Learning to Live With a Strong Canadian Dollar: Four Options for Business and Government by Glen Hodgson.
This briefing examines the implications of a strong currency for Canadian businesses and the Canadian economy, and it provides options and strategies for adapting to a strong currency.
The Conference Board of Canada, 8 pages, April 2010.
This document summarizes a quarterly newsletter from Northland Wealth Management. It discusses recent awards and recognition received by Northland Wealth and its CEO. It then discusses a family that dealt with the loss of their son by creating art calendars featuring his artwork to raise funds for charities. Other topics covered include the impact of lower oil prices, a new approach to low volatility investing, and positive signs for the US economy. The newsletter provides updates on financial markets and wealth management strategies to its clients.
This newsletter provides a summary of market conditions and investment strategies. It discusses that a slowing global economy indicates a slowing commodity cycle. For Canadian investors with significant commodity exposure, this implies re-evaluating portfolio allocations to secular versus cyclical growth. It also notes implications of US estate taxes for Canadians owning US assets and recommends an ETF for higher bond yields.
This document provides an investment outlook and recommendations for building a defensive portfolio amid rising economic and political risks while also seizing opportunities. It recommends maintaining adequate liquidity through cash reserves, holding high-quality intermediate bonds for diversification and yield, and selectively investing in areas with potential for earnings growth like technology and healthcare stocks as well as US small caps and high-yield bonds when prices decline due to market volatility. While there are challenges like low productivity growth, the document argues that innovation and business creation will support continued economic expansion over the long term.
The document provides an overview of the international real estate market in the United States. It summarizes data from a 2013 survey on international home buying activity. Some key points:
- In 2012-2013, international buyers spent $68.2 billion on residential real estate in the US, accounting for 6.3% of total spending.
- The top countries that international buyers come from are Canada, Mexico, the UK, India, and China. Canadian buyers make up 23% of international buyers.
- International buyers typically purchase detached single family homes to use as a primary residence or vacation home. They pay higher prices on average - $354k in 2013 versus the overall US average of $228k.
The portfolio manager provides a summary of market performance in 2012, an outlook for 2013, and commentary on portfolio strategy. Key points include: global markets gained over 10% in 2012 despite concerns over Europe and the US fiscal cliff; volatility is expected to continue in 2013 due to unresolved debt issues; the portfolio is diversified across regions and maintains an appropriate level of risk for clients through its asset allocation model.
Stocks rallied in May, with several indexes reaching record highs. Economic conditions have improved from a year ago, with inflation stabilizing and business spending recovering. Corporate earnings grew 8.1% in the first quarter, ending a streak of 14 quarters of double-digit growth. While markets have reached milestones, valuations are still relatively reasonable compared to the tech bubble peak in 2000.
The document discusses the concept of currency wars, where countries compete to lower the value of their currencies to boost exports. It provides background on past currency wars and reasons they occur, such as trade disputes and volatility. Specific examples discussed include China selling US treasuries, Brazil launching an offensive to suppress gains in its currency, and the introduction of the Euro challenging the US dollar's dominance. The effects of currency devaluation like improving trade balances are also summarized.
Глобальная горнодобывающая промышленность: бои «без перчаток»PwC Russia
Ожидалось, что 2014 год станет непростым для глобальной горнодобывающей промышленности из-за снижения цен на сырьевые товары и усиления краткосрочной волатильности. Положение 40 крупнейших горнодобывающих компаний было изначально неоднозначным. Теперь же игрокам отрасли и вовсе придется забыть о церемониях и вести бой «без перчаток»: результаты ежегодного отчета PwC «Горнодобывающая промышленность» показывают, что отрасли придется столкнуться с увеличением масштабов государственного вмешательства, внутренними конфликтами между участниками рынка, а также усилением активности акционеров.
This document summarizes a quarterly newsletter from Northland Wealth Management. It discusses recent awards and recognition received by Northland Wealth and its CEO. It then discusses a family that dealt with the loss of their son by creating art calendars featuring his artwork to raise funds for charities. Other topics covered include the impact of lower oil prices, a new approach to low volatility investing, and positive signs for the US economy. The newsletter provides updates on financial markets and wealth management strategies to its clients.
This newsletter provides a summary of market conditions and investment strategies. It discusses that a slowing global economy indicates a slowing commodity cycle. For Canadian investors with significant commodity exposure, this implies re-evaluating portfolio allocations to secular versus cyclical growth. It also notes implications of US estate taxes for Canadians owning US assets and recommends an ETF for higher bond yields.
This document provides an investment outlook and recommendations for building a defensive portfolio amid rising economic and political risks while also seizing opportunities. It recommends maintaining adequate liquidity through cash reserves, holding high-quality intermediate bonds for diversification and yield, and selectively investing in areas with potential for earnings growth like technology and healthcare stocks as well as US small caps and high-yield bonds when prices decline due to market volatility. While there are challenges like low productivity growth, the document argues that innovation and business creation will support continued economic expansion over the long term.
The document provides an overview of the international real estate market in the United States. It summarizes data from a 2013 survey on international home buying activity. Some key points:
- In 2012-2013, international buyers spent $68.2 billion on residential real estate in the US, accounting for 6.3% of total spending.
- The top countries that international buyers come from are Canada, Mexico, the UK, India, and China. Canadian buyers make up 23% of international buyers.
- International buyers typically purchase detached single family homes to use as a primary residence or vacation home. They pay higher prices on average - $354k in 2013 versus the overall US average of $228k.
The portfolio manager provides a summary of market performance in 2012, an outlook for 2013, and commentary on portfolio strategy. Key points include: global markets gained over 10% in 2012 despite concerns over Europe and the US fiscal cliff; volatility is expected to continue in 2013 due to unresolved debt issues; the portfolio is diversified across regions and maintains an appropriate level of risk for clients through its asset allocation model.
Stocks rallied in May, with several indexes reaching record highs. Economic conditions have improved from a year ago, with inflation stabilizing and business spending recovering. Corporate earnings grew 8.1% in the first quarter, ending a streak of 14 quarters of double-digit growth. While markets have reached milestones, valuations are still relatively reasonable compared to the tech bubble peak in 2000.
