American/Canadian dollar?

[cowman]

I think the Canadian dollar hit $86.80 US yesterday? I would think that very soon the US trade deficit with Canada should begin to move the other way? In other words more American products should be entering Canada and less Canadian products entering the US?
I will admit this whole dollar thing baffles me. For example: If I had $1,000 in 2002, when the Canadian dollar was worth 63 cents US($630 US) then today my $1,000 is worth $868 US...or 37.8% more? So in three years my $1,000 earned real value of close to 12.6% per year...just on the changing value?
Now this seems absurb because it doesn't seem to have anymore buying power!
How can any reasonable market exist when the money difference is all over the map like this? For really effective free trade wouldn't it make more sense if Canada/America/Mexico had a common currency?
The way it is now, when we sell 600 lbs calves for $1.30, how does that relate to what we were getting in 2002...if we put it into American dollars? In 2002 our $1.30 calf was worth $.82 US($491)? That is what an American feedlot paid for them in US dollars. In 2005 our calf was worth $1.13 US($677)?
Can you understand how a group like R-CALF might be a bit upset here? In 2002 a lot of calves went south, partly due to the drought, but a lot to do with the dollar difference? Due to the cheap Canadian dollar the American cow/calf man saw their market undercut. And I would say they had a valid concern?
I have often wondered how Australia could ship old cows to Canada and compete with our 20 cent cows and I suspect it is this same sort of monetary inbalance? Someone can manipulate the money supply to get pretty well any result they want, it seems?
I suspect the Bank of Canada was manipulating the money difference in some way...and I suspect it is being done again...only the other way? I will admit I sure don't understand how these bankers do it!
How can two countries have real free and fair trade without a common money supply or some kind of control over what the bankers do? These parasites can basically control both countries monetary policy and therefore pick the winners and the losers? How did our governments ever let this get out of their control? Who actually makes the decisions at the Bank of Canada...and the American Fed? Is it the governments or private bankers?

[wmoebis]

Drives me crazy too. USA bushell of wheat is smaller and price is quoted in US dollar we never know wether we are comparing apples to apples. Grain moiture and protien tables are different in the USA. Same grain is actully drier in the US than it is in Canada. I thought moisture was moisture and % was %.
Go for repairs they say price took a big jump because of our dollar value but it never goes back down when our dollar raises.

[cowman]

It certainly would be helpful if we had a more standardized system in place with the USA? Liters, American gallons, Imperial gallons, acres and hectares...all kinds of fun?
In the world of commercial spraying metric has basically become the standard, but not exclusively! Quite often you deal with people who still are lost in the dark ages and have no concept of Metric? This can lead to problems and mistakes! This goofy dual system we have can be a problem.

[farmers_son]

I found this item interesting, note the reference at the end to a country deliberately devaluing its currency. I believe this is what is happening in the United States.

http://www.theroyalgazette.com/apps/pbcs.dll/article?AID=/20051016/BUSINESS/110160098

What does depreciation or devaluation of a currency mean? Let's examine the concept of devaluation by starting with just the opposite. How do you value anything?
Tangibles (physical things) carry their own perceived value: a 200-year old chair, an Old Master's original oil painting, a litre of gas, a pound of Angus strip sirloin, a diamond ring, a gold watch. As the old saying goes, 'beauty is in the eye of the beholder' and the law of supply and demand always determines 'real' market value.
Intangibles, such as stocks and money, have no value on their own. Yes, stocks generally sport a market value (what a willing buyer and seller will exchange consideration for), and paper money has a value assigned to it (printed on it). The real value, though, comes from (derived) the underlying (the adjective becomes a noun in the investment industry). Without the underlying to provide backup value, there is little or no value.
So how is value determined? Stocks are equity holdings in a company. If the company has a strong financial balance sheet; runs a tight ship; has good corporate governance; keeps debt under control; performs consistently in good and bad times; and provides continued growth, its performance inspires confidence plus great creditworthy ratings from independent rating agencies.

