Well here we are a year later, after trudging through arguably the worst financial crisis in history, and the economy is still making headlines. The Dow Jones is up, past 10,000 once again, for the first time in more than 12 months. And the loonie is destined for parity against its southern counterpart – the U.S. dollar (USD). So what now?
Well for Canadians, the general consensus seems to be “uh-oh, a declining American dollar means more job losses here – not to mention undesirable, rising costs for our nation’s exported goods.”
But if we take a more educated approach, a devalued USD will ultimately be the key to stabilizing and balancing the world’s economic situation. And that’s what Kevin Carmichael touches on in a recent article in The Globe and Mail.
Sure, the weakening of the USD is due in large part to the fact the U.S. is still wrestling with some unprecedented debt – to the tune of nearly $1.5 trillion dollars (yes, you read that right). But some experts are willing to acknowledge that countries like China, India, Brazil, and yes, even Canada, stand to benefit economically from a recent shift set to change the world’s economy into something more resistant to financial meltdown.
Despite the USD’s decline, the article suggests the American economy will see a 1.5% increase in 2010, compared with 9% growth in China and 6.4% in India, alone. And as confidence, within the global economy, strengthens the U.S. will certainly feel some short-term pain, there is no doubt.
Here in Canada, Carmichael points out the Bank of Canada expects rates to remain at rock-bottom levels until the summer of 2010, even with several major Canadian banks recently hiking their 5-year mortgage rates by 35 basis-points, to 5.84%. And there are rumblings that’s putting upward pressure on the Bank of Canada raise it’s key interest rate, which would likely, then, pinch the U.S. dollar even further downward.
And in Australia, a recent rise in that country’s key interest rate was spurred by strengthening global markets in Asia – again, putting more pressure on the American greenback.
So what can we expect in the next 12 months? Expect more stability to be sure, and expect more of the economic ‘pie’ to be shared or divided more thoroughly amongst the rest of the world. And it will happen because of the recent slip of the USD.
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