10

(note I really don't want this to sound argumentative, I'm genuinely interested. The title is simply a follow up to this question and my answer.

To the Canadian users of this site, would you agree that it makes sense for Canada to adopt the US dollar? What are the reasons for or against?

Many of the economic reasons for the UK to join the Euro would also apply for Canada adopting USD. So I'd be fascinated to see your responses.

<ducks/>

  • +1 Great question. I'll wait and see what my fellow Canadians post before I answer. – Zephyr Jan 18 '10 at 18:15
  • I like this questions. It would be nice to talk about the possible pros and cons if this would happen in light of the European countries switching to euro. – gyurisc Jan 19 '10 at 20:19
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I don't see countries switching to the USD, I see countries moving away from it.

The US has the largest peace time debt ever, is not being even close to fiscally responsible (approving ~4 trillion budget!) and is faced with 100 trillion in future commitments (social security, medicare) with a workforce (tax base) that is decreasing as the baby boomers retire.

When the US cannot meet those obligations (and most experts agree there is no hope of that anymore) they will have to print money and devalue the currency.

  • 1
    My wheelbarrow is at the ready. – MrChrister Feb 4 '10 at 22:24
  • @MrChrister: There are some great old photos of worthless money at moneytipcentral.com/… ... including a wheelbarrow :) – Chris W. Rea Feb 15 '10 at 13:34
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The conspiracy buffs think this is already in the works. If you are interested, Google this fictional currency called the "Amero." Or you could just look up the snopes article on Amero.

4

I would say at about the same time as the US converts to having a public health system that covers everyone with very few people with private insurance.

  • tee hee hee.... – MrChrister Jan 30 '10 at 0:25
  • 1
    wouldn't that be... *socialism!!!111!? jk – Lagerbaer Aug 8 '11 at 15:39
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Canada would most likely not convert any time in the near future.

The challenge for Canada converting to the US Dollar or the fictional "Amero" mentioned by JohnFX is that :

  1. Canada would lose control over setting interest rates and monetary policy.
  2. For both the US and Canada to benefit they need to have similar economies. Canada has a strong commodity based economy compared to the American economy.
  3. Canada would be dominated by American monetary policy. As the larger partner in the union they would have more say and would tend to protect their own interests first.
  4. The U.S. currently has a high amount of debt which makes its currency not as desirable (as mentioned in another answer).

Some of the benefits would be:

  1. There is already a free trade agreement between the 2 countries. A common monetary policy would remove uncertainty related to exchange rates.
  2. Removal of currency exchange costs.
  3. Price comparison between industries in both countries would be more easily compared.
  4. Currency devaluation would not occur - this is believed to hide lower productivity.

The challenge right now for any government would be to sell the pros over the cons and from that viewpoint the cons would appear to have more negative impact to voters. Considering that Canada currently has a minority government with no expected change to that status for some time the risk would be very high.

For more details see Pros and Cons of Canadian Monetary Union and to see the Mexican impact see North American Currency Union

It is interesting to note that currency union was first proposed in 1999 when the Canadian Dollar fluctuated between $0.64 to $0.69 US. The Canadian Dollar is closer to par with the US Dollar currently (in fact it rose to $1.10 US in Nov. 2007). Look-up historical rates at the Bank of Canada

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