The document discusses the concept of currency wars, where countries compete to lower the value of their currencies to boost exports. It provides background on past currency wars and reasons they occur, such as trade disputes and volatility. Specific examples discussed include China selling US treasuries, Brazil launching an offensive to suppress gains in its currency, and the introduction of the Euro challenging the US dollar's dominance. The effects of currency devaluation like improving trade balances are also summarized.
Глобальная горнодобывающая промышленность: бои «без перчаток»PwC Russia
Ожидалось, что 2014 год станет непростым для глобальной горнодобывающей промышленности из-за снижения цен на сырьевые товары и усиления краткосрочной волатильности. Положение 40 крупнейших горнодобывающих компаний было изначально неоднозначным. Теперь же игрокам отрасли и вовсе придется забыть о церемониях и вести бой «без перчаток»: результаты ежегодного отчета PwC «Горнодобывающая промышленность» показывают, что отрасли придется столкнуться с увеличением масштабов государственного вмешательства, внутренними конфликтами между участниками рынка, а также усилением активности акционеров.
The results of EUROCHAMBRES\' annual economic survey (EES), based on over 70,000 entrepreneurs\' responses from across Europe, indicate that the economic outlook in 2011 is brighter. More than half of respondents anticipate that the favourable climate which started in 2010 will continue next year, and 30% believe that it will improve even further.
1) The document discusses the economic growth and income levels of Ukraine and Central and Eastern European countries from 2000 to 2008. Many CEE economies experienced strong growth and substantial income convergence with the Eurozone during this period.
2) It then analyzes the impact of the global economic downturn on Ukraine and the region. Ukraine suffered one of the worst economic contractions in the first half of 2009, with GDP declining over 13%. Other data showed Ukraine's currency depreciating sharply and the country losing access to external financing.
3) The document concludes by discussing challenges facing Ukraine, including stabilizing its currency, satisfying high demand for foreign cash, shifting to a more flexible exchange rate policy, and finding resources for future
Post-Recession CEE: Relative Potential Amid The Global RecoveryJustin Patrie
A presentation delivered to the EBRD\'s Eastern European Business Information Conference on the opportunities and risks in post-recession Central and Eastern Europe. Particular emphasis on the global outlook and the relative positioning of individual CEE economies.
The document provides an overview of Northland Wealth Management's quarterly newsletter. It discusses Northland's recognition and awards for excellence in private banking and wealth management. It also summarizes several articles in the newsletter, including features on the history of the Canadian dollar, strategies for avoiding poor market performance, and an analysis of the Michael J. Fox Foundation and its efficient approach to Parkinson's disease research.
The document provides an overview of recent market performance and outlook, as well as articles on various topics. It discusses the poor performance of markets in 2015, with Canadian equity markets faring the worst. It also profiles the Michael J. Fox Foundation and its efficient and effective approach to Parkinson's disease research. Additionally, it examines the history of the Canadian dollar and how its value has fluctuated against the US dollar over the past decades.
This document summarizes key information from a report on U.S. estate tax implications for Canadian clients, including:
- The U.S. presidential candidates have proposed different changes to the U.S. estate tax regime that could impact Canadians subject to it.
- Canadians with over US$60,000 in U.S. assets may need to file a U.S. estate tax return upon death, and could owe tax on the value of those assets depending on their worldwide wealth and credits available.
- The report provides two scenarios to illustrate potential U.S. estate tax implications for a hypothetical Canadian resident based on different levels of total worldwide wealth including U.S. assets.
In this issue:
TD Wealth: Developing a roadmap for success
TD Economics: Oil prices remain a wild card for Canada’s outlook
TD Wealth Asset Allocation Committee: Market Outlook
Running Head COMPREHENSIVE OUTLINE12Running Head COMPREH.docxjoellemurphey
Running Head: COMPREHENSIVE OUTLINE 1
2
Running Head: COMPREHENSIVE OUTLINE
Learning Team Comprehensive Outline
MGT/448 Global Business Strategies
Learning Team Comprehensive Outline
Introduction
Learning Team C has selected nutritional granola bars and the country Canada to enter into a global business venture with. This outline will document pertinent regional, country, and product analysis information which justifies why this new global business venture would be a sound idea for Team C to enter into.
Region Analysis
Canada has regional alliances with numerous countries and has free trade agreements in place with more than 10 countries. These free trade agreements “provide a competitive advantage across a wide range of sectors” states (Foreign Affairs, Trade, and Development Canada, 2014). “Under an FTA, a range of Canadian goods and services benefit from the reduction or elimination of tariff and non-tariff barriers to trade, such as quotas or technical barriers” states (Foreign Affairs, trade, and Development Canada, 2014).
Canada’s Prime Minister Mulroney signed and implemented the North American Free Trade Agreement (NAFTA) with Mexico and the United States in January 1994. “NAFTA has generated economic growth and rising standards of living for the people of all three member countries” states (Foreign Affairs, Trade, and Development Canada, 2014).
Canada has many physical environmental features that effect trade. Canada has the largest border with any other country sharing this with the United States which allows for more trade of farming goods near the borders. Canada also links to three oceans: Artic, Pacific, and Atlantic. This allows for Canada to be a leader in exporting fish (Slideshare.com, 2014). The Great Lakes and St. Lawrence River help to create fertile land for farming in Southern Canada. Here they produce and export canola, wheat, and grain across the globe (Slideshare.com, 2014).
Political stability can be considered as a state of peace that is experienced in a country. This can be caused in large part to the activities of the government keeping in mind the best interests of the people. Thanks to Canada’s political stability, the country can be considered a natural playground. The United Nations ranked Canada one of the best countries in the world in which to live and Canada has also been globally recognized for its outstanding quality of life. It is also known for having a stable, progressive political environment and one of the healthiest economies in the world.
Economic conditions in Canada in 2013 throughout the current year 2014 indicate that Canadians have become more careful with their spending habits. Canadians as a whole appear to be holding on to their funds which have resulted in slow financial growth for the Canadian economy. One way to improve the economic growth would be by having an increase in the demand in exports and business investments which could improve the Canadian econ ...
