Much has been stated about the stability of the US Dollar in recent year, as the federal reserve continues to pursues reckless economic polices i.e. using the printing press at full speed to inflate the money supply. Printing currency destroys the value period of money. Although, how will other fiat currencies par with the debasement of the US Dollar, specifically the Canadian Dollar.
Well despite Canada’s significant resource base, the Canadian economy still relies heavily on exports to the United States.
Approximately 20% of the entire Canadian economy relies on trade to the US. This factor alone could have an adverse repercussion on the Canadian economy if the US economy would go into a depression. The Canadian economy is still very tied with the US economy. However, Canada’s economy could recover rather rapidly if the right economic decisions are carried out, as its economy could replace the demand from the US to elsewhere.
As it is mentioned in the article Petrodollar Collapse, When–and not if–the US dollar eventually loses its status as the reserve currency, we should expect the Canadian Dollar to rise relevant to the US Dollar. This will create an environment where Americans will no longer be able to afford Canadian goods, essentially undermining the Canadian economy. Although, as we have seen in recent years, Canadian politicians have responded to this crisis by devaluating their own currency, to again increase Canadian exports and jump start the economy. If Canadian politicians continue this policy, the consequences can become grave, as it will be a currency devaluation ‘race to the bottom’ and both countries will experience high levels of inflation. Currency wars ensues.
On the other hand, if Canadians decide to bite the bullet, do the right thing, and let the Canadian Dollar rise, the economy will initially suffer as a whole, as the exports stop receiving orders from the south, but eventually this demand could be replaced to other countries with stronger currencies. At the end, the decoupling effect will be necessary for a strong recovery, although Canada’s fate surely relies on the strategy of its government.
An additional argument to make for the lack of fate of the Canadian dollar, is Bank of Canada’s negligible gold reserves.
Gold reserves can provide a solid groundwork for a currency backing it up with an commodity with intrinsic value. But Canada stands in 80th position in the wold with the most gold in reserves. Sri Lanka and even Nepal has more gold than Canada.
For more on Canada’s gold reserves see here
The Canadian dollar is also not traded in international markets.
You cant buy practically anything with Canadian Dollars outside Canada. In very seldom circumstances you can, but overall its not widely accepted as a form of payment.
At the end, the Canadian dollar is exposed to many risks ahead. Considering, the current trend of Canadian politicians artificially debasing the Canadian currency alongside the US dollar, to help prop up Canadian exports. Also, not to mention their socialist nature, I do not see how Canada’s dollar not experiencing high inflation as well. The Canadian Dollar is definitely not a safe-haven from a US Dollar Collapse.
Not convinced that the US Dollar will collapse?
See our economic “truth” documentary library here. The money as debt series and many others provides the groundwork for the reasons of a US Dollar collapse.
In order to properly protect your savings, you need to be invested in inflation protected hard assets. Click here to view the post Top 5 Investments to Hedge Against Inflation.
If you have anything to point out, please comment below.
