I have a modest proposal.
We are all worried about the value of the Canadian dollar. We recently have watched its decline in its value since 2013, when it was at par with the US dollar, to now under US$0.70. This is a result of the health of the US economy and the contrasting decline of the value of oil; the American economy does fine with cheap oil, but as net exporters of oil Canada suffers. The industrial heartland of Ontario and Quebec suffered setbacks in the economic crisis of 2008 and never bounced back to where it had been before. A low Canadian dollar may well encourage more development across the country, with the notable exception of the oil patch in Western Canada.
What I am more concerned about is the effect of inflation on the value of a dollar. I remember when I could buy a comic book for $0.12. New paperbacks could be had for $0.95. Movies were $0.50. Haircuts were $1.00. You could get a meal at a fast food restaurant for less than a dollar. Obviously, this was a while ago – I’m thinking the late ’60s and early ’70s, when I first started buying things on my own – but it still strikes me as a course of decreasing expectations as inflation slowly but surely reduces the value of our currency.
Indeed, according to the Bank of Canada inflation calculator a dollar in 1970 buys what $6.23 does now – a 523% change! It gets even worse. In 1962, the year of my birth, a dollar bought what cost us now $8.00 ($7.94, to be precise). When my parents were married in 1950 the dollar was worth about $10.00 in 2015 value. A hundred years ago, as the First World War began, a dollar bought the 2015 equivalent of $20.84, a change of 1984%.
So here’s what I suggest.
Let’s knock a zero off of our dollars, and make $10.00 the new $1.00.
A nice meal at a restaurant would then be $2.00 – $3.00. A good paperback would be less than a dollar, or less than two dollars if a trade edition. A Canadian dollar would be worth seven times more than a US dollar.
Of course, we’d need new currency – it’s not like our old dollars could magically increase in value ten-fold, after all. But a quarter, a dime, and a nickel would have real value. We’d have to reintroduce the penny, and who doesn’t want that!
Of course, some people wouldn’t like it. They’ll be upset that their million dollar homes in the suburbs are worth only $100,000. Median annual income for a family would go from $79,550 to $7955. That said, I suspect that the psychological effect would be to make us more thrifty, while at the same time making us feel very rich every time we exchange money when we visit the US.
Of course, some people would say that this is just smoke and mirrors – knocking off a zero will make no real difference to the true value of anything. Indeed, arguably, other countries with far greater inflation do this on a regular basis, with no real effect on prices or the rate of inflation. But those critics are overlooking the “cool” factor of resetting the value of our currency, and surely that’s important, too, eh? I look forward to hearing from the Prime Minister and the Governor of the Bank of Canada on this modest proposal.