false. The lessons of goldbased globalization in the
19th century simply must be relearned. Just as the prodigious daily
capital flows between New York and California, two of the world's
12 largest economies, are so uneventful that no one even notices
them, capital flows between countries sharing a single currency,
such as the dollar or the euro, attract not the slightest attention
from even the most passionate anti-globalization activists. The
world can do better. Since economic development outside the process
of globalization is no longer possible, countries should abandon
monetary nationalism. Governments should replace national
currencies with the dollar or the euro or, in the case of Asia,
collaborate to produce a new multinational currency over a
comparably large and economically diversified area. Europeans used
to say that being a country required having a national airline, a
stock exchange and a currency. Today, no European country is
any worse off without them. A future pan-Asian currency, managed
according to the same principle of targeting low and stable
inflation, would represent the most promising way for China to
fully liberalize its financial and capital markets without fear of
damaging yuan speculation. Most of the world's smaller and poorer
countries would clearly be best off unilaterally adopting the
dollar or the euro, which would enable their safe and rapid
integration into global financial markets. As for the United
States, it needs to perpetuate the sound money policies of former
Federal Reserve chairmen Paul Volcker and Alan Greenspan and return
to long-term fiscal discipline. This is the only sure way to keep
the United States' foreign creditors, with their massive and
growing holdings of dollar debt, feeling wealthy and secure. It is
the market that made the dollar into global money --and what the
market giveth, the market can taketh away. If the tailors balk and
the dollar fails, the market may privatize money on its own. --- -
Benn Steil is director of international economics at the Council of
Foreign Relations. This is an excerpt from an extensive article by
Mr. Steil in Foreign Affairs last June. 2007, Council on Foreign
Relations, publisher of Foreign Affairs. All rights reserved.
Distributed by Tribune Media Services.
No easy fix for loonie Linking it to the greenback isn't
politically acceptable Patrick Leblond, Financial Post Published:
Tuesday, January 22, 2008 Reuters File PhotoA currency board with a
fixed loonie would delegate Canada's monetary policy to the U.S.
Federal Reserve. In the wake of the loonie's rise above parity
against the U.S. dollar, there has been a revival of the debate
around the idea of a common currency between Canada and the United
States. In one corner stand people like David Laidler who argue
that it is a bad idea; the loonie should continue to float against
the greenback. In the other corner, we have the likes of Herbert
Grubel, Thomas
Courchene and Pierre Fortin who clamour for some form of
monetary integration between Canada and the United States.
Interestingly, this is the same debate with the same protagonists
that took place a few years back when the loonie was at US65. For
the no side (i.e. against monetary integration), the exchange rate
must continue to fluctuate in order to deal with the Canadian
economy's dependence on commodities, which is not the case in the
United States. For the yes side, the Canadian dollar is either too
low and it hurts productivity (since Canadian companies do not
import more efficient machinery and equipment) or it is too high
and it hurts firms' international competitiveness. In any case, the
loonie's exchange rate with the greenback is volatile and this is
bad for the economy. The truth about this debate is that both sides
make some valid economic arguments. This explains why the debate
has not really progressed in the last 10 years. The real debate,
however, should be about the shape that monetary integration with
the United States should take. But even in this case, as we shall
see, there is no real debate to be had because of the politics
involved. In his article in last Friday's National Post, Herbert
Grubel offered one yes-side solution to the loonie's exchange rate
volatility: a currency board and a new Canadian dollar. The
currency board would fix the exchange rate between the loonie and
the greenback, while the "new" Canadian dollar would be set at
parity with the U.S. dollar (instead of a US90 fixed exchange
rate). In such a system, each new loonie issued by the Bank of
Canada would require one U.S. dollar in its vaults. As a result,
Grubel argues, the two dollars should be used interchangeably by
the public (thereby making the greenback legal tender in Canada),
potentially leading to the complete (U.S.) dollarization of the
Canadian economy. Such a monetary arrangement would no doubt be
acceptable to our American neighbour, since there is no political
and public support for the creation of a new North American
currency (e.g., an amero) south of the border. In fact, it is
probably the only monetary integration arrangement acceptable to
the United States other than Canada adopting the greenback
outright. From a Canadian perspective, the proposed currency board
would have the political advantage of keeping the loonie, which
Canadians appreciate, especially when it is close to parity. The
few opinion polls conducted on the issue between 1992 and 2002 show
clearly that there is an inverse relationship between Canadians'
support for monetary union with the United States and the value of
the Canadian dollar. According to the same polls, however, few
Canadians are willing to abandon the loonie in favour of the
greenback, at any level of the exchange rate. A currency board with
the loonie fixed to the greenback implies a delegation of Canada's
monetary policy to the U.S. Federal Reserve. The issue here is
whether the Fed would do a better job than the Bank of Canada at
running our monetary policy. One can doubt it by looking at the
mess it created with, first, the IT bubble at the end of the 1990s
and, now, the subprime mortgage crisis. In any case, U.S. monetary
policy has and will always be geared towards U.S. political and
economic realities, not Canadian ones.
