Sharp Export Drop Squeeze Trade Surplus

1 06 2011

Article can be found here

Discussion Question:

1. Besides the ones mentioned, what are other possible factors why both export and import fell this year?

2. Why is the Canadian dollar so strong lately? If possible, should the government purposely weaken the Canadian dollar?

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10 responses

2 06 2011
Lok-Hin Yuen

In response to your second question –
Aside from our strong banking system, the Canadian dollar has remained strong because we have a lot of what the world needs. That is, natural resources like oil and agriculture. That being said, it would be in the best interests of the Canadian economy to lower the value of the Canadian dollar, even if just a bit. As mentioned in class, a strong Canadian dollar means it costs foreign countries more to import our goods, and therefore import less. If we decrease the value of the dollar, our already highly demanded exports will be even more enticing to foreign markets and will greatly boost our exports and economy.

2 06 2011
Alejandro Enamorado

Ah yes, the Canadian doller, a meteoric rise to say the least. The Canadian dollar has been so strong lately due to confidence in the Canadian economy and a lack of confidence in the American one. This is due to the effects of the financial crisis and the fact that was previously discussed, Canada has stronger banking regulations and thus was not hit too hard by the great recession. As the world recovers, the purchasing of commodities increases as a result, commodities prices had gone up (particularly: gold, oil, and other minerals). Canada, being the exporting giant in terms of natural resources benefitted from this increase in price as well as demand for a period of time driving up the currency. I can also point towards market speculators, oh yes the invisible characters that can dictate the direction of the market. Many hit up the Canadian currency for the very reason that they believe it will keep increasing and thus will convert back to their funds to make a profit. In addition, currency investors, as mentioned above, may have lost confidence in the US currency and are seeking refuge in others, the Canadian dollar being a great alternative. But sadlt, supposedly good things can result in being quite naughty. Since the canadian dollar is so high now, countries are not looking to Canada for their exports because it would be more expensive. This in the end hurts Canada’s revenue. I believe the government should intervene and lower the dollar to continue with Canadian growth and increased exports.

2 06 2011
bgray8

2. Firstly, our strong Canadian dollar is caused by our large quantity of oil, a resource which the rest of the world greatly desires. In terms of the government weakening the dollar, different perspectives must be looked at. In the eyes of the citizens, a decrease in the dollar would mean less inexpensive shopping on the other side of the border, but in the eyes of the government it would mean more spending on Canadian products. With a low Canadian dollar, more spending would go towards Canadian goods from both other countries (exporting) and our own citizens. In conclusion, the Canadian dollar would need to be weakened to an optimal level.

2 06 2011
Chris Li

Like what everyone else has wrote, the strong Canadian dollar is due to our oil and us being quite a bit better off that various other countries. As for the matter of whether the government should decrease the value of the Canadian dollar, I believe that it is in their best interest if they do. A strong Canadian dollar may not be detrimental to an individual since they can purchase imported goods for cheaper. But on a larger scale, companies, and businesses are losing a lot of revenue as both our own people and foreign companies are turning away from our products. As spending towards domestic goods decreases, we won’t be expanding as much, which is something we desperately need right now coming out of the recession.

3 06 2011
Carolyne Wang

1. Exports may have also fallen because the economies of other countries are experiencing a slowdown, and do not need to or have the resources to spend as much as before on foreign goods. Imports in Canada may also be dropping for the same reason.
2. The Canadian dollar is strong because the price of oil is high due to political conflict in Libya at the same time that demand for oil is also high in the world, meaning more countries are still competing to purchase oil from Canada even though it is more expensive. Since the Bank of Canada is relying on exports to drive growth, the government should weaken the dollar slightly to encourage more exports.

3 06 2011
lindashidilei

1. The financial crisis doesn’t just happen in one country instead it spreads to all over the world. While in a crisis, government tends to protect its own companies rather than purchasing from other foreign corporations. Most countries try to cut its spending and firms slow down their business plans in order to live through this year. Obviously, the export decreases because no one really needs it.

3 06 2011
Kevin Yeo

The Canadian dollar has been so strong due to the high demand of the export of Canadian natural resources. The combination of the higher demand as the world recovers from the recession and the high prices of the natural resources have allowed Canada to benefit economically leading to the strong Canadian dollar. On the other hand, this high Canadian dollar means that it costs more for other countries to import Canadian products. Thus, a slight decrease in the Canadian dollar through government intervention would allow an increase in Canadian exports and be beneficial to the overall Canadian economy.

3 06 2011
Maria Li

Firstly, the Canadian dollar is strong lately because we weren’t hit as hard as the US during the recession. Our dollar didn’t nearly take as hard a hit as the USD. So it makes sense that our economy is recovering faster than that of the US. Secondly, the strong dollar is due the large quantity of commodities that we are able to export. Oil, water, lumber, and metals are all constantly in high demand. These commodities (especially oil) are all relatively inelastic so no matter how high the price, people will always be will to pay. Recently, the price demand for oil has sky rocketed, and being one of the providers, our dollar has taken a positive hit. The government might want to step in to lower the value of our dollar because a high dollar might lead to decreased GDP due to fewer exports. Other countries might look to cheaper alternatives.

3 06 2011
Sid

The Canadian dollar is strong right now because of our potential economic growth. Canada’s economy is currently doing better than the U.S economy therefore the Canadian dollar is more expensive right now. I think the government should weaken the Canadian dollar a bit just to increase imports from other countries because if the value of our dollar is high, its more expensive for other countries to import goods from us. Therefore decreasing imports. I think if the government decreases the value of our dollar by just a little it would still be very beneficial for the Canadian economy. It will bring more wealth into the country 🙂

3 06 2011
Nahee Kim

Maybe in my opinion, not only becuase Canadian dallar is strong but maybe decrease in aggregate demand may cause exports and imports to fall. Not only Canadians’ demand decrease but globally, the demand can decrease which will have impact of falling of exports and imports. However, this is very rare.. becuase people’s demands are mostly high. But mostly the reason why exports and import falls is due to strong canadian dollar.

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