Goodbye loonie, hello 'amero?

'
Last Updated: Tuesday, October 5, 1999 | 9:48 AM ET

CBC News

A common North American currency would bring about lower long-term interest
rates, greater price stability and improved trade, says a new report from the Fraser
Institute.

The study calls for a North American Monetary Union that includes Canada, the United States,
and Mexico.

It proposes a common currency, called the "amero," which would have its own distinctive
emblem on one side and national symbols on the other.

The study's author, Herbert Grubel argues that flexible exchange rates have not brought Canada
the benefits promised by its advocates.

Instead, he says, they have reduced labour market flexibility and delayed Canada's adjustment to
declining world prices for natural resources.

"This system has contributed to Canada's high and excessive reliance on the production of
natural resources," says Grubel, a senior fellow at the institute.

"A monetary union will ensure that we move to the high-tech and other profitable and expanding
industries at a more optimal pace, and Canadians' productivity and living standards will increase
correspondingly."

Continue Article

The study says Canada's cultural sovereignty and political independence would not be affected
by monetary union, arguing that monetary union would not inhibit Canada's ability to pursue its
own tax, spending, social, regulatory and foreign policies.
Consider a continental currency, Jarislowsky says
Renowned money manager says Canada should peg loonie to greenback or adopt
a common dollar

STEVEN CHASE

November 23, 2007

OTTAWA -- Canada should replace its dollar with a North American currency, or peg it to the
U.S. greenback, to avoid the exchange rate shifts the loonie has experienced, renowned money
manager Stephen Jarislowsky told a parliamentary committee yesterday.

"In a country like Canada we cannot permit ourselves to have a dollar that goes through these
kind of gyrations," Mr. Jarislowsky told MPs on the Commons finance committee. " I think we
have to really seriously start thinking of the model of a continental currency just like Europe."

MPs on the finance committee are probing the consequences of the strengthened loonie - which
has risen more than 20 per cent against the U.S. greenback this year.

Mr. Jarislowsky, a former Canfor Corp. director, said the loonie's rise to above par with the U.S.
dollar is destroying manufacturing and could devastate the forest sector.

"We don't have a single mill in Canada which isn't losing cash at the current exchange rate
despite the fact we invested hundreds of millions in dollars into new equipment when we had the
money," said Mr. Jarislowsky, chairman of Montreal investment firm Jarislowsky Fraser Ltd.

"I believe that if we stay at the present levels the entire forest products industry practically is
going to be in liquidation-bankruptcy and there's going to be an enormous loss of employment."

He scorned suggestions that now is a great time to invest in new equipment because the stronger
loonie can buy more.

"Very often we are being told that this is a wonderful time to invest but if you are going to go
bankrupt anyhow, and if the dollar keeps shooting further up, I would say it would be throwing
good money after bad," he said.

You may as well go bankrupt and try to save as much of your money by pulling it out of there
before you go bankrupt rather than putting additional capital into the company."
Mr. Jarislowsky said Canada could either aim for a common North American currency or peg the
loonie to the U.S. greenback at about 80 cents (U.S.), allowing it to float within a small band.

"There could be a 5 per cent margin on either side and this would make sense for the Canadian
dollar which in my opinion should be worth about 80 cents [U.S.] so it should go up 5 per cent or
down 5 per cent from that benchmark."

Mr. Jarislowsky noted that other countries such as China peg their currency.

However the federal Finance Department is cool to such ideas. It resolutely opposes the notion in
briefing notes prepared for Finance Minister Jim Flaherty and obtained by The Globe and Mail
under access to information law earlier this year. Finance officials told Mr. Flaherty that a
common currency would mean an erosion of sovereignty for Canada.

They say it would ultimately mean Canada abandoning an independent monetary policy and
therefore its ability to directly influence economic conditions within its borders.

"A North American common currency would undoubtedly mean for Canada the adoption of the
U.S. dollar and U.S. monetary policy," Finance officials say in the briefings. "Canada would
have to give up its control of domestic inflation and interest rates."

