Loonie keeps on flying, US headed for disaster (maybe)

Is it a sign of the times that once again the Canadian dollar is flying above the greenback?   That despite ongoing pressures in Europe the Euro still remains a very viable currency against the Simply Ben for what can be foreseen to be quite some time to come (and growing, with Estonia joining the club on Saturday)?

I don't honestly know.   But according to the CIA (yes, that one), the US is now at about 83.5% debt to GDP -- Canada, by comparison, is at about 40%.   Despite some irresponsible deficits the last few years under "Steve" (not all of which can be explained away by the recession and a decline of revenues from income withholding tax) -- and the ongoing problems in Europe and Japan -- Canada will stop swapping currency with the EU sometime in 2014 and Japan in 2019 while swaps with The Fed will go on far as the eye can see.   That's how bad it is for the States, that they have to be bailed out not only by enemies like Red China but also by friends such as NATO!

Not that we should be in any way complacent.   The last time we hit parity three years ago it was actually a slap in the face as many companies rode the coattails of a low dollar and didn't make the proper investments to upgrade equipment for when the currency advantage eroded ... of course most of us have wizened up and are not so surprised this time.

I honestly don't think Americans still get it.   They usually don't unless they go to the currency exchange counter.  It wasn't that long ago, say a decade ago, when Americans were laughing at how cheap it was to travel to Europe -- with the Euro down to about 87 cents (when it was still a virtual currency) people were renting out entire villas in Provençe and the Apennines instead of instead of cramped shoe boxes in downtown Paris or Rome.   Now it's the Europeans who in spite of their many problems are having a ball when they travel to the States.   It'll be a while before the Euro gets back up to its high two years ago of $1.60 but right now it's at about $1.31, well up from the year's low of $1.19 when all hell broke out in Greece.

Don't believe for a second that any of the PIIGS will withdraw from the Euro.   When you're in you're in.   The fact Canada's central bank (along side those of other middle powers, such as Australia, Sweden and Switzerland) still sees the Euro, and not the greenback, as the future reserve currency for the world, should make it clear that we have our fundamentals generally right.   If we can get back to more reliable income streams (i.e. cut income taxes, shift to consumption -- while ensuring the lower and middle classes don't get shafted) we'll do even better.

Reminds me of the old joke from the 1980s, when Lee Iacocca allegedly said, "Talk of bailing out the government may be a bit premature."   He was only off by 28 years -- and he warned the world then that America was headed for disaster if it didn't get its financial house in order.   Will be interesting to see what the self described Tea Party tries to do -- my guess is once all the hype settles, they'll see how entrenched things are and will make the deficit even worse.  They should have stuck with tea baggers and sloppy seconds -- sexual innuendo aside, it would have been much more appropriate.

But Iacocca did say that his country needed to raise the revenues which while correct is the last thing anyone -- left or right -- wants to do right now.   They blew their chance when they had the chance, and it's just a matter of when, not if, the US goes cap in hand to the IMF for a loan.   They'll get it all right -- on condition that they lose their long time sole veto over it and the World Bank.   About damn time -- the rationale for the States having that kind of sway ended mere seconds after the ink dried at Bretton Woods in 1944 just a month after D-Day.

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