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The Rise of the Loonie

Last week, the Canadian dollar reached a 30-year high against the US dollar: 91.79 US cents to the Canadian dollar, which it hadn't seen since October 1977. (Since then, it has continued to rise, and is now at 92.41 US cents.)

My first visit to Canada was in March 1998, when I visited MGI Software in Toronto, a developer I was courting in my role as VP Developer Relations at Be. On the day of my arrival, 25 March, a Canadian dollar was worth 70.84 US cents. It continued to fall during the remainder of President Clinton's term in office. On the date of President Bush's inauguration, 20 January 2001, it was worth 66.12 US cents. It reached a low of 61.92 cents on 21 January 2002, and came close again exactly 10 months later, at 63.06 US cents, but it has been on a tear ever since. (Statistics via the FXHistory section of OANDA.com.)

Since Bush took office, the Canadian dollar is up 39.76 percent. When you consider that Canada has a comparable (though much smaller) economy, a comparable standard of living, a border that's essentially open to most trade, and a higher level of government services, this becomes an amazing statistic. It's what happens when one government runs budget surpluses year after year, while its neighbor, after briefly running a budget surplus under one president, begins running unprecedented budget deficits under his successor.

I compared the US and Canadian federal budgets back in 2003 (here and here). The Canadian government has continued its policy of fiscal restraint, while the US government seems to have learned little or nothing. Before long, the Canadian dollar will be at parity with the US dollar, and then surpass it. I hope someone in our elected government sits up and takes notice then.

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