Thursday 14 June 2007

Canadian Dollar and Prices

The media is making much of how the Canadian consumer is not getting the savings of the higher value of our dollar passed on to them. There are a number of factors in play here.

It takes time for the savings to get passed on since in some areas, prices are only set once a year (or every few months). Also, goods bought by suppliers months ago, cost the importer the old price - more than it would cost the supplier today. So, they still need to sell at a price related to the old cost, the old dollar value. Some products, which were produced with the 2 different prices printed on them, will still have the prices relative to when the product was produced - different than today's value. So, these products will normally still be sold at these prices. Eventually, new production of these products will reflect the new prices - but it will take some time. There is always some lag of pricing catching up to current value. It has always been like this. There is more lag when the dollar jumps quickly.

If you are buying products that move quickly (like fresh produce, computers, cars...) you are already, or will be very soon, seeing price reductions.

Books are products that may have been bought by suppliers months ago, but some stores are now selling books at par with the American price marked (instead of the marked Canadian price)

So, don't believe all the bad news the media is giving you. Prices have either come down for consumers, or will within the next few months.


rabbit said...

A real blogging dipper would have blamed the current price anomalies on massive corporate conspiracies, and use that to prove that the free enterprize system is inherently corrupt and should be abandoned in favour of a socialist paradise.

Instead we get this sensible piece of economics. Are you sure you're a BD?

Thor said...

I do freelance tech support, so I have a very close eye on computer prices - over many years. I can see how this is affecting these prices, and it is. I can also see lower prices due to the higher dollar in a number of other areas.

Sure part of the lag is likely an aim to make a profit at some level or another. But the main point of my post was to say, there is a lag. Yes, you will eventually see a difference (in favour of the consumer) on products we buy that come from outside the country, but it may take time (regardless of the reason for the lag).

I am a full NDP supporter and Blogging Dipper. I also tell em like I see em. And this is what I see. I've been keeping a close eye on the value of our dollar vs US and vs the Euro, and on the US vs the Euro for the past 5 years. And I've noticed that there has always been a lag of sometimes a few months to a year on price reaction in relation to a rise in our dollar value. This lag is not being mentioned in the MSM. So, I write about it here. The MSM hints at the corporate greed factor (which is all well and good, but that's only part of the story), but they don't cover the whole story by dealing with the facts about the lag, as evidenced over the years each time our dollar has risen.

Now here is where it could get interesting. Why is the MSM not mentioning this lag? Why are they seemingly scaring the public into thinking that our rising dollar makes no difference to consumers, and that our rising dollar may even be bad for our country? Is it to convince us that we should adopt the American dollar? Is it to convince us that we need to work for lower wages to be more competitive with other countries? Who would benefit from these? The big corporations who control the MSM.

rabbit said...

Do not attribute to malice what can as easily be explained by incompetence.

Much of the MSM is scientifically, economically, and statistically illiterate. What's more, they have a commercial interest in creating controversy and outrage even when little justification exists. Stories of "corporate greed" sell well, and they know it.

Your conjecture that such reporting is secretly driven by some cabal with an agenda of economic oppression is over the top.

Thor said...

Yes, you are most probably right in that the MSM stories here are more driven by sensationalism as opposed to a secret agenda.

Not reporting on the fact that there is a normal lag to this issue makes it seem more of something to get upset about. If they did add the fact about the normal lag time, the story would not be so sensational.