The cho$en few

Stephen Poloz was appointed Governor of the Bank of Canada in June 2013. The Canadian dollar has been declining against the American dollar ever since. Could this collapse have anything to do with the fact that Poloz, who worked at the central bank earlier in his career, came back to the bank following almost 15 years with Export Development Canada, his final two years there as CEO?

Let’s see, what does Export Development Canada do? Why they finance, insure and generally grease the wheels of exporters seeking to sell their goods abroad. And what have exporters been complaining about during the last few years? They wanted desperately to get back to the halcyon times of 2002 when the C$ was worth a piddly 64 cents U.S. That meant our exports were cheap when sold in the U.S. and Canadian manufacturers enjoyed an artificial boost against competitors from other lands. 

By 2007, the C$ was above par, and lazy Canadian exporters were apoplectic. Their advantage was gone. Things had improved for them slightly by the time Poloz was appointed Governor when the C$ was worth US95 cents. And then, mirable dictu, with an exporter at the helm of the Bank of Canada, the C$ started to fall to the point where it is now hovering around US80 cents.

Oh, thank you Governor Poloz, for maneuvering the value so well. Your last interest rate cut sent the C$ – already suffering from falling oil prices – down even more. And with all the talk of another rate cut in March or April, the C$ has been further destabilized. 

Moreover, in addition to newly exuberant exporters, Governor Poloz would also like to please Prime Minister Stephen Harper. With an election due no later than this October, the governor would like to help out the ruling party by getting the economy into higher gear using lower interest rates. With lower rates and a falling dollar, his former colleagues and benefactors at EDC as well as his political bosses are happy and the Governor can expect praise from both.

The rest of us, forced to buy imported goods at higher prices because so much of what we consume is made elsewhere, don’t seem to matter a whit in this monetary equation. Nor do any of the major players seem to care about the higher rates of inflation that will almost certainly result and further reduce our purchasing power. 

Imagine, all this public policy effort for the precious few manufacturers left in Canada. Makes you feel kind of humble. Or had.