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How the weakening loonie is about to make life more expensive

(Image: bgilliard)

(Image: bgilliard)

When this sentence was written, the value of the Canadian dollar was hovering around 92 cents U.S. That’s the lowest the loonie has sunk since the first year of the financial crisis. For people who happen to have a lot of U.S. dollars on hand, this is a godsend. (Canadian businesses that export to the U.S. are in for a particularly good time.) For everyone else, the prognosis isn’t as great. Here’s a quick tour of some of the probable consequences.

1. Uncertainty will reign

The general consensus among experts is the loonie’s decline will continue, at least for a little while, but nobody is sure where rock bottom lies. The price change is being driven by so many different factors—a stronger U.S. economy, a not-quite-as-strong market for Canadian resources—that all we really have to go on are the best guesses of investment bankers. As of November, Goldman Sachs was thinking we’d sink as low as 88 cents. At this rate, the loonie could be there before long.

2. Cross-border shopping will definitely be more expensive

The days of Buffalo shopping sprees could be coming to an end. Losing 10 per cent to an unfavourable currency exchange is enough to wipe out any savings that might result from a cross-border trip—especially considering the price of gas and tolls.

3. Warm-weather vacations could be more difficult to afford

Flying south for the winter has never exactly been cheap, but a weak loonie means those tour packages could go up in price. Even Caribbean vacations could be affected, because flights and hotels are often priced in U.S. dollars. According to the Star, at least one travel company is already planning to hike its rates.

4. Some groceries could get a little more pricey

Any foods that are imported from the U.S. will become more expensive if the loonie continues to weaken. Experts say fierce competition among grocery chains will insulate consumers from sudden price changes, but a steady rise is inevitable if things remain as they are.

5. Egos will deflate

There was something ennobling about having currency that was valued on par with the U.S. dollar. Canada is the smaller part of so many side-by-side comparisons with its neighbour to the south, but this one measurement of relative national success was different, for a little while. Fortunately, the Canadian ego isn’t prone to massive swelling (except maybe when it comes to hockey), so the comedown should be manageable.

  • Simon Gray

    we never had a currency as “high” as the american dollar. the american dollar was just in the toilet.

  • grandmommy10

    How about: Canadians living abroad on a fixed income pension will be in deep doo doo.

  • Raf Bural

    i dont recall them lowering prices when the loonie was on its way up to parity with the greenback. so why should they raise them now that it on its way down

  • morningdove

    I love the reason that the loonie is devaluing is because of Canadian household debt – the USA is in trillions of dollars of debt but their dollar is just fine. When will bankers, economists and the media start telling the truth about our corrupt monetary system. Do economists, bankers and media people think they can stay ahead of the corruption – that it will not catch you and your family. The only thing that provides security and self-respect is to live within the truth. When will the truth be sought out – is it going to take extreme suffering, grief and violence to stop us or can we stop this downward spiral by doing the right thing?

  • EL

    Why so sad? Loonie always is 10% lower than US dollar in most of the recent history. It is just back to its normal rate.

  • EL

    it depends on if there fixed incoming pension is from a Canadian or American company.

  • disqus_h6zQsVhJGE

    Look at the positive, a lower loonie makes investment from the US more attractive. There’s pros and cons with everything.

  • John Harrington

    “Fortunately, the Canadian ego isn’t prone to massive swelling…” Funniest thing I read all day; Canadians have possessed one of the most degenerate inferiority complexes with the USA for centuries. On topic: Why does Canada continue to be a subsidiary of the USA? Break free of your American dependence in socioeconomic matters; this will stifle your currency’s perpetual value fluctuations and ameliorate Canada’s international image as a lame American knockoff.

  • Raf Bural

    well in that case then, i guess the fact that the american dollar is going up and our dollar is still the same there is still no reason to raise prices. just as there was no reason to lower them when the greenback was in the toilet.

 

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