The Value of Paper money also derives from the value of the underlying. At one time, money was real; you could bite it to test if its metal was real. Originally when paper money, being more practical, was introduced, it was backed by the gold standard. Now the underlying (value derived) is the fiscal strength of the country and its government. Make no mistake; a country is a business and receives agency ratings just like any other business. When considering the enhanced value derived from a country, the criteria are the much the same: a stable environment, good corporate governance including a system of checks and balances (law enforcement, military), manageable debt (balance of payments), independent oversight and democratisation of processes, public sector transparency, consumer and environmental protection, an excellent legal system, ability to provide for its citizens in social safety net, and wonderfully, if available, natural resources.
Countries that can provide all of the above along with being uniquely situated to reap profits from oil, say, or mineral rich mine deposits have a natural advantage. In a country as small as Bermuda, the only natural resources are far more limited: the beauty of its natural surroundings, the stability of its economy and monetary system, and the good will of its people. Natural or otherwise, to generate hard cash, tangible and intangible resources still have to be marketed and sold to foreign investors (tourist, industry and the like).
Currencies have two classifications: hard currency, usually from a strong industrialised country, is that which everyone has confidence in (because it is a safe haven in times of international tension) and everyone consequently wants, such as US dollars, euros, the British pound, the Japanese yen and the Swiss franc. Soft currencies, on the other hand, generally from less sophisticated, smaller countries, are considered less preferable during times of increased inflation, political or military risk.
Floating helps. The major hard currencies have floated against each other, in sort of a popularity contest, in the largest exchange in the world – in excess of a trillion dollars – and at all times are appreciating or depreciating against each value. Currently, the US dollar is tending to depreciate against the pound, the euro, the yen and others, even though the opposite has been true as well over the years, where the US dollar dominated. Those travellers from Europe and the Far East are enjoying their currency strength by laying off lots of risk at the gambling tables in Las Vegas, and other US dollar cheap destinations.
Smaller or less economically powerful countries, in order to provide confidence in their currency, will allow it to float in value (or in some cases peg) with a very stable hard currency. The Chinese renminbi, for instance, is pegged to the US dollar while Panama has no native currency, using the US dollar instead.

What causes a currency to depreciate/appreciate? Perception, rumour, trade deficits, capital outflows, low foreign reserves, economic instability, sound (or unsound) fiscal policies, inability to spend outside home country, favourable (or unrealistic) exchange rates, etc. What is often not realised is that even major currencies at one time or another have been considered structurally unsound – the pound after the Second World War. Additionally, in a real devaluation, the country (government or central bank) may deliberately devalue a currency to attract foreign investment and thus reduce its balance of payments. The opposite effect of such a calculated strategy is higher local costs of almost everything for the domestic population.

[Rodjam]

In simple terms this is how it works. The country with the strongest economy will have investors wanting to put their money there. As investment increases so does the demand for that countries currency. Right now the US is borrowing money as and spending it twice as fast, that little skirmish in Iraq turns out to be a little costly. Shrewd investors know that there will be a day when that money needs to be paid back. Here in Canada our economy is strong and we have our spending under control, well at least the bugdet is balanced. The result is investors choose Canada over the US and that increases demand for our currency and it becomes stronger against the US currency. Supply and demand.

[cowman]

In simple terms supply and demand...but what about when the Bank of Canada(or US FED) intervene to either prop up or drop the value of the currency? For whatever reason?
What happens when a country deliberately drops the value of its currency to promote exports or impede imports?
I don't think anyone would argue that the lower American dollar has had an impact on Canadian beef/cattle prices?
Now who is making the decision to manipulate the money markets? Is it government doing it for the good of the country or is it private bankers doing it for their own reasons?
Who actually owns the Bank of Canada and the American Federal Reserve? Who is making fiscal policy in both countries?

[Rodjam]

The Gov't uses the Bank of Canada to manipulate the value of the dollar by increasing or lowering interest rates. High interest rates increase investment and lower spending. Lower rates mean more borrowing and less investment. The wisdom of the government tries to take the place of the natural capitalist business cycle. In essence remove the extreme swings that occur naturally in a capitalist economy. For some reading on the topic do a search on Supply side economics and Demand side economics, also try a search on John Maynerd Keanes.

[cowman]

Okay, I understand all that. But who controls the bank of Canada and the Federal Reserve in the USA?
The Bank of Canada is basically autonomous? The governer of the bank(David Dodge) answers to basically no one. The Finance minister can exert some influence over him through the governing council. So who is David Dodge? Well he was Paul Martins assistant when he was finance minister! Do you think this might give Paul Martin personally a lot of influence in bank of Canada policy?
The US federal Reserve is actually a consortium of private banks! It is not a government agency! Can you see there might be a conflict of interest in this situation? Could these private bankers manipulate the money supply to benifit their own interests?
I find it strange that the relationship between the American and Canadian dollar is all over the map? I suspect billions are being made everyday on these wild fluctuations? I often wonder if the exchange rate is being manipulated for someones personal gain?
The banks that make up the US Federal Reserve are:
Rothchilde Bank of London
Rothchilde Bank of Berlin
Warburg Bank of Hamburg
Warburg Bank of Ampsterdam
Lehman Bros. of New York
Lazard Bros. of Paris
Kuhn Loeb Bank of New York
Israel Moses Seif Bank of Italy
Goldman Sachs of New York
Chase Manhatten Bank of New York

Kind of an interesting list who control the US money supply?