The high loonie will hurt manufacturing in Canada. However, the insatiable American hunger for oil and gas will outweigh the downside parity with the US dollar. I don't see our cousins down south (bless them) turning off the aircon or trading in the Suburban any time soon. Not with pres. Cheney at the helm anyway. Also, don't forget to factor in the quagmire that Iraq is becoming....those chickens still have to come home to roost. That account will have to be settled in monetary and human terms.

Nostradamouse, Calgary, Canada

The value (or lack thereof) of the US dollar should distress Europe much more than it appears to. It means US tourists are much more likely to stay home... London is definitely my favorite vacation destination, but at $2US to the GBP, I'll try my luck in NYC instead.

michelline, Jacksonv, FL, US

Well all the aforementioned points sound quite valid, though they do not totally agree with each other. But I think another important determining factor will be the severity of the subprime crisis. For the last 10 years at least, the locomotive of the US economy has been consumption-driven (partly by loans people got by using their homes as collateral to borrow more money to consume). If the mortgage market worsens, even the borrowers with relatively good credit scores will be pinalized (either denied loans or pay higher-than-normal interests). When that happens, then we could see US economy go into a bad recession and USD fall into a chasm. But of course, we don't want this to happen b/c so many export-driven economies (esp. SE aisan ones + China) depend on US consumption.

Martin, London,

I can recall as a teenager travelling to the United States for their Bicentential year. One Canadian dollar bought something on the order of $1.06 or 1.07 US dollars. No one thought much about the level of the Canadian dollar that summer of 1976, but a few months later, when a separatist government was elected in Quebec, the Canadian dollar did a very quck plunge, and that plunge went on for at least 25 years. It's taken 30 years to regain parity, but at what cost? Yes you can go to Florida much more cheaply these days, but that is not much consolation to the workers in the nearly 250,000 manufacturing jobs that have been lost in Ontario over the past few years, partially attributed to the higher Canadian dollar. Although bankers may be jumping up and down with national pride, you can be sure that anyone working in the manufacturing sector is looking over their shoulder.

Patrick Legris, Toronto, Canada

I think when our Bozo president, and his greedy simpleton friends leave office, the dollar will come back... Who knows how many backroom deals he cooked up to make US goods cheap overseas for his Big Business rich friends... All done with farmed-out cheap foreign workers... Trust me on this, the Republicans are on their way out.

K. Bennett, Kansas City, USA

You have to be careful using a single, favourite item as a price comparison yardstick between two economies.
A pint of good bitter bought in San Diego and served at your table for $6 plus $1 tip may seem expensive - but not when you realise that it is seen as a foreign, exotic drink akin to a tequila sunrise being ordered in Manchester.

Stephen, Liverpool, England

If the dollar continues to decline, as it probably will with a central banker like 'Helicopter' in charge, then the US is more vulnerable than most other countries would since its currency is (or perhaps was) viewed as the reserve currency of the world.

The US has built much of its 'spend now, pay never' consumer society on the basis that foreigners will continue to fund its lifestyle in perpetuity. Take away the belief in the US currency, and they will very soon find the rug pulled from under them.

Unfortunately the central bankers have a short term view to simply encourage consumers to borrow their way out of each crisis, each time making the imbalances greater. There will come a point where people cannot borrow because no one will lend to them, and then the music will finally stop. Given recent events, one might speculate that kicking out time may not be that far away.

Paul, Dubai, UAE

Just back from the US with $2.00 rate in my pocket and I was surprised to discover how expensive everything is. Something very odd is going on.

John Albert, Lisbon, Portugal

In January 1998, upon visiting Vancouver British Columbia, I met a very nice older couple at an Italian restaurant. They welcomed me to their home city, but, with the US dollar then trading at about CAD $1.60, they bemoaned the fact that their visits to the States were, of necessity, few and far between.