Finance also believes that alternatives to a common currency, such as pegging the loonie to the
greenback, are even worse ideas, notes show.

Separately, tourism officials warned MPs that the stronger loonie will only worsen the outlook
for their sector.

"In five years, we have seen the number of inbound customers from the United States drop by an
astounding 34 per cent," Tourism Industry Association of Canada vice-president Christopher
Jones said in a statement prepared for the finance

PREMEDITATED MERGER

Billionaire to Canada: Time for amero is now

Wants euro-style currency to avoid exchange problems

Posted: November 27, 2007

1:00 a.m. Eastern

By Jerome R. Corsi
© 2007 WorldNetDaily.com

Stephen Jarislowsky, a billionaire money manager and investor the Canadian

newspaper Globe and Mail bills as the Canadian Warren Buffet, has told a
parliamentary committee Canada and the United States both should
abandon their national dollar currencies and move to a regional North
American currency as soon as possible.

"I think we have to really seriously start thinking of the model of a

continental currency just like Europe," Jarislowsky told the Canadian House of
Commons' finance committee, according to the Globe and Mail in Toronto.

Jarislowsky's call for immediate action belied an article published in the

Boston Globe on Sunday that said the call for the amero to become the new
North American regional currency was "purely theoretical."

In an exclusive telephone interview with WND, Jarislowsky repeated his call

for a European Union-style currency to be created between Canada and the
United States.

"The idea would be a European Union-type set-up," Jarislowsky said, "with a

North American Central Bank that would issue the new currency and sit over
the Bank of Canada and the Federal Reserve Bank in the United States."

(Story continues below)

"An alternative would be to create a peg on the U.S. dollar which would allow
the Bank of Canada to adjust the Canadian dollar in a 5 percent plus or
minus range, based on the fluctuation in value of the U.S. dollar," he
explained.

Still, Jarislowsky was less confident the U.S. dollar peg would work.

"The Bank of Canada only pinpoints inflation," he told WND. "My idea would
be to have the Bank of Canada manage the Canadian dollar with a view both
to inflation and the U.S. dollar. The Bank of Canada has never been very
receptive to this idea."

Jarislowsky insisted Canada was going to be forced to do something because

the increased value of the Canadian dollar vis-à-vis the U.S. dollar was likely
to depress business activity in Canada and cause a recession.

"Two-thirds of the Canadian economy is tied to the U.S. economy,"

Jarislowsky pointed out. "Some 85 percent of our exports are headed for the
U.S. market. Our economy is tied to the U.S. dollar, whether we like it or
not."

In an interview published with the Globe and Mail, Jarislowsky emphasized

the likely adverse impact on the Canadian economy triggered by the rise in
the value of the Canadian dollar.
"We don't have a single mill in Canada which isn't losing cash at the current
exchange rate despite the fact we invested hundreds of millions in dollars
into new equipment when we had the money," Jarislowsky said.

"I believe that if we stay at the present levels, the entire forest products
industry practically is going to be in liquidation-bankruptcy and there's going
to be an enormous loss of employment," he continued.

Jarislowsky told the House of Commons finance committee that a regional

North American currency would reduce the adverse currency exchange risk
being experienced in Canada since the Canadian dollar has risen more than
20 percent against the U.S. dollar this year.

Jarislowsky brushed aside stated opposition from the Canadian Finance

Department, including a negative recommendation to Finance Minister Jim
Flaherty because of concerns a common North American currency would
mean an erosion of sovereignty for Canada.

"I know Finance Minister Flaherty quite well," Jarislowsky told WND. "Sure,
first he will have to deny he is taking seriously the idea of a new currency,
then later he will come out and say he was forced to create one anyway."

Jarislowsky insisted he made very seriously the suggestion to create a euro-

style currency for North America.

"Pretty soon, the Finance Ministry will have no choice but to create a new
currency," Jarislowsky argued, "unless the Canadian dollar all of a sudden
changes course and reverses against the U.S. dollar all on its own."

"In the provinces we are already seeing economic activity slowdown because
of the rise in value of the Canadian dollar," he insisted. "If our automobile
and lumber industries begin to decline, we will have a serious recession as a
result."

