For Canadians, what's worse than a weak loonie?
The Canadian dollar hit a new low this week, fueling a tough debate: Should Canada adopt the US dollar?
Ask the average Canadian about the American greenback, and you'll hear how silly US bills look, since they are all the same color. In Canada, fives are blue and fifties are pink. Only 20s are green. But as the value of their multicolor currency continues to slide, Canadians are grudgingly mulling whether they may have to surrender their monetary smugness.
The loonie hit a new low of 61.75 cents to the US dollar this week, fueling a debate that has been gathering momentum for many years, but has extra urgency now. Editorial pages and the halls of Parliament are filled with discussion about whether Canada should adopt the US dollar, or perhaps a single North American currency.
The rub is, using the US dollar would mean Canada's interest rates would be set by the US Federal Reserve, depriving Canada of its economic freedom. A common currency might also give Canada some input, but not much. For a nation with an enduring love-hate relationship with its southern neighbor, the concept doesn't go down easily.
"It's like handing over your finances to someone you don't know," says Susan Martin. "It's worse than handing over your wallet. It's handing over your passport."
Prime Minister Jean Chrétien's Liberal government says it's unthinkable. Nonetheless, the foreign affairs committee of the House of Commons plans cross-country hearings on economic integration with the US, including currency.
Financially, adopting the greenback would make sense for hundreds of thousands of Canadians, who winter in places such as Florida and Arizona. It costs them C$160 just to buy US$100. But even the snowbirds remain patriotic about their loonie. "It would be nice to come down here with money that was worth the same," says Leslie Wright, who leaves Cardinal, Ontario, every November and spends five months in Bradenton, Fla. "But I feel strongly that we should keep our dollar. If we adopt the American dollar, we'll be Americans pretty soon."
The Canadian dollar, known as the loonie because of the loon etched on the $1 coin, has been sliding since the mid-1970s, when it was once worth US$1.05. The separatist Quebec government came to power in 1976, ushering in a new threat to national stability and sending the loonie into a tailspin from which it has never quite recovered. In the 1990s, the government reined in the deficit, and NAFTA popped the loonie up to around US90 cents. But for reasons that bewilder many economists, it has hovered around 65 cents for the past several years.
The slide since then has provoked an emotional and financial trauma for many Canadians. "The real issue at stake is sovereignty," says Anne Golden, president and CEO of the Conference Board of Canada. "Canada does not need to adopt the US dollar. Not now, and probably not for a long time, if ever."
With 87 percent of Canada's exports going to the US, many businesses would benefit from sharing a currency with the US, as there would be no more currency exchange fees.
For many Canadians, moving south and working for US dollars is irresistable, contributing to a "brain drain" from this nation of 33 million.
Meanwhile, Americans are buying up cheap land and vacation homes on Canada's Atlantic coast and in ski resorts in British Columbia. "Americans with their strong dollar are buying properties here," says Michael d'Artois, owner of a real estate company in Whistler, British Columbia. "We need to get on board with the common currency. It would make the Canadian economy more stable."
Like the British shunning the euro to keep the pound, many Canadians are sentimental about their loonie. But even that seems to be changing. A survey by the Council of Canadian Unity shows 55 percent of Canadians think it would be a good idea for Canada and the US to share a currency, up from 43 percent in 1992. But for the shared currency to be the US dollar is much less palatable: only 36 percent approve.