Economists are saying by end of next year the Canadian Dollar will be on Par with the US dollar. The Canadian economy is basically booming on oil, and other natural resources such as steel and other metals which are being bought up at record prices because of China and India industrializing. Have you seen the price of steel lately? Steel has gone gangbusters to the point where the big 3 automakers are having a hard time getting a consistent supply.
The reason why the USD has dropped so much is because countries have stopped or bought alot less US treasury bonds because their dollar was dropping so much. Bonds give ya 2-3 percent return but if your currency drops 10-15% your losing money. Economists got nervous because the US deficit was so high and there were no signs of reigning it in so countries went to other country bonds like in Europe. Norway was giving 6% return on 1 year bonds which is alot more attractive than the US treasury bond. Thats how governments finance debts by issuing bonds and selling them.
Don't think the USD will be going for 1.40 Canadian for a while. The US economy depends on consumer confidence to keep going. If gas prices keep going up like the experts are predicting thats gonna be more money taken out of peoples pockets and less money spent on buying a new car or other goods like tv's,vcr's, or eating out.
The hurricanes don't help either. Insurance rates will be going up most likely because of it so that means more cash out peoples pockets. But the big kicker is the oil prices. Cheap oil is all gone the experts are saying. There is enough oil for a few hundred years still, but the remaining oil will no longer be 30 dollars a barrel. The reality of oil is its gonna be 60-100 dollars US probably as the norm, and if it gets real bad 100-200 dollars a barrel from what I have read.
The problem is oil is barely keeping up with demand and they are saying we have or will hit the peak production of petroleum soon if we haven't already. This peak means we have used up half the oil in the ground on the planet. Like on a bell curve after you hit the peak you get decrease in production after that point is reached. This means about a 3% decline in production a year till its gone. And with demand going up and supply going down price will be going up.
What does this mean for economies in general? It means with higher energy prices people will be spending less and buying less because it costs more to live. Also for global economy to grow you need 4% eccess energy a year to grow every year. Thats about 4 million extra barrels a year.
Also higher oil costs translates to higher everything because petroleum products account for 90% of the worlds ecomony. From fertilizer, plastics, chemicals, transportation, pharmaceuticals, cosmetics, computers, manufacturing etc............
The future isn't looking very pretty unless your in the oil business.