Another aspect not discussed by the yes side is the rate at
which the loonie would be fixed to the greenback. Grubel talks
about fixing the exchange rate at US90, which he says is the
current equilibrium rate as calculated by the Bank of Canada. The
problem here is that back in 2001-02, the equilibrium rate was
around US75 and this was the rate at which it was argued the
exchange rate with the U.S. dollar should be fixed. Had Canada
opted for monetary integration back then, as Grubel and co. argued
for, we would currently have an undervalued currency. Obviously,
this would fuel inflation in Canada. Unfortunately, there is
nothing that we could do, since monetary policy would be run by the
Fed, which would now be reducing interest rates to deal with the
subprime mess, rather than increasing them as Canada's overheating
economy would require. For sure, the current minority Conservative
government would look to abandon the currency board in order to
stay in power, assuming that Canadians are not very fond of
inflation. Grubel mentions that a currency board would be as
credible as European monetary union. He forgets to mention,
however, that Argentina had such a currency board in the 1990s. And
it did not prevent the country from experiencing one of its worst
financial crises ever between 1999 and 2002. Eventually, political
pressures forced the Argentine government to abandon the currency
board and let the peso float against the U.S. dollar. Only complete
monetary union can nowadays achieve a sufficient level of
credibility with financial markets. The problem is that only the
dollarization of the Canadian economy is acceptable to Americans,
whereas only the creation of a new common North American currency
(a la euro) with a supranational central bank with powers shared
equally between Canada and the United States (a la European Central
Bank) would be acceptable to Canadians. In sum, the status quo is
the only politically acceptable solution for Canada, even if it may
not be the best economic solution (in fact, it is second best).
Until this reality changes, the debate concerning the loonie and
monetary integration with the United States will continue to be
sterile. Let's rather focus our energies on finding ways to make
trade easier within Canada, as well as with the United States. ---
- Patrick Leblond is Assistant Professor of International Business
at HEC Montreal
Fix the loonie Cure Canada's Dutch disease by setting the dollar
at par
Herbert Grubel, Financial Post Published: Friday, January 18,
2008
David Laidler's recent defence of Canada's flexible exchange
rate system misses completely the point made by Nobel Prize winning
economist Robert Mundell in his famous article on optimum currency
areas. Mundell's article has been widely credited with providing
the intellectual base for the European Monetary Union and merits
attention. Mundell's point is simple and straightforward. If
flexible exchange rates are best for Canada on the grounds
presented by Laidler, why would flexible rates not be best also for
Alberta, Ontario or New Brunswick? Like Canada, these jurisdictions
encounter economic shocks the impact of which would be minimized by
the exchange rate buffer. Milton Friedman's response to Mundell was
that he would not advocate flexible rates for every possible
region. He told me once that he did not think that Panama would
benefit from flexible rates and that its hard currency fix, the use
of U.S. dollars, served the country best. Clearly, the standard
Friedman-Laidler analysis misses essential ingredients needed to
decide the case for Panama and, I would insist, Canada. The
following analysis considers the costly burden suffered by Canadian
manufacturing through the strong appreciation of the dollar during
the recent boom in commodity exports, the short-comings of all
suggested remedies, and the permanent cure to the problem by the
adoption of a hard currency fix. As Laidler notes, Canada has a bad
case of the dreaded Dutch disease, which is named after the
problems that developed in the 1960s when the Netherlands sold
natural gas that had been discovered on its coast. The increases in
Dutch exports of resources, like those of Canada in recent years,
resulted in a strong appreciation of exchange rates, which was
reinforced by interest rate policies of central banks and currency
speculators. The disease manifests itself through the loss of
domestic manufacturers' ability to compete abroad and with imports.
