Dodge mentions single currency

May 22, 2007

Canadian Central bank governor David Dodge according to a report in the Globe and Mail(p.B3) yesterday in response to a question from a member of the audience for his speech in Chicago said surprisingly that a common currency for North America was a possibility one day.
This is a remarkable statement, in the United States of all places, at a time when the Canadian dollar is trading above 92 cents US. Given the nature of our trading relationship with the US and the fact that the Americans would insist and clearly by the sheer weight of numbers be in charge of such a currency with minimal Canadian influence over the direction of interest rates this is not a good idea. Not now nor in the foreseeable future.

Canada is on the edge of becoming an even more important middle power in the decade ahead than it is at present. Our population will likely exceed 38 million people by 2020. Our economy rich in natural resources, creativity and entrepreneurship with a highly skilled and well educated labour force ensures us a bright future. Far better for such a country, like Great Britain that has refused to give up its pound and join the monetarist European currency union,   for Canada to keep control of its own central bank and set its own interest rates.

In the case of Britain not joining the Euro has led to higher growth and lower unemployment. But Britain still has very close economic ties and free trade with Europe.Similarly, we can can continue to have very close trade relations with the US but continue to operate our own currency.

By keeping our own currency we also gain the substantial seniorage involved and have greater flexibility and control over both our debt management and monetary policy than we could ever have in a unified North American currency.

There has been a Canadian currency for over 140 years . It is simply folly to trade it in for a currency that would be totally dominated by the US.