By Sean Condon
With the Canadian dollar performing poorly, some economists are calling for Canada to form a monetary union with the United States as the only way to save the crippled dollar and our economy. The Canadian dollar is now worth about 68 cents American.
But joining the two countries’ central banks and forming the North American Monetary Union (NAMU), would mean the end of Canadian monetary sovereignty.
Under the NAMU, a joint central bank would be run by a coalition of Canadian and American directors. However, the U.S. federal bank would have much more sway. As the world’s strongest economy, it is unlikely the U.S. would give up much control over a common currency and Canadian interests would not be much of a concern. In the NAMU, Canada would only be given symbolic power.
Even proponents of the union have admitted that Canada might have to accept an observer status or just one-thirteenth of a role, proportional to Canada’s share of the combined Gross Domestic Product relative to the U.S. The NAMU proposal is meant to ease the worries of large investors and big businesses who stress over the uncertain swings in the Canadian currency.
Proponents of the NAMU say much of the Canadian economy is already linked to the American economy as many businesses have adopted the U.S. dollar in order to make business life easier. They also claim the weak Canadian dollar has hurt the standard of living for Canadians, who must pay more for imported American goods.
But what’s good for the U.S. economy is not necessarily good for Canada’s. By keeping the Canadian dollar, Canada maintains the power to look after its own economic interests. Interest rates can be raised or lowered according to inflation and if the Canadian currency comes under attack from an external source, then the dollar can be devalued in order to cushion a potential blow to the market.
In Canada, where 40 per cent of the GDP is based on exports, a devalued dollar actually works as an asset for many businesses. The lower the costs, the more investments it is likely to attract. The weak dollar has also helped fuel a boom in the tourism industry.
The U.S. economy is far too large and powerful to deal with any financial concerns that our economy may face in the future. The NAMU would destroy an important part of Canadian sovereignty by leaving its monetary policy in the hands of another nation.