In both countries many workers in these manufacturing firms lost
their jobs. Some became unemployed but many undertook the desirable
move into the booming export and steadily growing service sectors.
Less desirable was the move of some of the unemployed into
public-sector employment, which was facilitated by fiscal surpluses
due to the economic boom. During the year ending October 2007,
Canadian public sector employment rose by 4.9% while private sector
employment rose only .9% This increase in public-sector employment
reduces the growth in productivity because of the perverse
incentives facing civil servants: punishment if innovations fail,
no rewards if they succeed. Moreover, productivity growth in the
private sector is slowed by the proclivity of civil servants to
design and administer onerous private-sector regulations.
There are no simple remedies for Canada's Dutch disease.
Subsidies for manufacturers are complex to administer, inefficient
and likely to become permanent. The government can use fiscal
surpluses to retire public debt, a large part of which is held by
foreigners. While such foreign-debt retirement lowers the exchange
rate and thus helps manufacturers, it comes at the expense of tax
reductions. The Bank of Canada can keep interest rates low to
discourage capital inflows and thus exchange rate increases, but at
the cost of fuelling inflationary pressures. The most promising
remedy for the Dutch disease is the increased importation of
labour-saving capital by the private sector, taking advantage of
the favourable exchange rate. The problem is that the resultant
higher productivity and international competitiveness would grow
only slowly. While all of the opportunities for dealing with
Canada's Dutch disease have some merit as quasi palliatives, there
is only one permanent cure: inoculation of the system by fixing the
exchange rate at a level that allows manufacturers to be
competitive, perhaps at the rate the Bank of Canada research
identifies as the long-run equilibrium, around US90. The
Netherlands and Austria in the years before the introduction of the
euro successfully operated such a system and enjoyed near perfectly
stable exchange rates against the German currency. The essential
ingredient in this success was the official commitment of the
central banks of these two countries to maintain the same interest
rate as that of the German central bank. An analogous commitment by
the Bank of Canada with respect to U.S. interest rates may not be
credible, tested by speculators and therefore ultimately doomed to
failure. However, there is a solution to this lack of credibility.
In Europe, it came through the creation of the euro and formal end
of the ability of national central banks to set interest rates. The
analogous creation of the amero is not possible without the
unlikely co-operation of the United States. This leaves the
credibility issue to be solved by the unilateral adoption of a
currency board, which would ensure that international payments
imbalances automatically lead to changes in Canada's money supply
and interest rates until the imbalances are ended, all without any
actions by the Bank of Canada or influence by politicians. It would
be desirable to create simultaneously the currency board and a New
Canadian Dollar valued at par with the U.S. dollar. With longer-run
competitiveness assured at US90 to the U.S. dollar, the creation of
the new currency would reduce present incomes, prices, assets and
liabilities from their current Canadian dollar value by the same
10%, leaving real incomes and wealth unchanged.
The public would readily use the new Canadian and the U.S.
dollars interchangeably and enjoy savings in the conversion of one
currency into the other. The present exchange risk premium on
Canadian interest rates would be eliminated completely. The
creation of the New Canadian dollar and its credible fix against
the U.S. dollar is not a panacea. Fluctuations in global demand for
natural resources will always result in competition for labour and
capital among Canadian manufacturers and producers of resources.
