Having created a public service worthy of international respect, Canadian governments have striven to keep up with the coolest innovations in public policy. Indeed, in keeping up with what the United States had to do in the early '70s, Canada did a dangerous thing that it didn’t have to. When Richard Nixon was forced by global economic dynamics to float the globe’s reserve currency, Canada instantly followed suit. Our dollar has been managed as a modern world currency ever since, and that pretense has depreciated our North American interests and middle class.
A stand-alone, freely floating Canadian dollar has been a source of pride to modern nation-builders. Unfortunately, it’s floated above critical analysis. Akin to high Anglicanism, it’s a faith now that’s impossible to explain. Unlike Anglicanism, however, Canada’s floating god literally tithes both believers and the rest of us.
Hundreds of highly trained monetary economists are employed at the Bank of Canada, protecting its freedom to ignore the Canada-US exchange rate. They disseminate one circular dictate: it doesn’t matter what happens to the wider economy when the dollar rises or falls, so long as those directly elected to manage the economy stay out of the way. Private speculation is healthy, so long as it is not about what the government thinks.
This morning in the National Post, Andrew Coyne offered the lay sermon on the proper separation of the Church of the Unpredictable Dollar and any biases amongst amateur politicians.
“It is, of course, not a given that even a 10% devaluation will be manufacturing’s salvation — with the pressure off, businesses may feel less impetus to make the adjustments needed to regain competitiveness — but whatever gain there may be to exporters comes at the expense of everyone else, in the form of higher prices for imported goods and services."
“There’s nothing wrong with a falling dollar, in itself: indeed, the fundamentals may well support a decline. But that is a different thing than a deliberate policy of devaluation, which is no more to be desired than a policy of propping it up: both subordinate the proper objectives of monetary policy, domestic price stability, to an extraneous target.”
Coyne makes dogma sound sophisticated by appearing to please no one.
The “fundamentals” are never enumerated, let alone weighed against one another. Conceivably, the fundamental that drives the driverless Canadian dollar is theological: above all, our monetarists must be as orthodox and as in charge as their so-called peers in Washington, London, Tokyo, and Frankfurt.
That would be fine, if it was free.
However, although it’s a crap shoot what the recent 10% devaluation of the Canadian dollar will do for or against individual producers in the Canadian economy, it’s blindingly obvious what it is doing to hard-pressed middle-class consumers. In three short quarters, their standard of living has declined by 10%.
Maybe they didn’t deserve the 10% income boost they received over the last half-decade. They didn’t recently lose that 10%, however, because they weren’t willing to be more productive or accept controversial policies to make Canada more competitive.
They’re losing that purchasing power relief simply because policy elites in Ottawa, in its Parliament and its bureaucracies, either refuse to consider the benefits of monetary union with the US or secretly hope that their homemade dollar will float down and stay there. The country will be that much poorer. But basic economic change will be less urgent — and governing that much easier.
Canada’s leaders are being squeezed by entrenched special interests that resent the high dollar. Obligingly, they’re accepting another squeeze on the middle class because currency depreciation is almost invisible to the untrained eye. Gallingly, they assume they won’t be interrupted as they prepare their tearful middle-class election platforms.