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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Henry Volquardsen who wrote (609)	9/7/1998 11:03:00 PM
From: N	Read Replies (1) \| Respond to of 3536

no protected voodoo, just econometrics....on second thought I guess it is voodoo. Various think thank types do this sought of analysis. blasphemy!

To: Henry Volquardsen who wrote (609)	9/8/1998 10:43:00 AM
From: Robert Douglas	Read Replies (1) \| Respond to of 3536

Henry, you wrote. But even in a completely open economy there is not one equilibrium rate. Canadian lumber exporters are not competitive at the same exchange rates as Canadian auto parts manufacturers. You always get trade offs. Isn't this a beautiful example of free market economics at its best? If Canada wants to subsidize an unproductive industry, who pays for it? The productive ones of course! In an unfettered market the unproductive industry would disappear, lessening demand for the currency allowing it to drop to a level that the other industries could compete at effectively. But no, instead you have to pay for the subsidies which then raises the currency rate to a harmful level and you pay for it a second time with lost worldwide market share and profits. You get a growth of inefficient industries and a shrinkage of efficient ones. What a horrible economic price to pay. -Robert