Wednesday, November 19, 2008

Can anyone explain this to me?

I'm trying to understand the economy. I really am. But I'm fairly lost and I don't know where to begin. I keep hearing how Canada, in comparison to the U.S., will be OK because we have more regulation. Really, what this means is that it is unlikely that the same crazy mortgage crisis won't take place here. But it has already taken place there, and aren't they going to bring us down with them?

Here's something else I don't get. The value of a dollar in a particular country is tied to the state of that country's economy, right? I know, simplistic, but that's how it works, I believe, for the most part. A year ago, the Canadian dollar was "at par", because our economy was doing pretty darn good, right? And "at par" meant equal to the American dollar. Because the American dollar is the standard by which the currency of the world is measured. Now, if the American economy collapses, as it is currently doing, should their dollar not lose some value? And because it is the measuring stick for the world, we would not see their dollar value plummet so much as we would see the value of the other currency in the world shoot up, in relation to that benchmark. Right? So if our dollar is still worth only 80 cents U.S., then doesn't that mean that our economy is slowing down at the same rate theirs is?

Like I said, there is a lot I don't understand about the economy, and I'm sure someone can give me a satisfactory explanation for this. Consider this blog posting my appeal for that explanation. Can anyone really convince me that Canada will not be affected on the same level as the States?

3 comments:

  1. I think my level of economic understanding is about equal to yours, Eric, but here's my kick at the can:

    1) Canada's economy is resource-based, so when resource prices fall (ie. oil) our dollar will as well.

    2) Our dollar has actually maintained or increased its value compared to most other major currencies (Euro, British pound, Australian dollar). With the US economy being in such a fragile state, the US dollar was a cheap buy with good long-term return potential so a lot of countries bought a lot of US dollars, increasing its value.

    I may be way off on both of those points but that's my 2 cents.

    ReplyDelete
  2. That makes some sense...I still don't understand the whole situation, but your response brings me a little bit closer to doing so. Thank you!

    ReplyDelete
  3. What can ya do about politicians.they say one thing when they mean something else.same with economists. they say were gonna be be fine but thats total b.s. At least the gas prices are low.besdides im 12, what do i care bout the economy.im just worried about if some chick likes me or not . well thats my opinion

    ReplyDelete