Iceland Considers Using Canadian Dollar

[Kulindahr]

That's an interesting idea. I'm a bit too brain-dead at the moment to do it justice.

 

[maxpowr9]

At least from what I read (the article is pretty fail but I have the brains to figure it out) by "adopt" they mean "peg" or fixed exchange rate. That basically means that they will have a 1:1 exchange rate or some other fixed value between the two countries. Of course the main issue with that is trade imbalances and it is a failed policy unless one country is subordinate to the other.

I did paper on this for my monetary economics class, particularly with China fixing their Renminbi to a certain exchange rate with the US dollar.

Rant/aside: China's currency is not called "Yuan". Yuan is Mandarin for "money". So when you see 1 yuan = X... that is wrong. It would imply that 1 "money" = X... Renminbi is their currency.

 

[bankside]

I'm all for it if their economy really moves in rough alignment with ours. We have out-sized commodity sectors but it's oil and energy for us and apparently aluminum for them.

We have great affection for icelanders too given their settlement on the prairies.

I say go for it!

 

[bankside]

Well we're already bilingual:
This note is legal tender.
Ce billet à cours légal.
so why not add
Þessi athugasemd er lögeyrir?

 

[Kulindahr]

I think the simplest way to go about it would be for Iceland to annex Canada.

 

[JayHawk]

Why dont they just do what many other countries do with the Dollar. they have their own currency but match the US dollar. Seems to work well for Bahrain and the UAE...

At least then they could pretend to be their own country.

 

[bankside]

I think we just need a world currency. The UN should just come up with something.

 

[rareboy]

Why dont they just do what many other countries do with the Dollar. they have their own currency but match the US dollar. Seems to work well for Bahrain and the UAE...

At least then they could pretend to be their own country.

Certainly with the US dollar wobbling all over the place, the Canadian dollar might actually represent a more solid choice as a linked currency over the next decade.

The problem is that the Iceland economy isn't really a good match for Canada and their cost of living is dependent on many factors that Canada can't help mitigate.

But Welcome Iceland!

 

[Kulindahr]

I think we just need a world currency. The UN should just come up with something.

The time for a world currency will be when all existing currencies stop rising and falling against each other -- and not before.

 

[bankside]

The time for a world currency will be when all existing currencies stop rising and falling against each other -- and not before.

I'd prefer constant currency and more flexible pricing.

Anyway it looks like the Foreign Affairs ministry has nixed the idea. Booooooooo…..

 

[Kulindahr]

I'd prefer constant currency and more flexible pricing.

Rising and falling currencies reflect economic realities in different areas in ways humans would never track by themselves. Just as money itself is economic information, so are the differences between different currencies.

It's arguable that our economies be be healthier if each state and province had its own currency.

Anyway it looks like the Foreign Affairs ministry has nixed the idea. Booooooooo…..

Whose FAM?

 

[evanrick]

out of curiousity - for ppl that work in canada can you tell us what taxes you pay if you live in BC?

 

[bankside]

Rising and falling currencies reflect economic realities in different areas in ways humans would never track by themselves. Just as money itself is economic information, so are the differences between different currencies.

It's arguable that our economies be be healthier if each state and province had its own currency.



Whose FAM?

Ours - i.e. Canada's.

Currencies which vary against each other just serve to complicate open exchange and trade in goods & services; it makes opaque rather than informs, and it allows for the creation of an optical illusion that all is well in a country's finances. Most of all, it allows those with the means to vary the rates to effect mass theft on a populace.

 

[Kulindahr]

Ours - i.e. Canada's.

Currencies which vary against each other just serve to complicate open exchange and trade in goods & services; it makes opaque rather than informs, and it allows for the creation of an optical illusion that all is well in a country's finances. Most of all, it allows those with the means to vary the rates to effect mass theft on a populace.

Variable currencies allow economic realities in different places to manifest and to adjust to the whole. It avoids situations such as in the U.S. where a dollar goes a lot farther in some places than in others. As transportation and communications become easier and cheaper, those differences level out.

The last problem is true. If there was a way to identify currency transactions that were just speculation, they should be taxed at 90%.

 

[Kulindahr]

BTW, what would Canada do if Iceland just went ahead anyway?

 

[rocabar]

BTW, what would Canada do if Iceland just went ahead anyway?

Not much, I'd think.

I can't see how it would be any different than the countries that use the US Dollar. (i.e El Salvador, Ecuador, ect.)

 

[Kulindahr]

Maybe they could just join Canada.

 

[Benvolio]

Iceland may be boarding the Titanic. The only reason the Dollar appears strong is that the Euro looks so risky by contrast. But Europeans are working on a treaty to control deficit spending. If they do the Euro will look like a safe haven while Obama is about to exceed all other Presidents combined and, God forbid, he may get to borrow 4trillion year until the poor Dollar collapses, as it to a certainly will.

 

[bankside]

As far as Iceland moving unilaterally; well, they're welcome to do that. Lots of countries use the currency of other places. I remember buying things in Hungary using Deutsche Mark. The disadvantage for Iceland would be that Canadian monetary policy could become unsuitable for their needs; we would not consider the needs of their economy unless there was an economic advantage for us. Interest rates, money supply, they'd have no control over that…the Bank of Canada would not open a regional office in Reykjavik. That's their risk to manage.

Variable currencies allow economic realities in different places to manifest and to adjust to the whole. It avoids situations such as in the U.S. where a dollar goes a lot farther in some places than in others. As transportation and communications become easier and cheaper, those differences level out.

The last problem is true. If there was a way to identify currency transactions that were just speculation, they should be taxed at 90%.

But my contention is there is only one reality… (incidentally that's my advice for areas other than economics as well, but I digest…)…and that economic adjustments, and their effect, can be more easily appreciated, defined, and implemented against the backdrop of a common currency.

In the US,where a dollar goes further in some areas compared to other, it signals an opportunity for people to make more of the bargain location and to recognize that an overheated location has gone about as far as it can go. The differential is responsible for driving the improvements in transportation and communications. If a whole bunch of separate currencies masked that effect, it would be harder to achieve the levelling out.

Separate currencies are a protectionist trade barrier, in that view.

 

[rotary]

Why dont they just do what many other countries do with the Dollar. they have their own currency but match the US dollar. Seems to work well for Bahrain and the UAE...

At least then they could pretend to be their own country.

Their central bank would have to purchase currency reserves to peg to our dollar. If their already small economy took another hit they likely wouldn't be able to maintain the exchange rate.

Anyway, last I heard the Canadian gov't shot down the idea.