"The Finance Ministry knows how closely our economy in Canada is tied to
the U.S. market," he continued. "A common currency would avoid the
problems we are now facing with currency exchange risk added to the
normal risks of doing business."

Jarislowsky currently heads the Canadian investment firm Jarislowsky Fraser

Limited, headquartered in Montreal.

According to Canadian Business, Jarislowsky has amassed a personal fortune

of $1.2 billion, ranking him as the 25th richest person in Canada.
Canadian Business also claims the average private client at Jarislowsky
Fraser typically has more than $10 million in liquid assets to invest.

Forbes put Jarislowsky's net worth at $1.5 billion, ranking him No. 512 in the
list of the world's richest people in 2006.

Forbes estimates that Jarislowsky Fraser currently manages $50 billion for a
select list of institutional clients and high-net-worth individuals.

Jarislowsky's 2005 book, "The Investment Zoo: Taming the Bulls and the
Bears," was a business best-seller in Canada.

The Canadian dollar reached parity with the U.S. dollar at the end of
September. Since then, the Canadian dollar has been trading above the U.S.
dollar, at values not seen since the 1960s.

The Canadian dollar closed yesterday at $1.01 to the U.S. dollar on major
currency exchanges.

Canada's Finance Department did not respond to WND requests for a

comment.

Comment: Globalization makes national currencies obsolete

Benn Steil, Special to the Financial Post
Benn Steil is director of international economics at the Council of
Foreign Relations. This is an excerpt from an extensive article by Mr.
Steil in Foreign Affairs last June. © 2007, Council on Foreign
Relations, publisher of Foreign Affairs. All rights reserved.
Distributed by Tribune Media Services.

Published: Thursday November 08, 2007

Story Tools

Capital flows have become globalization's Achilles heel. Over the past
25 years, devastating currency crises have hit countries across Latin
America and Asia, as well as countries just beyond the borders of
Western Europe -- most notably Russia and Turkey. The economics
profession has failed to offer anything resembling a coherent and
compelling response to currency crises.

International Monetary Fund (IMF) analysts have, over the past two
decades, endorsed a wide variety of national exchange-rate and
monetary-policy regimes that have subsequently collapsed in failure.
They have fingered numerous culprits, from loose fiscal policy and poor
bank regulation to bad industrial policy and official corruption. The
financial-crisis literature has yielded policy recommendations so
exquisitely hedged and widely contradicted as to be practically useless.
Anti-globalization economists have turned the problem on its head by
absolving governments (except the one in Washington) and instead
blaming crises on markets and their institutional supporters, such as the
IMF -- "dictatorships of international finance," in the words of the Nobel
laureate Joseph Stiglitz.

Is this right? Are markets failing, and will restoring lost sovereignty to
governments put an end to financial instability? This is a dangerous
misdiagnosis. In fact, capital flows became destabilizing only after
countries began asserting "sovereignty" over money -- detaching it from
gold or anything else considered real wealth. Moreover, even if the
march of globalization is not inevitable, the world economy and the
international financial system have evolved in such a way that there is
no longer a viable model for economic development outside of them.

The right course is not to return to a mythical past of monetary

sovereignty, with governments controlling local interest and exchange
rates in blissful ignorance of the rest of the world. Governments must let
go of the fatal notion that nationhood requires them to make and control
the money used in their territory. National currencies and global markets
simply do not mix; together they make a deadly brew of currency crises
and geopolitical tension, and create ready pretexts for damaging
protectionism. In order to globalize safely, countries should abandon
monetary nationalism and abolish unwanted currencies, the source of
much of today's instability.