In this issue:
1. TD Wealth Asset Allocation Committee: Market outlook: the year ahead
2. TD Economics: A foundation for uncertain times
3. TD Wealth: New principal residence exemption rules
3. From Capital Controls To Dollarization American Hegemony And The US DollarDaniel Wachtel
This document discusses dollarization in Latin America and its implications. It makes two key points:
1) Dollarization does not necessarily lead to smooth balance of payments adjustment in emerging markets. Instability and economic crises could increase with the loss of independent monetary policy.
2) The collapse of Bretton Woods increased US economic hegemony through a more widespread use of the US dollar internationally. Countries in Latin America extensively use dollars beyond international transactions.
13. From Capital Controls To Dollarization American Hegemony And The US DollarKayla Jones
This document discusses dollarization and the role of the US dollar in international markets. It makes two key points:
1) Dollarization does not necessarily lead to smooth balance of payments adjustment in peripheral economies. Instability and economic contraction are possible outcomes as these countries lose the ability to use currency devaluation to correct deficits.
2) The collapse of Bretton Woods increased US economic hegemony and the global role of the US dollar. This has been actively pursued by the US to maintain advantages like persistent trade deficits. Dollarization became more widespread after Bretton Woods.
Foreign Takeovers & The Canadian EconomyColinbest
The document discusses foreign takeovers and ownership in Canada and its effects on the Canadian economy. It notes that foreign ownership has increased significantly over the past century as trade barriers were reduced. While some argue this "hollows out" Canadian industry, the document finds that foreign investment has actually increased productivity, wages, and head office employment in Canada. It concludes that fears over loss of national identity must be balanced with the economic benefits of foreign capital.
In the realm of economic speculation, the hypothetical collapse of the dollar is a topic that garners significant attention and curiosity. While the actual collapse of the world's leading reserve currency remains uncertain, it is worth exploring the potential consequences that such an event could trigger. In this article, we delve into the hypothetical realm, examining the possible ramifications of a dollar collapse. Understanding these scenarios can provide insights into the global economic landscape and foster preparedness for potential future shifts.
The document discusses the redenomination of Sierra Leone's currency. It examines the impacts of redenomination on inflation, currency exchange rates, economic growth, and export values. While past studies have found redenomination significantly impacted inflation and economic growth, the document also discusses potential positive impacts. A weaker currency can stimulate exports by making them cheaper for overseas customers. For example, a weaker U.S. dollar allows exporters to offer discounts while still earning the same dollar amount. Overall, the redenomination was meant to modernize Sierra Leone's currency but also had economic and political considerations.
The document discusses the re-denomination of Sierra Leone's currency. It examines the impacts of re-denomination on inflation, currency exchange rates, economic growth, and export values. While re-denomination decisions may seem technical, they are an example of a government's control over its currency and national economy. The study found that inflation and economic growth were significantly affected by Sierra Leone's re-denomination. Both positive and negative outcomes resulted from the re-denomination.
The document discusses the rationale and potential methodical decline of the US dollar as the global reserve currency. It notes that empires that hold the global reserve currency are typically net creditors, but the US has become a net debtor due to large budget and trade deficits. This makes the dollar's status vulnerable. While China has taken steps to challenge the dollar's dominance, the yuan is not ready to become a reserve currency. However, if China and others diversify reserves away from dollars over time, it could lead to a controlled, gradual decline in the dollar rather than a sudden crisis. Technical indicators also suggest monitoring support levels for signs the dollar may begin a longer-term downward trend.
The results of EUROCHAMBRES\' annual economic survey (EES), based on over 70,000 entrepreneurs\' responses from across Europe, indicate that the economic outlook in 2011 is brighter. More than half of respondents anticipate that the favourable climate which started in 2010 will continue next year, and 30% believe that it will improve even further.
1) The document discusses the economic growth and income levels of Ukraine and Central and Eastern European countries from 2000 to 2008. Many CEE economies experienced strong growth and substantial income convergence with the Eurozone during this period.
2) It then analyzes the impact of the global economic downturn on Ukraine and the region. Ukraine suffered one of the worst economic contractions in the first half of 2009, with GDP declining over 13%. Other data showed Ukraine's currency depreciating sharply and the country losing access to external financing.
3) The document concludes by discussing challenges facing Ukraine, including stabilizing its currency, satisfying high demand for foreign cash, shifting to a more flexible exchange rate policy, and finding resources for future
Post-Recession CEE: Relative Potential Amid The Global RecoveryJustin Patrie
A presentation delivered to the EBRD\'s Eastern European Business Information Conference on the opportunities and risks in post-recession Central and Eastern Europe. Particular emphasis on the global outlook and the relative positioning of individual CEE economies.
The document provides an overview of Northland Wealth Management's quarterly newsletter. It discusses Northland's recognition and awards for excellence in private banking and wealth management. It also summarizes several articles in the newsletter, including features on the history of the Canadian dollar, strategies for avoiding poor market performance, and an analysis of the Michael J. Fox Foundation and its efficient approach to Parkinson's disease research.
The document provides an overview of recent market performance and outlook, as well as articles on various topics. It discusses the poor performance of markets in 2015, with Canadian equity markets faring the worst. It also profiles the Michael J. Fox Foundation and its efficient and effective approach to Parkinson's disease research. Additionally, it examines the history of the Canadian dollar and how its value has fluctuated against the US dollar over the past decades.
This document summarizes key information from a report on U.S. estate tax implications for Canadian clients, including:
- The U.S. presidential candidates have proposed different changes to the U.S. estate tax regime that could impact Canadians subject to it.
- Canadians with over US$60,000 in U.S. assets may need to file a U.S. estate tax return upon death, and could owe tax on the value of those assets depending on their worldwide wealth and credits available.
- The report provides two scenarios to illustrate potential U.S. estate tax implications for a hypothetical Canadian resident based on different levels of total worldwide wealth including U.S. assets.
In this issue:
TD Wealth: Developing a roadmap for success
TD Economics: Oil prices remain a wild card for Canada’s outlook
TD Wealth Asset Allocation Committee: Market Outlook
Running Head COMPREHENSIVE OUTLINE12Running Head COMPREH.docxjoellemurphey
Running Head: COMPREHENSIVE OUTLINE 1
2
Running Head: COMPREHENSIVE OUTLINE
Learning Team Comprehensive Outline
MGT/448 Global Business Strategies
Learning Team Comprehensive Outline
Introduction
Learning Team C has selected nutritional granola bars and the country Canada to enter into a global business venture with. This outline will document pertinent regional, country, and product analysis information which justifies why this new global business venture would be a sound idea for Team C to enter into.
