Loonie tunes

Parity. It's pronounced parrotty. Awkkk!! Polly wants a cracker! Pieces of eight! Pieces of eight! Awkkk!!!

Well, it's not about that.

It's about the relative value of currency. Here is a personal example. Back in 2002, my wife and son and I crossed over from the western U.P. to the eastern U.P.--to Sault Ste. Marie. And then we crossed the International Bridge and were in Canada--Soo, Ontario.

Our first stop (after Customs) was the big green-roofed building just off the bridge, an Ontario tourism site, with plenty of brochures from all over the province and also a bank where you could exchange your U.S. dollars into Canadian money. At that time, we got back roughly $1.55 Canadian for each dollar we paid--at the time a Canadian dollar was worth about 64 cents in U.S. money.

Sure, the prices in Canada were a little higher, but not enough to offset the exchange. We visited around, took a Algoma Central train ride that I love up north to the Agawa Canyon, visited a few stores and stayed two or three nights. A nice little vacation for us and David (still living with us at that time). He was all excited by the different currency.

In late 2004, we went to the state high school football finals in Detroit, and we crossed into Windsor, Ontario. The exchange rate wasn't as favorable then--about C$1.21 for each US$, 82 cents U.S.

In December 2005, I made a three-day visit to Canada (visiting my friend, S). The loonie (the Canadian dollar--named for the loon on their $1 coin) was getting stronger. Now it was worth 85 cents U.S.--about C$1.18 for each U.S. dollar. That was my most recent visit to Canada.

That brings us to today. The loonie has been on a roll lately, getting stronger, rising up through the 80s, then the 90s, and today it reached parity: which means that US$1 equals C$1. This hasn't happened since the mid 1970s, from what I understand, and the trends are unmistakable. The Canadian dollar keeps on getting stronger relative to the U.S. dollar, which is, shall we say, struggling in international financial circles.

That means that those long-maligned loonies are worth a lot more than before. It means U.S. goods are cheaper for Canadians to buy, and it means Canadian travelers will find some bargains south of the border. We get CBC's Winnipeg channel, and they are carrying many commercials from the Minnesota and North Dakota tourism offices--just south of Manitoba, you know.

The door swings the other way, too. Canadian tourism officials are worried. In July, travel from the U.S. fell to its second-lowest level in 35 years, says another article I read today. That's a big deal for many places located just north of the border.

I had been hoping we could visit the Soo and make another trip on that train this summer, but all the work at my mom's house ended those hopes. So, we thought, maybe in 2008. But now, with the U.S. dollar getting steadily weaker, I don't know. We may still do it, but we'll have to save more money.

Of course, we all know why this happened. The war on Iraq. The U.S. made a terribly costly mistake ... and the maddening part is that I (and many other war opponents) could see exactly what was going to happen way back before the invasion started: That we'd get bogged down over there for many years, that it would suck up a lot of our federal budget, creating huge budget deficits (especially since the U.S. was cutting rich people's taxes at the same time); and that it would kill and maim many of our country's best young men. What a terrible waste!

I saw it all coming. So did many, many others. We tried out best to be heard. It happened, anyway. It's no comfort of all to say "I told you so." To be honest, I didn't foresee all the problems with the insurgents or the inability of Iraq's new "government" to patch that nation back together.  When I think of the Iraqi government now, Humpty Dumpty comes to mind.

Anyway, back to today. The two lines have crossed. Canada's dollar is now worth more than the greenback. It has happened before. It's no disaster. It's mainly symbolic of what's been happening to the U.S. dollar's value in the last few years.

On a related topic ...

I don't know if you know, but Canada no longer has a $1 bill. They used to have a large $1 coin, like the old U.S. silver dollars. Paper money that is in heavy circulation doesn't survive long. It gets worn out as it passes from hand to hand to hand to hand. They last 21 months--then they are taken out of circulation and shredded. Wikipedia says that 45% of U.S. currency is $1 bills.

Coins, on the other hand, last for many, many years. The U.S. Mint created a new, smaller $1 coin. They misfired on the first one, but the golden dollar, with Sacajawea on it is very nice. They just started a series of coins with the presidents on them, like the state series of quarters.

But nobody uses them. You almost never see them in change, and if you ask for some at the bank, the tellers have to scurry from booth to booth to find some.

North of the border, Canada replaced its large dollar coin with the loonie. It was introduced in 1987, and, like the U.S., the government wanted its people to use the coins instead of paper money. But there is always reluctance to change. How did they do it?

Very simple! They started withdrawing $1 bills from circulation and stopped printing them altogether in 1989. People had to get used to the loonie, and they did. Now it's no big deal.

South of the border, we're still printing millions and millions of dollar bills each year, at taxpayer expense. Nobody is using the dollar coins.