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02 Mar 12 - 04:15 PM (#3316259) Subject: BS: Iceland eyes Canada's loonie? From: Ed T What do you think? (I did not link this story-because have had trouble linking this publication in the past): Iceland eyes loonie, Canada ready to talk Globe and Mail Friday, Mar. 02,barrie mckenna 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. 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-I1.01-0.003-0.33%) 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." In a recent Gallup poll, seven out of 10 Icelanders said they would happily dump their volatile and fragile krona for another currency. And their favoured alternative is the Canadian dollar, easily outscoring the U.S. dollar, the euro and the Norwegian krona. Iceland is also in a bind. The country imposed strict currency controls after its spectacular banking collapse in 2008. Foreign-exchange transactions are capped 350,000 kronas (about $3,000). A major downside of those controls is that foreign investors can't repatriate their profits, making Iceland an unattractive place to do business. Those capital controls are slated to come off next year. And many experts fear a return to the wild swings of the past -- in inflation, lending rates and the currency itself. Iceland is the smallest country in the world still clinging to its own currency and monetary policy. The krona soared nearly 90 per cent between 2001 and 2007, only to crash 92 per cent after the financial crisis in 2008. The official government plan is to go to the euro. Iceland has applied to join the European Union and eventually the euro zone. But that's not looking like a very attractive option these days. And formal entry could take a decade, experts said. The other options are to peg the krona to another currency, such as the yen, greenback or euro. And finally, there's the route of unilaterally adopting another country's money. Icelandic officials have apparently reached out to the Bank of Canada and the Finance department about the idea. It's hard to imagine Canada would object. Iceland wouldn't have a say in Canadian monetary policy and the dollars coursing through its small economy ($12-billion in GDP versus Canada's $1.8-trillion) would be a blip in the Bank of Canada's management of the money supply. Unilaterally taking on another country's currency is not unheard of. El Salvador took on the U.S. dollar in 2001. Ecuador did the same in 2000. And Kosovo adopted the euro in 2002. There are some good reasons Canada might want to see Iceland embrace the loonie. "If you join a new currency area it means you are completely open to businesses from that area," Mr. Gudjonsson pointed out. Adoption of the Canadian dollar could open opportunities for Canadian shipping companies, fish packers, banks, insurers and eventually oil distributors and service companies as the country taps undeveloped resources. "Trade between the countries would obviously multiply," Mr. Gudjonsson argued. But the greatest benefit for Canada could be enhanced geopolitical influence in a region that's poised to grow in economic clout. The Arctic is the last frontier for the mining and oil and gas industries, sectors where Canada is already a global player. It holds an estimated 22 per cent of the world's remaining conventional oil and gas, and vast untapped mineral potential. The transition wouldn't be easy. The Icelandic government, through its central bank, would authorize commercial banks to exchange kronas for loonies. At today's exchange rate, it would take roughly 100 kronas to buy a dollar. Iceland would need very strong reserves to conduct the operation, which might require an extended period when both currencies would be in circulation as kronas are soaked up. |
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02 Mar 12 - 04:23 PM (#3316263) Subject: RE: BS: Iceland eyes loonie? From: John MacKenzie Now that is very interesting. I can see where it might be a good idea. Certainly Iceland as it is now, is going nowhere fast. Currency controls are at best temporary, and at some point they're going to have to go, and the outlook thereafter would be uncertain. Yes, I can see a lot of sense in adopting another currency, and the Loonie, was largely anaffected in the recent little financial brouhaha, so it has obvious attractions. |
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02 Mar 12 - 04:42 PM (#3316269) Subject: RE: BS: Iceland eyes Canada's loonie? From: gnu Yes, John. Right now, we are slightly better than par with the greenback. Odd to me at this time of year but I think it s gotta something to do with Iran. >;-) |
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02 Mar 12 - 09:37 PM (#3316418) Subject: RE: BS: Iceland eyes Canada's loonie? From: Rapparee Hell, I want Idaho to secede and join Alberta. Wanna git inta all that oil money! |
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02 Mar 12 - 10:13 PM (#3316431) Subject: RE: BS: Iceland eyes Canada's loonie? From: Ed T ""Wanna git inta all that oil money!"" You had your chance, now China will get it:) |
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02 Mar 12 - 11:25 PM (#3316474) Subject: RE: BS: Iceland eyes Canada's loonie? From: GUEST,999 Potatoes = vodka, and that's a fair trade. However, leave north Alberta alone. I have friends there and they don't take shit from no one. |
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03 Mar 12 - 12:15 AM (#3316484) Subject: RE: BS: Iceland eyes Canada's loonie? From: Sandy Mc Lean We are indepted to Leif Ericson for discovering this country 500 years before Columbus was toilet trained. Icelandic Vikings discovered America (continent) first except for those Indians and Innuit who greeted them on our shores. We already have the Loonie and the Toonie but I propose that the new 5 dollar coin be called the Leif. |
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03 Mar 12 - 02:24 PM (#3316738) Subject: RE: BS: Iceland eyes Canada's loonie? From: gnu Closer to a thousand years, Sandy. I found L'Anse aux Meadows fascinating. It's a lonnnng drive but worth it. |
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03 Mar 12 - 11:00 PM (#3316943) Subject: RE: BS: Iceland eyes Canada's loonie? From: Sandy Mc Lean Bin there gnu and I agree. The settlement was about 1000 AD versus 1492. |
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04 Mar 12 - 05:25 AM (#3317016) Subject: RE: BS: Iceland eyes Canada's loonie? From: Paul Burke Everybody knows that Prince Madoc, Saint Brendan and Lehi discovered it first. And Ken Newick Mann. |
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04 Mar 12 - 09:35 PM (#3317378) Subject: RE: BS: Iceland eyes Canada's loonie? From: Beer I have also been there and left in a hurry as a blizzard moved in. hard to believe it was discovered just in the 60's. Ad. |
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04 Mar 12 - 09:43 PM (#3317380) Subject: RE: BS: Iceland eyes Canada's loonie? From: Rapparee If they call the new coin that, won't many people just Leif it alone? |
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04 Mar 12 - 10:09 PM (#3317383) Subject: RE: BS: Iceland eyes Canada's loonie? From: GUEST,999 I thought they was lookin' at our prime minister! |
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05 Mar 12 - 07:42 AM (#3317547) Subject: RE: BS: Iceland eyes Canada's loonie? From: Beer Interesting read. ad. http://ca.reuters.com/article/businessNews/idCATRE8240IB20120305 |
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05 Mar 12 - 03:49 PM (#3317824) Subject: RE: BS: Iceland eyes Canada's loonie? From: gnu Sure we'll talk. As long as Skarpi brings the rotten shark and Brennivín. |