Region Analysis
Canada has regional alliances with numerous countries and has free trade agreements in place with more than 10 countries. These free trade agreements “provide a competitive advantage across a wide range of sectors” states (Foreign Affairs, Trade, and Development Canada, 2014). “Under an FTA, a range of Canadian goods and services benefit from the reduction or elimination of tariff and non-tariff barriers to trade, such as quotas or technical barriers” states (Foreign Affairs, trade, and Development Canada, 2014).
Canada’s Prime Minister Mulroney signed and implemented the North American Free Trade Agreement (NAFTA) with Mexico and the United States in January 1994. “NAFTA has generated economic growth and rising standards of living for the people of all three member countries” states (Foreign Affairs, Trade, and Development Canada, 2014).
Canada has many physical environmental features that effect trade. Canada has the largest border with any other country sharing this with the United States which allows for more trade of farming goods near the borders. Canada also links to three oceans: Artic, Pacific, and Atlantic. This allows for Canada to be a leader in exporting fish (Slideshare.com, 2014). The Great Lakes and St. Lawrence River help to create fertile land for farming in Southern Canada. Here they produce and export canola, wheat, and grain across the globe (Slideshare.com, 2014).
Political stability can be considered as a state of peace that is experienced in a country. This can be caused in large part to the activities of the government keeping in mind the best interests of the people. Thanks to Canada’s political stability, the country can be considered a natural playground. The United Nations ranked Canada one of the best countries in the world in which to live and Canada has also been globally recognized for its outstanding quality of life. It is also known for having a stable, progressive political environment and one of the healthiest economies in the world.
Economic conditions in Canada in 2013 throughout the current year 2014 indicate that Canadians have become more careful with their spending habits. Canadians as a whole appear to be holding on to their funds which have resulted in slow financial growth for the Canadian economy. One way to improve the economic growth would be by having an increase in the demand in exports and business investments which could improve the Canadian econ ...
In this issue:
1. TD Wealth Asset Allocation Committee: Market outlook: the year ahead
2. TD Economics: A foundation for uncertain times
3. TD Wealth: New principal residence exemption rules
3. From Capital Controls To Dollarization American Hegemony And The US DollarDaniel Wachtel
This document discusses dollarization in Latin America and its implications. It makes two key points:
1) Dollarization does not necessarily lead to smooth balance of payments adjustment in emerging markets. Instability and economic crises could increase with the loss of independent monetary policy.
2) The collapse of Bretton Woods increased US economic hegemony through a more widespread use of the US dollar internationally. Countries in Latin America extensively use dollars beyond international transactions.
13. From Capital Controls To Dollarization American Hegemony And The US DollarKayla Jones
This document discusses dollarization and the role of the US dollar in international markets. It makes two key points:
1) Dollarization does not necessarily lead to smooth balance of payments adjustment in peripheral economies. Instability and economic contraction are possible outcomes as these countries lose the ability to use currency devaluation to correct deficits.
2) The collapse of Bretton Woods increased US economic hegemony and the global role of the US dollar. This has been actively pursued by the US to maintain advantages like persistent trade deficits. Dollarization became more widespread after Bretton Woods.
Foreign Takeovers & The Canadian EconomyColinbest
The document discusses foreign takeovers and ownership in Canada and its effects on the Canadian economy. It notes that foreign ownership has increased significantly over the past century as trade barriers were reduced. While some argue this "hollows out" Canadian industry, the document finds that foreign investment has actually increased productivity, wages, and head office employment in Canada. It concludes that fears over loss of national identity must be balanced with the economic benefits of foreign capital.
In the realm of economic speculation, the hypothetical collapse of the dollar is a topic that garners significant attention and curiosity. While the actual collapse of the world's leading reserve currency remains uncertain, it is worth exploring the potential consequences that such an event could trigger. In this article, we delve into the hypothetical realm, examining the possible ramifications of a dollar collapse. Understanding these scenarios can provide insights into the global economic landscape and foster preparedness for potential future shifts.
The document discusses the redenomination of Sierra Leone's currency. It examines the impacts of redenomination on inflation, currency exchange rates, economic growth, and export values. While past studies have found redenomination significantly impacted inflation and economic growth, the document also discusses potential positive impacts. A weaker currency can stimulate exports by making them cheaper for overseas customers. For example, a weaker U.S. dollar allows exporters to offer discounts while still earning the same dollar amount. Overall, the redenomination was meant to modernize Sierra Leone's currency but also had economic and political considerations.
The document discusses the re-denomination of Sierra Leone's currency. It examines the impacts of re-denomination on inflation, currency exchange rates, economic growth, and export values. While re-denomination decisions may seem technical, they are an example of a government's control over its currency and national economy. The study found that inflation and economic growth were significantly affected by Sierra Leone's re-denomination. Both positive and negative outcomes resulted from the re-denomination.
The document discusses the rationale and potential methodical decline of the US dollar as the global reserve currency. It notes that empires that hold the global reserve currency are typically net creditors, but the US has become a net debtor due to large budget and trade deficits. This makes the dollar's status vulnerable. While China has taken steps to challenge the dollar's dominance, the yuan is not ready to become a reserve currency. However, if China and others diversify reserves away from dollars over time, it could lead to a controlled, gradual decline in the dollar rather than a sudden crisis. Technical indicators also suggest monitoring support levels for signs the dollar may begin a longer-term downward trend.
Problem Set 6 Part I Multiple-choice questions 1. Wh.docxwkyra78
Problem Set 6
Part I Multiple-choice questions
1. Which of the following in NOT true about a country’s current account deficit?
a. By definition, an economy running a current account deficit will
experience an overall capital inflow.
b. A current account deficit can mean that a country is “living beyond its
means.”
c. A current account deficit can mean that a country is an “oasis of
prosperity,” attracting investment from around the globe.
d. A current account deficit means that the country is currently lending more
to other countries than it borrows from other countries.