As I've read this past week of the Loonie reaching parity with my Yankee dollar, my thoughts have turned often to that couple. I hope that they're enjoying good health and that they're somewhere in the 50 states spending money hand-over-fist.

As for me, I drive an extremely fuel-efficient car, and with Montreal only 7 hours' drive away, a weekend trip is still very affordable - as long as I don't buy anything.

James, Long Island New York, USA

I can't speculate at what group of new Canadians whose behavior you observed, but I am a 65-year-old 10th generation male Canadian lumberjack and here is my perspective. During the 1950's and later, the US dollar was worth less than Canada's. Sometime in the 1960's it reached parity and those of us within 100 miles of the 49th parallel made regular shopping trips across the border. I am pleased to see it happen again, if only to purchase US made goods. But now, since North America has been getting the Jihadist overflow from Europe, crossing the border is more of an issue, but I judge the popular Canadian sentiment differently from you and feel the loonie/dollar parity to be where it should be. It may take time for a newcomer to realize it, but Canada and the US is really joined at the hip.

Joe Legris, Dacre, Ontario, Canada

To Gerald Baker, as I read your artical with interest and you no doubt have a great deal of knowledge on the situation I couldn't help but realize your bias. As a Canadian I am quite aware that when the USA coughs we sneeze however I do not think that even the almighty USA did not antisipated the lack of control they really have over the finacial balance of the the whole world and Lord Help us all. I can only hope that there are enough brilliant minds in the world and together they can set things us back on course that will keep the financial system of the world moving

L. M. Pipke, Penticton BC, Canada

Whatever rate the greenback will be valued against any major currency at the moment will be seen as sign of strength to that currency. The apparent short-coming are that exports become expensive and they seem to be incompetent. I refer to that as 'colateral damage'. This is what pinches most.
But there is another blessing that very few experts have kept a blind eye on regarding the depreciation of the green paper back. I have been closely following dollar rates for over a decade now. But this time around the dollar is being matched with rising crude oil prices. The higher the oil prices the weaker the dollar. Lets not forget that the US is either in control of major oil producing areas or has extensive access to supplies. If the dollar is not 'adjusted' at this $82-abarrel rate, hell will break lose and we would have a global economic crisis.
Dip down dollar, rise high the price of oil. I think it fits like a hand in a glove.

Omar Abeid, Kamuli, Uganda

A very good article. I would only add that sometimes a currency that has been overvalued establishes such large liabilities overseas that it takes a wrenching re-adjustment to unwind.

A good example is the way that Sterling balances owned by India and the Gulf States acted as a permanent drag on the Pound in the decades after the Second World War.

You try to support your currency, but as you do, you are facing constant selling by holders.

And they, of course, have a porblem of their own, which is not to sell out so fast that they destroy the value of their own remaining holdings.

jon livesey, Sunnyvale, CA/US

No other nation in the world is more similar to the U.S. than Canada. However, in many ways we are also worlds apart. Living in the shadow of a giant can give you a major identity crisis so when we see ourselves creeping out of the shadow of the giant we allow ourselves to roar, if even only for a moment. Having our dollar reach parity with the U.S. dollar gave us a moment to feel good about ourselves. We dont mind if we slip back to 90 cents U.S. We are modest by nature and dont enjoy too much of the limelight. We are comfortable in the shadows. But it is nice to see the sun sometimes...

David mccaig, Victoria, Canada

With all this automation and ATMs its sad that
the Canadian dollar is unable to keep its value,the industry
is to be blamed with its out sourcing it thends to be too
rigid!,and what you get industrial backlog with low
bounce-back,and to make matters worse and less
indipendant ,some developing countires shoul
d try to float their currencies

John.D, Ca , US

As an ex-pat living in Canada, I saw the many, many articles and discussions concerning dollar parity; I am attending a conference in two weeks discussing what Canadian manufacturers learned from 30 years ago. So, once again, typical media hype to entice readers. Sure, when you are so close to the US and having Americans say the reverse, people make take time out to applaud Canada's good economic policies versus those of Bush.

