Is the falling Canadian dollar good or bad for the economy?

Or a little bit of both?


Brent Lewin/Bloomberg via Getty Images

The Canadian dollar has had a rough time of it lately. The loonie has fallen by about five per cent in just over two months, reaching its lowest level since September 2009.

News that the loonie is trading at below 91 cents US comes one day before an announcement from the Bank of Canada about interest rates. While the Bank was initially in favour of raising rates, it has taken a more neutral stance in recent days. One of the reasons the loonie has been faring so poorly is because of stiff competition from a rising U.S. dollar. The U.S. Federal Reserve’s move to taper its bond-buying program has led to traders favouring the American dollar.

But what is the significance of the depreciating dollar for Canadians? The Conference Board of Canada says the dip in the dollar’s value will have a “small net positive impact on economic growth in the short term.” That sounds good. But wait, the think-tank also says the falling loonie will take a negative toll on consumers’ wallets. That doesn’t sound so good.

Confused yet? It is exactly this mixed bag of expert economic opinions that a popular satirical CBC television show takes aim at.

In tonight’s episode of This Hour Has 22 Minutes, the show talks to economic professors to find out what the falling loonie really means. After one professor attempts to explain that “it could be good, it could be bad” for firms, it seems only logical when Abdul Butt, a Montreal comedian playing a business reporter on the show, depicts the loonie as the victim with a noose in a Hangman game.

In a blog post on the Conference Board of Canada’s website, authors Glen Hodgson and Michael Burt write that the cost of imported goods will go up, limiting Canadians’ purchasing power and spending habits. But the underperforming Canadian market, they argue, could actually help “stave off the risks of deflation.”

In the end, the long-and-short answer is that the falling loonie is both a blessing and a curse.


Is the falling Canadian dollar good or bad for the economy?

  1. Short answer: Dollar drop is bad for the economy in the mid and long term.

    Reality is people with less money (taxes) and less value money (currency devalued) means people will have less to spend on other peoples jobs.

    An example, while I have investments out of Canada, I realize taxable inflation gains in 2013 minus currency depreciation has decreased my net worth after inflation taxes. Thus my analysis shows another year of negative investing in Canada.

    This will mean I have less to spend in terms of value. As goods, services, labour prices rise fewer will afford or spend on those jobs. This will put a up tick in unemployment for at least 6 months if not longer.

    Employers buying tones of steal, toilets, copper wiring, appliances, all just went up 9% or more. Remember, a 9 cent drop is a 9.9% price increase in terms of CAD, it amplifies as its lower value money.

    But politicians love the deceit and propaganda. The reality is our governments are bankrupt and printing too much money for ponzi fiat fraud. Predictable actually as it means Harper has chosen to preserve government bloat and waste at the cost of productive people in Canada.

    In the last 5 months, we got slapped with a inflation tax of 10%+++ as remember, while no value has been created, the CRA tax greedy will want taxes on inflation.

  2. For the laymen, its a compounding inflation tax and devalues incomes, pensions, savings and money.

  3. US dollar goes up, Canadian dollar goes down. As always.

    • Yep. Few people realize the CAD did not rise in 2004-9 to par, the USD fell faster than the CAD.

      A chart on USD depreciation from excessive money print fiat debt fraud:

      If you note int he chart, devaluation occurred before the employment and credit crunches. US Fed/Treasury fraud caused the depression. Its why after almost 8 years they still can’t fix the economy, its their ponzi fraud debt bloat causing the troubles.

      But it isn’t politically corrupt enough for politicians to say it as it is. Just deceive the public and preserve government statism bloat even at the costs to the people who support it.

      Everyone knows the current economy isn’t sustainable right? Try buying food with 9.9% devalued money and 1% raises and more hidden taxes.

      • I do not support or encourage any of Dave’s crackpot economic theories.

        • Hey, I am not a money for nothing whiner, I and a 2%er early retired and made money in terms of CAD.

          Sort of says it all. I am here to educated people on reality, and not some politicians appeasement and illusions. This 9.9% drop in CAD value is going to impact you a lot more than me.

          My biggest problem is taxes, yours is how to pay for it. Any savvy investor knows governemtn interferences, taxes and currency fraud for debt do impact value of investments. You bet I follow government debt fraud and waste, its one of the inputs to deciding if to invest or not. Like workers, we don’t job invest to lose value.

          • Dave you can say anything you like on Macleans….just don’t do it by bouncing off my posts and implying I agree with and support you on your theories.

            I do not. You are talking rubbish.

  4. Funny how the Canadian economy boomed along with a 90 cent dollar through the 90s and early 2000s. The fact that the Harper government did not fall into the deficit spending spree the opposition demanded when the economy tanked tells me that inflation will not hit Canada like the rest of the world when the chickens start coming home to roost. Canada’s biggest problem will be competing with the high interest rates that will hit the US soon, caused by the trillions spent by Obama during the recession.

    Hate him or not, you can thank the Harper government for that. The conservatives spent millions while the US government spent trillions.

  5. Mostly bad. Simple reason is everyone has been devalued, incomes, wages, pensions, savings and there is going to be inflation with this as 89 cent money is (1.00 / 0.89) 13.6% inflation. Home materials, appliances, food…all up 13.6% as it takes more devalued money to buy the same stuff.

    Only reason gas prices are about the same as 13.5% decrease in oil is offset by 13.6% decrease in value of money, yet economic ignorance wonders why gas pump prices have not decreased. Take CBC propelling economic illiteracy on the issue, its amazing how little economic understanding exists in Canadian media.

    Its bad as people with less value money will pay more for homes, food, stuff, and have less to spend on each others jobs. Expect this Christmas the spend in $$ to the same but get less for it. And less goods means less labour to make/ship/sell it. Layoffs too, why ignore the reality? Bombardier materials of tires, aircraft materials all cost 13.6% this year….so 1700 lose jobs.

    People travel less too, so expect some tourist and airline layoffs and reductions. If its discretionary, its going to get a hit.

    Govmint can only tax, confiscate and redistribute wealth. It can’t create wealth or jobs. As tax me more and devalued money, I am spending less on other peoples jobs.