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Iceland eyes loonie, Canada ready to talk

Hicup

Hicup

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For 150 years, no country has expressed interest in adopting the Canadian dollar — the poor cousin to the coveted greenback.
But now tiny Iceland, still reeling from the aftershocks of the devastating collapse of its banks in 2008, is looking longingly to the loonie as the salvation from wild economic gyrations and suffocating capital controls.
And for the first time, the Canadian government says it’s open to discussing idea.
In brief remarks to be delivered Saturday in Reykjavik, Canadian ambassador Alan Bones will tell Icelanders that if they truly want the Canadian dollar, Canada is ready to talk.
But he will warn Icelanders that unilaterally adopting the loonie comes with significant risk, including complete loss of control over their monetary policy because the Bank of Canada makes decisions only for Canadians and the Canadian economy. He’ll caution, for example, that giving up the krona in favour of the Canadian dollar (CAD/USD-I1.01-0.004-0.35%) will leave the country with few levers, short of layoffs, to counter financial shocks and fluctuations in the loonie.
A group of prominent Icelandic business leaders approached Mr. Bones last year about the idea. And his speech Saturday, to a meeting of the opposition Progressive Party, marks Canada’s first public response.
The Bank of Canada, which referred all calls to the Finance department remains tight-lipped.
“We don’t speculate on another country’s currency or domestic issues,” Finance department spokesman Jack Aubry said.
There’s a compelling economic case why Iceland would want to adopt the Canadian dollar. It offers the tantalizing prospect of a stable, liquid currency that roughly tracks global commodity prices, nicely matching Iceland’s own economy, which is dependent on fish and aluminum exports.
There’s also a more sentimental reason.
“The average person looks at it this way: Canada is a younger version of the U.S. Canada has more natural resources than the U.S., it’s less developed, has more land, lots of water,” explained Heidar Gudjonsson, an economist and chairman of the Research Center for Social and Economic Studies, Iceland’s largest think tank.
“And Canada thinks about the Arctic.”
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linky: Iceland Is Thinking Of Adopting The Canadian Dollar

Now, why would Iceland want the Loonie over the world's reserve currency? Any guesses? :)


Tim-
 
rocket88 said:
They make a nice clinky sound in your pocket. And if you put a two-nie in the freezer, I've heard you can pop out the middle.

(Hey, nice Stevie pic. Any chance the Bills are cutting his TD dropping ass loose?)
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Nope, I hope not.. Stevie that is.. He'll grow up this year.. :) I'll SJ over most of the receivers in the NFL lest maybe ten or so. He's the only guy to light up Revis whenever they've faced off, so he can't be all that bad. :)

Tim-
 
If I were the Canadians I'd think twice. Any idea how Iceland managed to recover so quickly from one of the worst banking crises in the world? They basically told the banks to **** off. If a bank holds an under water mortgage they just have to eat most of the principal that's above current market valuation.
 
Hicup said:
linky: Iceland Is Thinking Of Adopting The Canadian Dollar

Now, why would Iceland want the Loonie over the world's reserve currency? Any guesses? :)


Tim-
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Canada has done much to build confidence in its currency. During the 1990s, faced with a challenging fiscal situation, Canada demonstrated political courage in putting in place a credible fiscal consolidation regime that involved reductions in spending and hikes in taxes. Last year, the U.S. had a similar opportunity to demonstrate political courage on the fiscal front. It failed badly and S&P downgraded its credit rating.

The far-sighted Canadian fiscal consolidation program has paid enormous fiscal and macroeconomic dividends. Today, Canada has among the developed world's lowest debt-to-GDP ratios and most attractive medium- and long-term fiscal outlooks. Canada has also enjoyed a long period of credible monetary policy and has among the world's strongest banking systems. Finally, despite a relatively small population, Canada has a a highly productive workforce and a competitive economy that extends beyond just the natural resource sectors one increasingly reads about today.
 
I know that at least as of 30 years ago the Icelandic economy was closely tied to the US economy. They had huge trade with the US, and got plenty of foreign aid for allowing the USAF to maintain their base there.
 
rocket88 said:
They make a nice clinky sound in your pocket. And if you put a two-nie in the freezer, I've heard you can pop out the middle.
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ROFL. I laughed - I NEVER actually laugh. I find it funny - but do I laugh? No. I was on conference with some people from our London office and I had to mute the phone so I could laugh. Thank you good sir. Thank you.
 
donsutherland1 said:
Canada has done much to build confidence in its currency. During the 1990s, faced with a challenging fiscal situation, Canada demonstrated political courage in putting in place a credible fiscal consolidation regime that involved reductions in spending and hikes in taxes. Last year, the U.S. had a similar opportunity to demonstrate political courage on the fiscal front. It failed badly and S&P downgraded its credit rating.

The far-sighted Canadian fiscal consolidation program has paid enormous fiscal and macroeconomic dividends. Today, Canada has among the developed world's lowest debt-to-GDP ratios and most attractive medium- and long-term fiscal outlooks. Canada has also enjoyed a long period of credible monetary policy and has among the world's strongest banking systems. Finally, despite a relatively small population, Canada has a a highly productive workforce and a competitive economy that extends beyond just the natural resource sectors one increasingly reads about today.
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Are you talking about the GST, Don?
 
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Middleground said:
Are you talking about the GST, Don?
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No. The GST predated the fiscal consolidation program launched in 1994. I'm referring to the increase in the employer-employee tax to help fund Canada's pension system. That tax was increased from 5.85% to 9.90% over about a 10-year period.
 
donsutherland1 said:
No. The GST predated the fiscal consolidation program launched in 1994. I'm referring to the increase in the employer-employee tax to help fund Canada's pension system. That tax was increased from 5.85% to 9.90% over about a 10-year period.
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I guess that would have been the handywork of Mulroney. He made a lot of unpopular decisions that had dire consequences for his party. But looking back in retrospect, some of his changes were needed.

*edited to add: wait a minute. Come to think of it, it was the Liberals in power at the time, I think.
 
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