But the key point is that the US economy has bounced back many times in the past. In fact it takes effort to damage it. Clinton didn't do too much but he did have the sense to let it run. Bush, on the other hand is too interventionist and has hammered American confidence; along with the cost of the war and the dawning by all that they cannot win. But new leadership will be an overnight stimulus if they let market forces work.

US businesses invest heavily in technology and the US still has a philosophy of investment and entrepreneurship unrivalled anywhere.

I would say their demise is still far off.

Paul, Oshawa, Canada

"Current preditcions are that it will fall another 30% until 2009 where it will stabilise for some time."
Nobody knows whats around the corner. These types of predictions are of no use whatsoever.

Kv, New England ,

Mike of Bangkok hits the nail right onthe head.
The fact is the fundamnetals of the US economy are poor.
The Fed rate cut was a reversal of previous policy of consistent raises- for a Fed to reverse policy is clearly and indication of a very ill export sector and general business climate.
Do not forget that debt is at an historic high of 7 trillion plus and that many OPEC nations are now trading in alternate currencies.
This means that the US dollar no longer has the principal commodity to provide valuation against.
Furhtermore Tresury Bonds are poorly [erforming,. If CHina- largest holder of US currency and Bonds decides the US market is prone to further devaluaute- it will simply sell (perhaps with a view to repurchase at a lower cost)- futehr devaluating a very shoddy greenback.
US dollar has lost 30% since 2000 to 2003. Current preditcions are that it will fall another 30% until 2009 where it will stabilise for some time.
A very good time to go share shopping.

Will, Bath, UK

If I had to rely on just one warning signal that a story is overbought it would be seeing it plastered across every financial media publication. This is a sign that smart money has at least for the moment stopped building the market and is using speculator money to take profits. Be warned.

sc, preston, LANCS

As british ex-pat livng in San Diego I am not so convinced that the dollar is undervaled on a purchasing power parity. T quote just one example, I was in London a few weeks ago and got a 20 oz (not the US 16oz) pint of good bitter from a pub near Charring Cross for 2 pounds 50. The same pint would be about $6 here and thats not including the tip (normally $1). This goes for alot of goods and services in the US. The US simply isn't that cheap any more and sales tax (unlike VAT ) is added to the price and tipping is out of control.
Hotels are no more expensive in London than Los Angeles in my opinion after you add all the extras in, plus breakfast.

jon capp, san diego, California

The dollar may look cheap, but why should anyone hold dollars if:

(i) US interest rates are going to 3% (for example);
(ii) US growth only limps along for some time, recovering mainly via exports, not household consumption (i.e., no need for vendor financing from Asia).
(iii) if the US decides just to inflate its way out of its debt problem by printing more dollars, which it has already shown it certainly will.

Yes, the dollar is too cheap on some measures. But that it what happens when you effectively debase a currency over a long period of time. Economic history is pretty clear on this - as are the currency, gold and commodity markets right now.

Don't forget that the trick the US is trying to play is, in a nut shell, to spend more than it earns in perpetuity; for a short period this is viable - but forever? Where are the US politicians saying it's time for consumers to spend a bit less, and save a bit more, as Asians did after their 1997 crisis? No-where, that's where.

Mike, Bangkok,

Well said on the purchasing power parity point. And on how foreign exchange markets have no basis in the reality of what makes an economy tick within. The pound's "strength" [sic] at double the dollar being illustrative of a demand for sterling that is not reflected in the demand for Britain's goods, only its financial markets. Thus exporters and the tourist industry suffer unduly while a small number of forex gurus in St James's square prosper. Waterfronts in Vancouver being 20% more expensive won't suffer but watch Whistler and Ontario tourist attractions bleed. Also aren't the words "incipient" and "panic" mutually contradictive?

Paul Turner, Hong Kong,