The political mythology associating the creation and control of money

with national sovereignty finds its economic counterpart in the
metamorphosis of the famous theory of "optimum currency areas"
(OCA). Fathered in 1961 by Robert Mundell, a Nobel Prize-winning
economist who has long been a prolific advocate of shrinking the
number of national currencies, it became over the subsequent decades a
quasi-scientific foundation for monetary nationalism. Dr. Mundell, like
most macroeconomists of the early 1960s, had a now largely discredited
postwar Keynesian mindset that put great faith in the ability of
policymakers to fine-tune national demand in the face of what
economists call "shocks" to supply and demand. His seminal article, A
Theory of Optimum Currency Areas, asks the question, "What is the
appropriate domain of the currency area?" Dr. Mundell goes on to argue
for flexible exchange rates between regions of the world, each with its
own multinational currency, rather than between nations. The economics
profession, however, latched on to Dr. Mundell's analysis of the merits
of flexible exchange rates in dealing with economic shocks affecting
different "regions or countries" differently; they saw it as a rationale for
treating existing nations as natural currency areas. Monetary nationalism
thereby acquired a rational scientific mooring. And from then on, much
of the mainstream economics profession came to see deviations from
"one nation, one currency" as misguided, at least in the absence of prior
political integration.

Why has the problem of serial currency crises become so severe in

recent decades? It is only since 1971, when U.S. president Richard
Nixon formally untethered the U.S. dollar from gold, that monies
flowing around the globe have ceased to be claims on anything real. All
the world's currencies are now pure manifestations of sovereignty
conjured by governments. And the vast majority of such monies are
unwanted: People are unwilling to hold them as wealth, something that
will buy in the future at least what it did in the past. Governments can
force their citizens to hold national money by requiring its use in
transactions with the state, but foreigners, who are not thus compelled,
will choose not to do so. And in a world in which people will only
willingly hold U.S. dollars (and a handful of other currencies) in lieu of
gold money, the mythology tying money to sovereignty is a costly and
sometimes dangerous one. Monetary nationalism is simply incompatible
with globalization.

For a large, diversified economy like that of the United States,

fluctuating exchange rates are the economic equivalent of a minor
toothache. They require fillings from time to time -- in the form of
corporate financial hedging and active global supply management --
but never any major surgery. There are two reasons for this. First, much
of what Americans buy from abroad can, when import prices rise,
quickly and cheaply be replaced by domestic production, and much of
what they sell abroad can, when export prices fall, be diverted to the
domestic market. Second, foreigners are happy to hold U.S. dollars as
wealth.

But the U.S. dollar's privileged status as today's global money is not
heaven-bestowed. The dollar is ultimately just another money
supported only by faith that others will willingly accept it in the future
in return for the same sort of valuable things it bought in the past.
This puts a great burden on the institutions of the U.S. government to
validate that faith. And those institutions, unfortunately, are failing to
shoulder that burden. Reckless U.S. fiscal policy is undermining the
dollar's position, even as the currency's role as a global money is
expanding.

The U.S. current account deficit is running at an enormous 6.6% of

GDP -- about US$2-billion a day must be imported to sustain it. The
current account deficit is partially fuelled by the budget deficit, which
will soar in the next decade in the absence of reforms to curtail federal
"entitlement" spending on medical care and retirement benefits for a
longer-living population. In the absence of long-term fiscal prudence,
the United States risks undermining the faith foreigners have placed
in its management of the dollar -- that is, their belief that the U.S.
government can continue to sustain low inflation without having to
resort to growth-crushing interest-rate hikes as a means of ensuring
continued high capital inflows.

It is widely assumed that the natural alternative to the dollar as a global

currency is the euro. Faith in the euro's endurance, however, is still
fragile-- undermined by the same fiscal concerns that afflict the dollar,
but with the added angst stemming from concerns about the temptations
faced by Italy and others to return to monetary nationalism. But there is
another alternative, the world's most enduring form of money: gold.

It must be stressed that a well-managed fiat money system has

considerable advantages over a commodity-based one, not least of
which that it does not waste valuable resources. There is little to
commend in digging up gold in South Africa just to bury it again in Fort
Knox. The question is how long such a well-managed fiat system can
endure in the United States. The historical record of national monies,
going back over 2,500 years, is by and large awful.

