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To: DaveMG who wrote (13254)	8/3/1998 3:59:00 PM
From: JMD	Respond to of 152472

DaveMG, Canada's problem is their heavy reliance on Asia as an export market for all those goodies that Canada has in abundance: wood, pulp, paper products, oil--I'm sure you know the list better than I do. Well, our Northern Friends have had about as much luck pushing their stuff on Asia as everybody else has: zip, nada, no mas. And of course what they do manage to peddle goes off at a deep discount. This has hit Canada like a ton of bricks, more specifically it has cratered their exports [or their 'export earnings']. So their currency 'weakens' relative to their gold holdings, which causes other folks to get a little nervous in the service as to Canada's 'intentions'. Of course the money traders start smelling blood in the water and start shorting the bejeesus of the C$ which adds a little more spice to the pot. The Canadian dollar's 'purchasing power' relative to other 'strong" currencies weakens which means they pay more for imports at the very point in time that they are accumulating fewer of those currencies at the trading desks of Canadian banks. Now the currency is "in the box" as the speculators say and a juicy little arb opportunity jumps up: short the weak currency, go long a strong currency. If 'just' the current trend continues you'll make a few bucks; but if Canada devalues, the fat lady sings her head off. I seem to be long winded in all my posts these days, so will conclude here by saying that you have it right on: Canada's deteriorating resource prices [resources being the prime foreign exchange earner for Canada] directly effect the value of its currency. Since most hard asset prices around the world have been falling since "the Bubble" burst at the beginning of the decade, this has taken a particular toll on the Canadians. By contrast, the U.S., for example, doesn't export a whole lot of raw material type stuff as a percentage of our GNP so this same thing has caused much less damage RELATIVELY SPEAKING to the U.S. The agricultural producers have taken some hits and would be screaming at my benign description but with all due respect for the soybean belt, we earn a whole lot more with exports from the likes of Boeing and I.B.M. than we do with beans so that's the difference. Hope this helps. Mike Doyle