But, at least, the firms in these sectors would no longer have to
concern themselves with exchange-rate fluctuations and policies of
the Bank of Canada. There will also always be changes in the U.S.
(and Canadian) dollar exchange rate against the euro and other
major currencies. But these changes would have minor effects on the
Canadian economy because 80% of the country's trade is with the
United States. --- - Herbert Grubel is Professor of Economics
Emeritus, Simon Fraser University. < 12 >
The U.S. dollar might be destined to disappear, replaced by a
regional currency called the amero, reports the Tokyo correspondent
for the Singapore Business Times today. "Truth is said to be
stranger than fiction sometimes, and what I hear about the future
of the U.S. dollar may sound like pure fiction, but the sources
from whence the reports spring are, as they say, 'usually reliable'
ones, and so they do have a ring of truth to them," writes Anthony
Rowley. Rowley says the slide of the U.S. dollar in relation to
other foreign currencies makes such a transition more likely. "And,
looking at the size of U.S. debt to all those foreign central banks
and private investors who obligingly finance the American current
account deficit, similar conclusions might be drawn," he writes.
Because the U.S. is not going to stand by and watch its currency
depreciate forever, he says his sources in the monetary and
financial establishment plan a new currency that would take trade
and investment cooperation within the North American Free Trade
Agreement, or NAFTA, into new areas of monetary cooperation leading
ultimately, perhaps, to a common currency for the U.S., Canada and
Mexico. In addition to the name "amero," Rowley says the name
"americo" is also under consideration for this new currency. "It
would be a currency more likely to be judged worth the paper it is
written on than the obligations of a highly indebted U.S.," he
writes
Rowley says there is also talk of an Asian monetary union and
common currency. The commentary follows what appeared to be
confirmation of the common North American currency plan by former
Mexican President Vicente Fox, who told CNN's Larry King this week
that he and President Bush had agreed on a regional currency for
the Americas. White House spokeswoman Dana Perino told WND she's
not aware of any plan for such a currency either. The statement by
Fox was perhaps the first time a leader of Mexico, Canada or the
U.S. openly confirmed a plan for a regional currency. Fox explained
the current regional trade agreement that encompasses the Western
Hemisphere is intended to evolve into other previously hidden
aspects of integration. According to a transcript published by CNN,
King, near the end of the broadcast, asked Fox a question e-mailed
from a listener, a Ms. Gonzalez from Elizabeth, N.J.: "Mr. Fox, I
would like to know how you feel about the possibility of having a
Latin America united with one currency?" Fox answered in the
affirmative, indicating it was a long-term plan. He admitted he and
President Bush had agreed to pursue the Free Trade Agreement of the
Americas a free-trade zone extending throughout the Western
Hemisphere, suggesting part of the plan was to institute eventually
a regional currency.
The idea to form the North American Union as a super-NAFTA
knitting together Canada, the United States and Mexico into a
super-regional political and economic entity was a key agreement
resulting from the March 2005 meeting held at Baylor University in
Waco, Tex., between President Bush, President Fox and Prime
Minister Martin. A joint statement published by the three
presidents following their Baylor University summit announced the
formation of an initial entity called, The Security and Prosperity
Partnership of North America (SPP). The joint statement termed the
SPP a trilateral partnership that was aimed at producing a North
American security plan as well as providing free market movement of
people, capital, and trade across the borders between the three
NAFTA partners: We will establish a common approach to security to
protect North America from external threats, prevent and respond to
threats within North America, and further streamline the secure and
efficient movement of legitimate, low-risk traffic across our
borders. A working agenda was established: We will establish
working parties led by our ministers and secretaries that will
consult with stakeholders in our respective countries. These
working parties will respond to the priorities of our people and
our businesses, and will set specific, measurable, and achievable
goals.