At the turn of the 20th century -- the height of the gold standard --
German philosopher Georg Simmel commented: "Although money with
no intrinsic value would be the best means of exchange in an ideal social
order, until that point is reached the most satisfactory form of money
may be that which is bound to a material substance." Today, with money
no longer bound to any material substance, it is worth asking whether
the world even approximates the "ideal social order" that could sustain a
fiat dollar as the foundation of the global financial system. There is no
way effectively to insure against the unwinding of global imbalances
should China, with more than a trillion dollars of reserves, and other
countries with dollar-rich central banks come to fear the unbearable
lightness of their holdings.

So what about gold? A revived gold standard is out of the question. In

the 19th century, governments spent less than 10% of national income in
a given year. Today, they routinely spend half or more, and so they
would never subordinate spending to the stringent requirements of
sustaining a commodity-based monetary system. But private gold banks
already exist, allowing account holders to make international payments
in the form of shares in actual gold bars. Although clearly a niche
business at present, gold banking has grown dramatically in recent years,
in tandem with the U.S. dollar's decline. A new gold-based international
monetary system surely sounds far-fetched. But so, in 1900, did a
monetary system without gold. Modern technology makes a revival of
gold money, through private gold banks, possible even without
government support. Virtually every major argument recently levelled
against globalization has been levelled against markets generally (and, in
turn, debunked) for hundreds of years. But the argument against capital
flows in a world with 150 fluctuating national fiat monies is
fundamentally different. It is highly compelling -- so much so that even
globalization's staunchest supporters treat capital flows as an exception,
a matter to be intellectually quarantined until effective crisis inoculations
can be developed. But the notion that capital flows are inherently
destabilizing is logically and historically false. The lessons of gold-
based globalization in the 19th century simply must be relearned. Just as
the prodigious daily capital flows between New York and California,
two of the world's 12 largest economies, are so uneventful that no one
even notices them, capital flows between countries sharing a single
currency, such as the dollar or the euro, attract not the slightest attention
from even the most passionate anti-globalization activists.

The world can do better. Since economic development outside the

process of globalization is no longer possible, countries should abandon
monetary nationalism. Governments should replace national currencies
with the dollar or the euro or, in the case of Asia, collaborate to produce
a new multinational currency over a comparably large and economically
diversified area.

Europeans used to say that being a country required having a national

airline, a stock exchange and a currency. Today, no European country is
any worse off without them. A future pan-Asian currency, managed
according to the same principle of targeting low and stable inflation,
would represent the most promising way for China to fully liberalize its
financial and capital markets without fear of damaging yuan speculation.
Most of the world's smaller and poorer countries would clearly be best
off unilaterally adopting the dollar or the euro, which would enable their
safe and rapid integration into global financial markets.

As for the United States, it needs to perpetuate the sound money policies
of former Federal Reserve chairmen Paul Volcker and Alan Greenspan
and return to long-term fiscal discipline. This is the only sure way to
keep the United States' foreign creditors, with their massive and growing
holdings of dollar debt, feeling wealthy and secure. It is the market that
made the dollar into global money --and what the market giveth, the
market can taketh away. If the tailors balk and the dollar fails, the
market may privatize money on its own.

--- - Benn Steil is director of international economics at the Council of

Foreign Relations. This is an excerpt from an extensive article by Mr.
Steil in Foreign Affairs last June. © 2007, Council on Foreign
Relations, publisher of Foreign Affairs. All rights reserved.
Distributed by Tribune Media Services.

No easy fix for loonie

Linking it to the greenback isn't politically acceptable

Patrick Leblond, Financial Post Published: Tuesday, January 22, 2008

Reuters File PhotoA currency board with a fixed loonie would delegate Canada's monetary
policy to the U.S. Federal Reserve.

In the wake of the loonie's rise above parity against the U.S. dollar, there has been a revival of
the debate around the idea of a common currency between Canada and the United States. In one
corner stand people like David Laidler who argue that it is a bad idea; the loonie should continue
to float against the greenback. In the other corner, we have the likes of Herbert Grubel, Thomas
Courchene and Pierre Fortin who clamour for some form of monetary integration between
Canada and the United States.

