Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : C$ - The Peso of the North? -- Ignore unavailable to you. Want to Upgrade?

To: Kitskid who wrote (152)	6/23/1999 12:55:00 AM
From: Kitskid	Read Replies (1) \| Respond to of 177

southam.com - Think-tank urges North American currency union - GORD MCINTOSH - OTTAWA (CP) - Canada's floating exchange rate is not working well and the country should work toward some sort of North American currency union, the C.D. Howe Institute says. Such a union could mean Canada using the U.S. dollar as legal tender, use of the American dollar as a currency by the private sector on a limited basis, a fixed Canadian currency rate backed by the U.S. Federal Reserve as would be federal and provincial fiscal policies, exchange rate targets, a currency board or possibly a formal North American monetary union. In a study released Tuesday, the Toronto-based think-tank says floating exchange rates make currencies more volatile and do not appear to buffer the country against external shocks such as the Asian currency crisis in 1997 and 1998. Finance Minister Paul Martin rejected the study's arguments as he left cabinet. "I don't seen any Americans talking about a common currency. "They're talking about the utilization of the American dollar. "That would not be a good thing for Canada, neither for the Canadian economy, nor would it reflect the differences in our respective economies." The study by academics Thomas Courchene of Queen's University and Richard Harris of Simon Fraser University, cites the run on the Canadian dollar that began last summer and ended in the winter as proof of the need for a more stable currency. Two per cent of the currency's value was eroded between June 1998 and the following September during a fall in commodity prices brought on by the Asian crisis. Courchene and Harris argue that as the Canadian economy becomes more open to trade and investment flows, and as those flows become more focused on the United States, the evidence is growing in favour of a greater exchange rate fix between the Canadian and American dollars. The two academics prefer a currency union rather than so-called "dollarization" or adopting the American greenback as legal tender in Canada. Such a move would encourage wage and price flexibility in Canada and workers and employers alike to become more conscious of their competitive positions in North America, they argued. Gordon Thiessen, governor of the Bank of Canada, is a stronger foe of any kind of North American currency union, including a continental currency like the Euro. He argued last month before a Senate committee that a floating exchange rate, Canadian policy since 1970, helped Canada escape being pulled into recession by the Asian crisis. Thiessen argued that when Canada's commodity exports collapsed, the cheaper dollar made the country's manufactured exports more attractive, and those cheaper exports pulled up the economic slack. Courchene and Harris also argue that a fixed exchange rate or currency union would not lead to a loss of Canada's sovereignty. In fact, when Canada had a fixed exchange rate during the 1960s, it developed its comprehensive social policy infrastructure, they said. "Exchange rate stability relative to the U.S. dollar is important in sustaining and enhancing Canada's long-term economic potential," Courchene and Harris said. "The current flexible exchange rate regime, while necessary if Canada wants to pursue a different inflation rate than the United States, is increasingly at odds with both the economic stability and . . . integration that are vital to sustaining Canadians' living standards." = © The Canadian Press, 1999 Copyright 1998 Ottawa Citizen