2. What causes the weakness of the dollar? The two factors most often cited are
those mentioned by Fed Chairman Greenspan -- the twin deficits (CNN/Money,
November 19, 2004). What do the “twin deficits” refer to?
a. The trade deficit and the current account deficit.
b. The current account deficit and the budget deficit.
c. The budget deficit and social security deficit.
d. The trade deficit and the financial account deficit.
3. Which of the following is NOT true about the current account balance?
a. It is the net export component in GDP (X).
b. X = Y – E (E = C + I + G)
c. X = ST – I = IF
d. X = SP – I – (T – G)
4. The following five transactions are all entries to be made on the U.S. balance of
payments. For balance-of-payments purposes, four of the five are fundamentally
similar. Which one is different?
a. The Federal Reserve Bank of New York sells dollars in the foreign
exchange market.
b. An American tourist on vacation spends francs in Paris.
c. A South American country sells coffee in New York.
d. A British shipping firm is paid to carry an American export commodity
abroad.
e. An American computer company receives an order for software programs
from Germany.
5. According to the purchasing-power-parity (PPP) theory of exchange rates:
a. exchange rates tend to move with changes in relative price level of
different countries.
b. applies better to the long run than the short run.
c. applies better to the short run than the long run.
d. A and B.
e. A and C.
6. If the market exchange rate between Swiss francs and U.S. dollars were to change
from Sfr. 4 to the dollar to Sfr. 3 to the dollar, then the franc’s price must have:
a. risen from 25 cents to 33 cents, and the dollar has appreciated relative to
the franc.
b. fallen from 33 cents to 25 cents, and the dollar has depreciated relative to
the franc.
c. risen from 25 cents to 33 cents, and the dollar has, been devalued relative
to the franc.
d. risen from 25 cents to 33 cents, and the dollar has depreciated relative to
the franc.
e. fallen from 33 cents to 25 cents, and the dollar has appreciated relative to
the franc.
7. Suppose that the exports of Country A to Country B have increased substantially
and that both A and B operate on the gold standard. According to David Hume’s
gold-flow mechan ...
1. Reflation Phase To Be Temporary, More Downside Ahead
Earlier on in 2016, ‘random and violent markets’ went off to panic mode out of (i) fears over China’s messy stock market and devaluing currency, (ii) plummeting oil price, (iii) strong US Dollar. Today, we believe complacent markets are similarly illogical and over-shooting, this time on the way up. As we re-assess the validity of the underlying risks, we expect a shift in narrative in the few months ahead and a sizeable sell-off for risk assets.
2. Four Key Conviction Ideas
We analyze below our key ideas for the next 12 months:
Short Chinese Renminbi Thesis. In Q1, China only managed to keep GDP in shape by means of graciously expanding credit by a monumental 1 trn $. Unsurprisingly, at 250% total debt on GDP, you cannot borrow 10% of GDP per quarter for long, without a currency adjustment, whether desired or not.
Short Oil Thesis. Long-term, we believe Oil will follow a volatile path around a declining trend-line, which will take it one day to sub-10$. Within 2016, we expect global aggregate demand to stay anemic and supply to surprise on the upside, inventories to grow, primarily due to the accelerating speed of technological progress.
Short S&P Thesis. To us, the S&P is priced to perfection, despite a most cloudy environment for growth and risk assets, thus representing a good value short, for limited upside is combined with the risk of a sizeable sell-off in the months ahead.
Short European Banks Thesis. We believe that micro policies at the local level, while valid, are impotent against heavy structural macro headwinds, and only the macro environment can save the banking sector in its current form in the longer-term. Macro structural headwinds for banks these days are too heavy a burden (negative sloped interest rate curves, deeply negative interest rates, deflationary economy, depressed GDP growth, over-regulation, Fintech), and will likely push valuations to new lows in the months/years ahead.
Sprung Investment Management is an independent investment management firm that serves high net worth private clients. It focuses on creating customized portfolios to achieve clients' long-term investment goals through principled analysis and integrity. The firm takes a value-driven approach to selecting undervalued securities with a margin of safety for preserving capital and delivering income and growth. It has a track record of low volatility returns since 2005 and performance numbers are available upon request.
The document provides an overview and analysis of the ongoing global deleveraging process. Some key points:
- Deleveraging to reduce excessive debt levels will be a lengthy process taking years to complete. Minimal progress has been made so far in the US and Europe.
- Canada has avoided the worst effects but is still tied to the struggling US economy. Slow economic growth and low interest rates are expected to continue.
- Investors should focus on secure income streams from dividends and real estate to weather volatility in the markets during this prolonged period of economic uncertainty and transition.
Similar to Learning To Live With A Strong Canadian Dollar Conference Board Of Canada (20)
Learning To Live With A Strong Canadian Dollar Conference Board Of Canada
1. Briefing April 2010
Learning to Live With a
Strong Canadian Dollar
Four Options for Business
and Government
T
he loonie is flying high once again. With the
at a Glance economic recovery starting to take hold, the
TheCanadiandollarisatparitywithitsU.S. Canadian dollar has settled in comfortably at
counterpart,anditislikelytoremainstrong parity with the U.S. dollar, and it is getting ready to
foralongtimetocome. soar even higher on occasion, once the global recovery
becomes more widespread and sustained. Will a soaring
Firmsmusttakeactiontoadapttolifewitha loonie finally provide the boost to productivity that
strongloonie—the“donothing”approachis Canadian firms need? Or will Canadian firms become a
notaviableoption. victim of a strong currency and contract “Dutch disease”?
Afloatingexchangeratepolicyremainsthe
bestpolicycourseforCanada. This briefing for The Conference Board of Canada’s
International Trade and Investment Centre examines the
Forfirmsthatareableandwillingtoadapt,a implications of a strong currency for Canadian businesses
strongCanadiandollarmaybejustthechal- and the Canadian economy, and it provides four options
lengethatunlocksaneweconomicpotential— and related strategies for adapting to a strong currency.
throughenhancedinnovation,fasterproductivity
growth,andexpandedinternationalization.