The U.S. Department of Commerce has produced a SPP website,
which documents how the U.S. has implemented the SPP directive into
an extensive working agenda. Following the March 2005 meeting in
Waco, Tex., the Council on Foreign Relations (CFR) published in May
2005 a task force report titled Building a North American
Community. We have already documented that this CFR task force
report calls for a plan to create by 2010 a redefinition of
boundaries such that the primary immigration control will be around
the three countries of the North American Union, not between the
three countries. We have argued that a likely reason President Bush
has not secured our border with Mexico is that the administration
is pushing for the establishment of the North American Union. The
North American Union is envisioned to create a super-regional
political authority that could override the sovereignty of the
United States on immigration policy and trade issues. In his June
2005 testimony to the U.S. Senate Foreign Relations Committee,
Robert Pastor, the Director of the Center for North American
Studies at American University, stated clearly the view that the
North American Union would need a super-regional governance board
to make sure the United States does not dominate the proposed North
American Union once it is formed: NAFTA has failed to create a
partnership because North American governments have not changed the
way they deal with one another. Dual bilateralism, driven by U.S.
power, continue to govern and irritate. Adding a third party to
bilateral disputes vastly increases the chance that rules, not
power, will resolve problems. This trilateral approach should be
institutionalized in a new North American Advisory Council. Unlike
the sprawling and intrusive European Commission, the Commission or
Council should be lean, independent, and advisory, composed of 15
distinguished individuals, 5 from each nation. Its principal
purpose should be to prepare a North American agenda for leaders to
consider at biannual summits and to monitor the implementation of
the resulting agreements. Pastor was a vice chairman of the CFR
task force that produced the report Building a North American
Union. Pastor also proposed the creation of a Permanent Tribunal on
Trade and Investment with the view that a permanent court would
permit the accumulation of precedent and lay the groundwork for
North American business law. The intent is for this North American
Union Tribunal would have supremacy over the U.S. Supreme Court on
issues affecting the North American Union, to prevent U.S. power
from irritating and retarding the progress of uniting Canada,
Mexico, and the U.S. into a new 21st century super-regional
governing body. Robert Pastor also advises the creation of a North
American Parliamentary Group to make sure the U.S. Congress does
not impede progress in the envisioned North American Union. He has
also called for the creation of a North American Customs and
Immigration Service which would have authority over U.S.
Immigration and Customs Enforcement (ICE) within the Department of
Homeland Security. Pastors 2001 book Toward a North American
Community called for the creation of a North
American Union that would perfect the defects Pastor believes
limit the progress of the European Union. Much of Pastors thinking
appears aimed at limiting the power and sovereignty of the United
States as we enter this new super-regional entity. Pastor has also
called for the creation of a new currency which he has coined the
Amero, a currency that is proposed to replace the U.S. dollar, the
Canadian dollar, and the Mexican peso. If President Bush had run
openly in 2004 on the proposition that a prime objective of his
second term was to form the North American Union and to supplant
the dollar with the Amero, we doubt very much that President Bush
would have carried Ohio, let alone half of the Red State majority
he needed to win re-election. Pursuing any plan that would legalize
the conservatively estimated 12 million illegal aliens now in the
United States could well spell election disaster for the Republican
Party in 2006, especially for the House of Representative where
every seat is up for grabs.
Mr. Corsi is the author of several books, including "Unfit for
Command: Swift Boat Veterans Speak Out Against John Kerry" (along
with John O'Neill), "Black Gold Stranglehold: The Myth of Scarcity
and the Politics of Oil" (along with Craig R. Smith), "Atomic Iran:
How the Terrorist Regime Bought the Bomb and American Politicians,"
and most recently, "Minutemen: The Battle to Secure America's
Borders." He will soon author a book on the Security and Prosperity
Partnership of North America and the prospect of the forthcoming
North American Union.The story of the past couple of weeks has been
the meltdown of the U.S. currency. The U.S. Dollar Index which
should actually be referred to as the Federal Reserve Note Index
has now fallen to 82.42 as of this Friday. The Index appears to be
breaking down and will probably test the all time low which is
around the 80 mark. If we see the Index fall below this mark we can
expect to see it fall much further. There is no question that we
could very well be on the brink of a major slide in the value of
Federal Reserve Notes. One of the reasons why I believe this to be
true is because the mainstream media is now introducing the public
to the idea of a new currency called the Amero. The Amero is a
proposed fiat currency that will replace the Canadian, U.S. and
Mexican currencies as all three countries are merged into a North
American Union. Even though the idea of a North American Union and
the Amero has been talked about for quite sometime, there are still
people who believe that these are conspiracy theories. For any
skeptics, let me assure you that the possibility of a North
American Union and the Amero currency is very real. Below is an
excerpt from a World Net Daily article that quotes a CNBC interview
with Steve Pervis, Vice President at Jefferies International Ltd
where he urges a move to the Amero and a North American Union.
