Currently 1 Can $ is about 0.8 U.S. $. What that means is that if we do adopt US dollar, everybody’s salary will go down by 20%. Somebody making 100,000 $ per year will all of a sudden start making only 80,000. People won’t like it, there will be a revolt.
As for the matter of national pride, I don't see why we would wrap our pride in a piece of note-paper.
To ask what would happen if Canada should just adopt the US dollar is too vague. Do we mean that Canada would adopt the US dollar but that the Treasury of the USA would continue to maintain control over its production and lending rates, to be decided by the US federal government? Would Canada have a say in this?
Machjo, I assume Canada adopting US dollar would be similar to say, Ecuador adopting US dollar. Canada simply gets rid of Can $, and adopts US dollar, without any control over the currency. Presumably US will continue influencing its own currency as before, Canada simply uses US $. We are not talking of a common currency here, we are talking of Canada adopting US $.
National currency and national flag is what defines the identity of a country (along with other things, of course). Sure currency is just paper and flag is just a piece of cloth. But Canadian dollar, along with Canadian flag denote what Canada stands for, which is quite distinct from what USA stands for.
If you have no problem getting rid of a ‘note paper’, would you be OK to get rid of a ‘piece of cloth’, get rid of the Maple leaf and adopt Stars and Stripes instead? If yes, can Canada getting absorbed in USA be far behind?
Interesting. The Central African CFA Franc is similar to the Eurp in that it is shared by a number of countries. It just makes sense in a shrinking world.
There are definite advantages in several countries having a shared currency. It makes trade, tourism etc. easier; it eliminates some red tape and flow of goods, information become easier, smoother.
However, that is different from one country unilaterally adopting the currency of another country. In this respect, it is important to note that when EEC counties decided on a common currency, they did not adopt Guilder (Netherlands), Mark (Germany) or Schilling (Austria); they came up with a totally new currency, the Euro.
Adopting US dollar will mean that Canada gives up control on Canada's fiscal policy, economic policy. Canada will no longer have control over its currency. Usually when a currency is sliding, government may take steps to shore it up, when it is too strong, government may take steps to bring it down (like lowering interest rates etc.). These options will no longer be available.
In my mind the biggest reason we won't adopt the Euro is as SirJoe stated above:
How would that be any different by inserting Euro for USD? We'd be a minority partner at best, compared to the rest of the EU, and while its not as monolithic (different countries will have differing agendas/ideas on fiscal policy) as a partnership with the US would be, its farther removed in terms of its area of interest. Given our economic ties, we ARE more closely related to the US than the EU, so it wouldn't make as much sense, to adopt the Euro if we were looking to give up our national currency.
It would be kind of ironic though to see Canada converting to the Euro while the UK still used the pound
It's a bad idea.
So if you are looking for themes for your paper, it is this -
In a monetary union, the benefits of the union must be outweighed by the costs.
These are the benefits:
- it reduces uncertainty for exporters. With 40% of the country reliant on exports to the US, it would provide cost certainty and reduce volatility in the real economy
- it reduces costs because there is a cost with trading currencies that gets vacuumed up by the banks.
These are the costs:
- without a political union, it can put pressure on the real economy if Canada is in a recession and America is not. Canada will have to import American interest rates, which should be lower in Canada if Canada is in a recession and America is not. Canada has a political union between the provinces. When one province, say Alberta, is in a boom and another, say Nova Scotia is in a recession, political union allows for a valve to release the pressure on the economy from a common interest rate. In Canada, workers can move (almost) freely from province to province, so unemployed Nova Scotians can go to Alberta. The government will also transfer funds from Alberta to Nova Scotia. There would be no such political arrangement between Canada and the US.
- Canada would lose sovereignty by giving up its ability to set interest rates and issue its own currency.
I think the costs outweigh the benefits and a monetary union should not be pursued with the US.