Trade, InvesTmenT PolIcy and InTernaTIonal cooPeraTIon
2. 2 | LearningtoLiveWithaStrongCanadianDollar—April2010
conTexT lIvInG WITh a sTronG canadIan
dollar: The oPTIons avaIlable
Over the past year, the Canadian dollar has moved
steadily higher, going from a floor of about 77 cents U.S. So how might firms operating in Canada respond to the
a year ago during the worst of the global economic reces- structural repositioning of the loonie? There are a range of
sion to just below parity with the U.S. dollar today. In available options, with wide variation in the implications.
fact, the loonie started to rise in value well ahead of Here are the four most likely choices:
the recovery in global and Canadian growth, propelled
by a rebound in commodity prices (particularly global 1. do noThInG
oil prices) and by Canada’s relative attractiveness as an The first option is both easy and extremely painful—do
investment destination. nothing. If Canadian firms (and the entire economy
for that matter) fail to respond to the upward structural
realignment of the Canadian dollar, they will slowly lose
canada’s solid banking system, solid domestic economy, their international competitiveness and eventually contract
relatively healthy fiscal situation, and wealth in raw what is called “Dutch disease.” Dutch disease is the loss
materials will continue to support a strong loonie. of international competitiveness due to a stronger currency
that is pushed upward by higher prices for key commodity
exports. In the case of the Netherlands, the guilder was
The loonie’s rise is also the flip-side of the downward pushed progressively higher during the 1960s and 1970s
slide in the value of other major currencies—the U.S. by the revenues from the sale of natural gas from reserves
greenback, the British pound, and more recently, the in the North Sea. A rising guilder gradually eroded the
euro. Global currency markets are highly volatile right competitiveness of Dutch manufacturing, which did not
now due to the deep uncertainty that exists in many adapt quickly enough to the new exchange rate reality—
major economies. The U.S. economic recovery is still hence the name “Dutch disease.”
not fully assured. The financial crisis and recession has
taken a heavy toll on the British economy and on the
pound. And recent events within the euro zone, such as “doing nothing” is not a desirable or realistic scenario
the fiscal tragedies in Greece and Portugal, are raising for canadian businesses or the economy as a whole.
questions about the credibility of the euro. As a conse-
quence, investments in the Canadian dollar look awfully
good compared with investments denominated in many The conditions for Dutch disease are already occurring in
other currencies. Canada. The issue is whether firms will adapt, or contract
the disease and potentially expire. If firms do nothing,
For the foreseeable future, Canada’s solid banking system, there is much greater risk of contracting a serious case
solid domestic economy, relatively healthy fiscal situation, of Dutch disease. Therefore, doing nothing is not a
and wealth in raw materials (especially oil) will continue desirable or realistic scenario for Canadian businesses
to support a strong loonie. These fundamentals suggest or the economy as a whole, and it should be set aside
that the Canadian dollar will remain roughly at parity with as a credible option.
the greenback over the near term. Moreover, the loonie
could be pushed beyond par by factors such as a sharp 2. adoPT a FIxed exchanGe raTe
rise in oil prices or a period of positive interest rate A second option would be to consider a fundamental
differentials. In short, the signs point to continued change in Canada’s exchange rate policy, specifically by
strength in the Canadian dollar for some time to come. adopting a fixed exchange rate policy through pegging
the loonie to the U.S. dollar. In recent years, the idea of
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3. TheConferenceBoardofCanada | 3
fixing the loonie to the U.S. dollar has been raised with reached in 2002 when the Canadian dollar fell to 62 cents?
the Conference Board by numerous people in business, Presumably it isn’t the top of the trading range for the
and by a few in public policy. Some Canadian economists loonie, which briefly traded at US$1.10 in 2008. Or should
and media commentators have argued that Canadians a fixed rate fall somewhere in between, such as the point
would be better off if the country adopted a fixed where analysts think that purchasing power in the U.S. and
exchange rate policy.1 Canada is equalized—which is probably around 85 cents?
Under this line of argument, the Canadian dollar would The level at which the exchange rate is fixed would be
be pegged against its U.S. counterpart, thus effectively critical. There are economic winners and losers at any
removing currency fluctuations from decision making by exchange rate level, and the gains or losses would be
businesses and consumers. Alternative ideas, such as a long-lasting under a fixed exchange rate system. For
target exchange rate within a trading band, have also been example, exporters with high Canadian costs and a low
raised. A more extreme arrangement would see the loonie level of imports in their production process might prefer
disappear and the U.S. greenback adopted as Canada’s a pegged rate below 70 cents. Firms with a high import
currency, either unilaterally or under a full monetary content in their production process would favour a
union, similar to what has occurred under the euro zone. stronger currency, as would heavy consumers of imported
goods. At the extreme, Canadians on vacation in Florida
or Arizona, not to mention professional sports franchises
some economists have argued that canadians would be based in Canada with revenues in Canadian dollars and
better off if a fixed exchange rate policy was adopted. U.S. dollar salaries for players, would love a pegged
rate above US$1.00.
Advocates of a fixed exchange rate policy emphasize the
potential benefits of exchange rate stability. It is argued advocates of a fixed exchange rate policy emphasize the
that a fixed exchange rate with our dominant trade and potential benefits of exchange rate stability.
investment partner—the United States—would help to
maintain our international competitiveness. Stable prices
would be established for the majority of Canada’s traded The second critical issue is the impact of a fixed exchange
goods and services, and for much of our international rate on Canadian monetary policy. If we decided to peg
investment. However, the advocates of such a system the loonie to the U.S. dollar, we essentially would be
seldom give sufficient weight to the thorny economic eliminating the Bank of Canada’s latitude to establish an
policy and political decisions that would arise if we independent monetary policy for Canada. The Bank would
were to implement, and then try to maintain, a fixed have to follow the interest rate path determined by the U.S.
exchange rate policy. Federal Reserve Board in order to maintain the pegged
exchange rate. Tight controls on international capital flows
Three policy issues are of critical importance. First, we would be required in order to manage the movement of
would have to select the “right” exchange rate for pegging investment funds in and out of the country, since these
ourselves to the U.S. dollar. Is the “right” exchange rate movements influence the exchange rate. Of course, inter-
at the bottom of the historical trading range, which we national capital controls would cause other problems—
such as creating a barrier to increased investment, both
within Canada and offshore, by Canadian firms seeking
1 SeeThomasCourchene,“Canada’sFloatingRateNeedsFixing,”
Policy Options(February2008),pp.24–28;orNeilReynolds, to globalize their business.