London Stock Trader Urges Move to Amero In an interview with CNBC,
a vice president for a prominent London investment firm yesterday
urged a move away from the dollar to the "amero," a coming North
American currency, he said, that "will have a big impact on
everybody's life, in Canada, the U.S. and Mexico." Steve Previs, a
vice president at Jefferies International Ltd., explained the Amero
"is the proposed new currency for the North American Community
which is being developed right now between Canada, the U.S. and
Mexico."
The aim, he said, according to a transcript provided by CNBC to
WND, is to make a "borderless community, much like the European
Union, with the U.S. dollar, the Canadian dollar and the Mexican
peso being replaced by the amero." Previs told the television
audience many Canadians are "upset" about the amero. Most Americans
outside of Texas largely are unaware of the amero or the plans to
integrate North America, Previs observed, claiming many are just
"putting their head in the sand" over the plans. More proof of the
coming North American Union comes from a publication written in
2005 by the communists at the Council on Foreign Relations. The
publication talks about building a North American Community by the
year 2010. Dont be fooled by the politically correct terminology,
they go into considerable detail about building a North American
Union with governing agencies that will set policy for all three
countries. This is the CFRs official plan and it is being
implemented as we speak. Building a North American Community
Getting back to the main point, I dont see why CNBC would bring
somebody on to talk about the Amero if things were going so great
with our present currency. I believe that the value of Federal
Reserve Notes is going to be manipulated in such a fashion that it
makes it easy for the central bankers to implement the Amero. If
they continue to inflate the currency and escalate a currency
crisis, they can more easily gain public support to introduce a new
currency. Either way, the Amero is a terrible idea. It is going to
be an entirely fiat currency which will help further consolidate
power to the banking cartel. It will give them control over the
entire North American region through their power of currency
creation. Besides this public introduction to the Amero, all of the
fundamental factors driving the devaluation of U.S. currency
remain. We still have a huge mess in the U.S. housing market, a
government debt in the trillions, a huge trade deficit with China,
foreigners diversifying into other currencies, out of control
inflation, a mess in Iraq and of course the fact that our currency
is no longer backed by a tangible asset. Federal Reserve Notes as
of this past Thursday were trading at 15-year lows against the
pound sterling. With all of these fundamentals to consider, I would
be very surprised if we dont see a currency crisis take place
within the next few years. All of this has been extremely bullish
for gold and silver the past few weeks. Gold is now trading for
$645 an ounce and silver is trading for $13.97 an ounce. Im very
bullish on both precious metals but I continue to see much more
upside with silver.
U S. Bush administration's Amero Dollar Plan may make certain
personal saving and investments worthlessSubmitted by MichaelVail
on Fri, 2007-08-17 08:01.
American Union amero Bank of Canada Govenor borderless community
Enslavement Fraser Institute
Land Grab losing the freedom to manage our own economy military
industrial complex national security-driven police state National
Sovereignty NAU Spotlight SPP World News
The Canadian Posted : 2007-08-17 02:50:17 Project for a New
America plan for new currency promises to be corporate theft by
conversion toward commercial profit by Jenn Jones, Business Editor
The Amero is not being pursued by various elite-driven "Security
and Prosperity Partnership" (SPP) related interests because of
alleged benefits to the general Canadian, U.S. and Mexican public.
The Amero is an apparent agenda to introduce a new "continental"
currency that will enable corporate elites to steal investment
gains and savings from individuals.
Make sure you cast your vote on the Amero Currency