The loonie is flying (left, the Cdn vs U.S. currency since July 1), great news for those buying things from Americans but lousy news for anyone who, like most exporters, sells things to Americans.
Consumers tend to cheer a loonie that's close to par with the American greenback and for good reason. Because the world oil market works through U.S. dollars (even the oil produced and sold in Canada, believe it or not), a strong loonie keeps energy prices relatively low. Lettuce from California and broccoli from Florida will be (or ought to be) cheaper for Canadians.
But we're in a recession, not because of American broccoli or lettuce was getting a bit pricey, but because not enough people are working. And a high loonie works against a jobs recovery because, for many manufacturers, a Canadian worker has just become relatively more expensive than, say, a worker in South Carolina. Given the option of ramping up production in the U.S. or in Canada, a multinational manufacturer will find it makes more economic sense where workers are cheaper and that ain't Canada when our dollar is worth 97 cents.
Prime Minister Stephen Harper, speaking in Vancouver, seems to agree with Bank of Canada governor Mark Carney that this scenario ain't a good one but, on the other hand, he doesn't think the loonie's strength threatens, at this point, to derail the recovery here:
We know that Canada's economy is relatively stronger than certainly virtually any other developed country, industrialized economy, certainly stronger than all of the G7 economies and stronger than most in the developed world.
And obviously, some of these factors, you know, will have something to do with the rise of the dollar.
That said, the governor of the Bank of Canada has been clear that too rapid a rise in the dollar is a risk to our recovery.
As we have said before, we are not out of the woods. There are many risks., some of them within our control, some of them beyond our control and obviously, the value of the Canadian dollar is a risk to recovery.
I don't think it's a risk to choking off the recovery but if it goes up too rapidly, it does have difficult effects on our economy. That's why the governor has expressed those concerns.