“DollarWoes:AMonetaryUnionSolution,”The Globe and Mail
(November16,2007),p.B2.
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4. 4 | LearningtoLiveWithaStrongCanadianDollar—April2010
U.S. monetary policy is determined by U.S. economic shock—which could make for very difficult politics.
conditions, not by conditions here in Canada. Without And the political elephant in the room would be the
the establishment of a common currency area, it is highly potential—some might say the inevitable—erosion of
improbable that Canada would have a direct role in the Canadian political sovereignty if we were to peg the
Fed’s decision making; and the Canadian tail would Canadian dollar to the greenback.
be unable to wag the American dog when it came to
a common monetary policy. The bottom line on exchange rate policy is that Canada
has chosen to allow the exchange rate to float and adjust
Third, and perhaps most importantly, under a pegged to global forces. When global growth has weakened and
exchange rate, any external shocks or imbalances would commodity prices have fallen, the exchange rate has acted
need to be addressed by purely domestic adjustments in as a shock absorber—falling and thereby cushioning the
fiscal policy and in wages. The exchange rate could no impact on revenues and income. When commodity prices
longer be used to offset external shocks. and economic growth have been strong, the Canadian
dollar has risen in value—as is the case today. The cur-
rent system has served Canada well for many decades,
When commodity prices and economic growth have been notwithstanding the need to adapt to sharp exchange rate
strong, the canadian dollar has risen in value. movements and structural shifts—also the case today.
A floating exchange rate policy remains the best policy
course for Canada, and the fixed exchange rate option
A recent sharp external shock illustrates the point. should also be set aside. Like the “do nothing” option, a
Commodity prices collapsed in the fall of 2008 as a fixed exchange rate is not a desirable or realistic scenario
result of the financial crisis. If Canada had been under for Canadian businesses or the economy.
a fixed exchange rate regime at that time, it would have
had to cut wages and public spending in order to adjust
to the external shock and rebalance the country’s exter- Under a pegged exchange rate, any external shocks or
nal accounts. But under the existing floating currency balances would need to be addressed by purely domestic
system, the exchange rate took the hit from a collapse adjustments in fiscal policy and in wages.
in commodity prices, and the Canadian dollar drifted
down to around 80 cents.
3. boosT ProdUcTIvITy GroWTh
The natural reluctance of business leaders and ordinary The third and fourth options are challenging for businesses,
citizens to be required to adjust domestic wages and but also create the potential for significant rewards over
government spending in order to re-stabilize the external the long term.
accounts is one key reason why most countries have
moved away from a fixed exchange rate policy over The third option calls for Canadian firms to respond to the
the past 30 years. Recent events within the euro zone, structural shift upward in the loonie by becoming more
for example, provide more real-time illustrations of the productive and efficient. They would seek out ways to re-
challenges of implementing domestic economic policy invent themselves, re-structure their operations globally,
within a fixed exchange rate system. and create an internal culture of innovation that feeds
stronger productivity growth. Firms would no longer be
Then there are the politics of a fixed exchange rate able to rely on a cheap dollar for their competitiveness;
system. As noted, increases or decreases in public they would have to increase their productivity through
spending would be required to adjust to an external improved innovation, or risk contraction—even extinction.
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5. TheConferenceBoardofCanada | 5
Most economists would agree that a strong Canadian
dollar should act as a catalyst for stronger productivity chart 1
growth. A strong loonie makes imported goods—includ- LabourProductivityGrowth
(percent)
ing imported technology that can help firms become more
efficient—cheaper. But things are seldom that simple or Canada U.S.
linear in the real world. As but one example of this, the 2.0
Canadian national accounts data for the fourth quarter of 1.8
2009 indicated that investment in machinery and equip- 1.6
1.4
ment, much of which is imported, actually fell by 2.4 per 1.2
cent even as the dollar was rising in value. We suspect 1.0
that this was an aberration that will be corrected over 0.8
0.6
the coming quarters, but it does suggest that a strong 0.4
currency and the resulting lower import prices may 1970s 1980s 1990s 2000s
not be sufficient on their own to produce a sustained
improvement in Canada’s productivity performance. Source:TheConferenceBoardofCanada.
most economists would agree that a strong canadian dollar re-energizing free trade and investment within north
should act as a catalyst for stronger productivity growth. america and globally. (The recent Conference Board
report Re-Energizing Canada’s International Trade:
Strategies for Post-Recession Success2 provides
For many years now, The Conference Board of Canada detailed analysis and guidance on how to strengthen
has advised firms and governments to develop and imple- trade policy and strategy.)
ment a strategic plan to improve Canada’s dismal track
record on productivity growth. (See Chart 1.) There is Action on all these fronts should be supported by
no silver bullet for “fixing” productivity, but action on a adopting a culture of innovation within Canadian
number of fronts should contribute to better performance organizations—one in which new ideas and measured
by firms and by the entire economy. These include: risk-taking are encouraged. There are many competing
Fostering stronger investment in physical capital. Recent definitions for innovation, but in the simplest terms,
tax reform—such as the elimination of federal and innovation is making changes—both big and small—
some provincial capital taxes, and lower corporate that create value. These changes can lead to increased
income tax rates—should create better incentives productivity, improved efficiency, or the launching of
for capital investment. new initiatives, thereby creating value by increasing
deepening canada’s human capital through increased profits for firms or strengthening the financial capacity
investment in people. Renewed public investment in of public sector organizations. In an ever-more integrated
education by governments, but also enhanced training and competitive global economy, innovation will be
and development by private firms, would contribute the factor that separates mediocre from good, and good
to human capital development in Canada. from great.
reducing barriers across the economy and improving
the alignment of regulations. Some progress has been Implementing a strategic plan to improve productivity
made on this front in recent years—such as the Trade, growth (see Exhibit 1) will be a critical part of adapting
Investment, and Labour Mobility Agreement (TILMA) to a strong loonie.
between Alberta and British Columbia, and improved
regulatory alignment between different levels of gov-
ernment on environmental assessments of projects— 2 TheConferenceBoardofCanada,Re-Energizing Canada’s
International Trade: Strategies for Post-Recession Success
but this remains an unfinished agenda. (Ottawa:Author,2010).
