During yesterday’s trading, and then again today, the Canadian dollar achieved parity with the US dollar. Our economic system is a complex beast, not even fully understood by experts. However, there are likely two broad explanations for the dollar’s rise.
First, the American economy is in serious trouble. The events triggered by the collapse of the sub-prime mortgage Ponzi scheme have not yet played out in full. The housing boom was a key driver of US economic growth, but now over one million Americans risk losing their homes. In order to keep the market from collapsing, the Fed has injected more money than they did in the wake of 9/11. The other key to US economic strength, consumer spending, is also quite vulnerable thanks to a negative savings rate, declining consumer confidence, an average credit card debt of $9000 per person, and an average national debt of $29,500 per person. Oh, and then there’s the little matter of the $3,000,000,000.00 per week war in Iraq. The fact that our dollar is doing so well compared to the greenback isn’t necessarily something to brag about. You’d look like a supermodel too if you were standing next to an ogre.
The second reason the loonie’s gone loony is that our dollar has generally come to be considered a “petrocurrency,” in the sense that it has a close and direct relationship with the price of oil. The fact that oil is now hanging-out above $80 a barrel and is projected to continue to rise is an indication that we’ve used up all of the easily-accessible supply. The stuff that’s left in the ground is dirtier, more expensive, and more energy-intensive to extract (reducing the Energy Return On Energy Invested), meaning that until we shift from a paradigm of perpetual consumption and growth to one of conservation and efficiency, our energy crisis will only get worse.
In other words, the “high” dollar is hardly cause for celebration. Add to that the fact that our economy is already starting to feel the effects of what is likely to be a US recession, and the fact that the Conservative budget left us absolutely no wiggle-room for dealing with this eventuality.
And then that word, parity, starts to take on another, more sinister and dangerous meaning. An alignment with the US economy so tightly integrated that we can’t escape the increasingly powerful gravitational pull of its implosion. An alignment with the US military so close that we can’t say no to American-led wars. An alignment with US energy policy so one-sided that our own citizens freeze in the dark.
Wait, isn’t that just the worst-case scenario? Yes. It’s also where we’re heading.