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6. 6 | LearningtoLiveWithaStrongCanadianDollar—April2010
against currency fluctuations within their overall oper-
exhibit 1 ations. The reason is that firms that are highly “internation-
Productivity:AConceptualPolicyFramework alized” are likely to have more flexibility in their operating
structures. In general, manufacturing industries, as well as
mining and oil and gas extraction industries, are the most
broadly internationalized—and firms in these industries
are therefore likely to have an operational hedging strategy
built into their business model.
Skills/Human Innovation
capital In contrast, service industries may be more exposed to cur-
rency volatility since they have fewer means within their
Investment
tio operations of hedging against dollar volatility. Industries
me
nt
Na
n al
o p e r a ti n g e n v i r o n that are highly reliant on foreign markets and suppliers,
in cl
u d i n g i n fr a s tr u c t u r e as well as those with limited strategies for doing business
N ort
h A m e ri c a n i n t e g r a ti o n in international markets, are not as well positioned to
Inter respond to fluctuations in the exchange rate.
n a ti o n a l ent
tr a d e a n d in v e st m
Dollar Volatility: Who Should Care? used four indica-
Source:TheConferenceBoardofCanada. tors to identify the degree to which 27 industries rely on
international transactions to conduct business, and the
nature of that internationalization. The four indicators
4. exPand The InTernaTIonalIzaTIon were: export intensity, import intensity of inputs, import
oF canadIan bUsInesses intensity of machinery and equipment investment, and
Option four is closely interlinked with option three, the extent of Canadian direct investment abroad. High
and would see more Canadian firms embrace various rankings on multiple indicators indicated a high level of
forms of engagement in international business in order internationalization for the manufacturing, mining, and
to be competitive. oil and gas extraction industries. (The report provides the
industry sector analysis in detail.)
Rapid movements in the exchange rate have made it
increasingly difficult for some businesses to develop a
workable cost structure. A recent 2010 Conference Board service industries may be more exposed to currency
report Dollar Volatility: Who Should Care?3 identified volatility because they have fewer means within their
the industries that are most and least exposed to rapid operation of hedging against dollar volatility.
changes in the value of the currency, such as we have
seen the past two years. The report provided some
surprising insights. The implication of this research is that Canadian
industries must continue to internationalize in order to
The conventional view is that manufacturers were more remain competitive. A firm that uses various approaches
highly exposed to currency fluctuation, since they rely to globalization simultaneously will be better positioned
more on exports than do other industrial sectors. But to reduce the financial risks associated with changes in
the Conference Board’s finding was that manufacturing the value of the Canadian dollar, and with the strong
industries, along with the mining and oil and gas extrac- dollar we see today.
tion industries, are the most able to weather a volatile
Canadian dollar because they have more ways to hedge Businesses, particularly small and medium-sized enter-
prises, need to examine where they fit into global supply
3 ValériePoulinandLouisThériault,Dollar Volatility: Who Should chains and to identify risks and opportunities in the
Care?(Ottawa:TheConferenceBoardofCanada,2010). international marketplace. Internationalizing also means
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7. TheConferenceBoardofCanada | 7
forming strategic partnerships with other firms and indus- Canadian businesses will have to come to grips with this
tries to share resources, risk, expertise, and capital in new reality. Ignoring the problem, or implementing quick
foreign markets. Policy makers can undertake indirect fixes, won’t work. While we have set out four options for
measures to prepare for and mitigate exchange rate effects adjusting to a strong loonie, in truth only two interrelated
on Canadian industries. These measures include increasing strategies will work—boosting productivity within firms
trade liberalization and renewing policies that encourage and across the economy, and expanding the international-
both inward and outbound foreign direct investment. ization of Canadian businesses.
Canadian firms are now being exposed to the Dutch
Policy makers can undertake indirect measures to mitigate disease virus. Some firms will not be able to adapt
exchange rate effects on canadian industries. quickly enough to the upward shift in the loonie, just
as some firms were unable to adapt to earlier structural
changes (such as the Free Trade Agreement, or much
higher energy and commodity prices). These firms will
conclUsIon fall prey and could well succumb to Dutch disease.
Driven higher by the still modest economic recovery, But for firms that are able and willing to adapt, a strong
the Canadian dollar is now at par with the U.S. dollar, and Canadian dollar may be just the challenge that unlocks
it could soar further once the global recovery becomes a new economic potential—through enhanced innovation,
more widespread and sustained. Our view is that the faster productivity growth, and expanded international-
Canadian dollar will remain a strong currency for some ization of their business strategy and operations.
time to come.
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8. acknowledgements
author Internal reviewers external reviewer
Glen Hodgson Louis Thériault and Danielle Goldfarb Christopher Ragan
The Conference Board of Canada would like to thank external reviewer Christopher Ragan of the federal Department of Finance and McGill
University, for his comments and suggestions, which were offered in his personal capacity and do not necessarily represent the views of his
organization. Any errors of fact or interpretation are solely the responsibility of the author and The Conference Board of Canada.
InTernaTIonal Trade and InvesTmenT cenTre members
The Conference Board of Canada is also grateful to the champion and lead members of the International Trade and Investment Centre
who, through their membership, support the Centre’s research program.1
aboUT The InTernaTIonal Trade and InvesTmenT cenTre
The International Trade and Investment Centre aims to help Canadian leaders better understand what global economic dynamics—such as
global and regional supply chains—mean for public policies and business strategies. The Centre brings together business and government
leaders in an off-the-record forum to discuss successful trade and investment strategies. The Centre’s independent, evidence-based reports
propose effective policy and business solutions for improving Canada’s trade and investment performance.
champion members Business Development Bank of Canada Natural Resources Canada
Export Development Canada Canada Economic Development Ontario Ministry of Economic
Foreign Affairs and International Canada Mortgage and Housing Corporation Development and Trade
Trade Canada Farm Credit Canada RBC Financial Group
Forest Products Association of Canada Sun Life Financial Inc.
lead members Industry Canada
Alberta International and Ministère du Développement
Intergovernmental Relations économique, de l’Innovation
et de l’Exportation du Québec
For more InFormaTIon
Please visit www.conferenceboard.ca/ITIC.
1 Theseorganizationsdonotnecessarilyendorsetheresearchconclusionsofthispaper.