Interestingly, this is the same debate with the same protagonists that took place a few years back
when the loonie was at US65¢. For the no side (i.e. against monetary integration), the exchange
rate must continue to fluctuate in order to deal with the Canadian economy's dependence on
commodities, which is not the case in the United States.

For the yes side, the Canadian dollar is either too low and it hurts productivity (since Canadian
companies do not import more efficient machinery and equipment) or it is too high and it hurts
firms' international competitiveness. In any case, the loonie's exchange rate with the greenback is
volatile and this is bad for the economy.

The truth about this debate is that both sides make some valid economic arguments. This
explains why the debate has not really progressed in the last 10 years. The real debate, however,
should be about the shape that monetary integration with the United States should take. But even
in this case, as we shall see, there is no real debate to be had because of the politics involved.

In his article in last Friday's National Post, Herbert Grubel offered one yes-side solution to the
loonie's exchange rate volatility: a currency board and a new Canadian dollar. The currency
board would fix the exchange rate between the loonie and the greenback, while the "new"
Canadian dollar would be set at parity with the U.S. dollar (instead of a US90¢ fixed exchange
rate).

In such a system, each new loonie issued by the Bank of Canada would require one U.S. dollar in
its vaults. As a result, Grubel argues, the two dollars should be used interchangeably by the
public (thereby making the greenback legal tender in Canada), potentially leading to the
complete (U.S.) dollarization of the Canadian economy.

Such a monetary arrangement would no doubt be acceptable to our American neighbour, since
there is no political and public support for the creation of a new North American currency (e.g.,
an amero) south of the border. In fact, it is probably the only monetary integration arrangement
acceptable to the United States other than Canada adopting the greenback outright.

From a Canadian perspective, the proposed currency board would have the political advantage of
keeping the loonie, which Canadians appreciate, especially when it is close to parity. The few
opinion polls conducted on the issue between 1992 and 2002 show clearly that there is an inverse
relationship between Canadians' support for monetary union with the United States and the value
of the Canadian dollar. According to the same polls, however, few Canadians are willing to
abandon the loonie in favour of the greenback, at any level of the exchange rate. A currency
board with the loonie fixed to the greenback implies a delegation of Canada's monetary policy to
the U.S. Federal Reserve. The issue here is whether the Fed would do a better job than the Bank
of Canada at running our monetary policy. One can doubt it by looking at the mess it created
with, first, the IT bubble at the end of the 1990s and, now, the subprime mortgage crisis. In any
case, U.S. monetary policy has and will always be geared towards U.S. political and economic
realities, not Canadian ones.
Another aspect not discussed by the yes side is the rate at which the loonie would be fixed to the
greenback. Grubel talks about fixing the exchange rate at US90¢, which he says is the current
equilibrium rate as calculated by the Bank of Canada. The problem here is that back in 2001-02,
the equilibrium rate was around US75¢ and this was the rate at which it was argued the exchange
rate with the U.S. dollar should be fixed.

Had Canada opted for monetary integration back then, as Grubel and co. argued for, we would
currently have an undervalued currency. Obviously, this would fuel inflation in Canada.
Unfortunately, there is nothing that we could do, since monetary policy would be run by the Fed,
which would now be reducing interest rates to deal with the subprime mess, rather than
increasing them as Canada's overheating economy would require. For sure, the current minority
Conservative government would look to abandon the currency board in order to stay in power,
assuming that Canadians are not very fond of inflation.

Grubel mentions that a currency board would be as credible as European monetary union. He
forgets to mention, however, that Argentina had such a currency board in the 1990s. And it did
not prevent the country from experiencing one of its worst financial crises ever between 1999
and 2002. Eventually, political pressures forced the Argentine government to abandon the
currency board and let the peso float against the U.S. dollar.

Only complete monetary union can nowadays achieve a sufficient level of credibility with
financial markets. The problem is that only the dollarization of the Canadian economy is
acceptable to Americans, whereas only the creation of a new common North American currency
(a la euro) with a supranational central bank with powers shared equally between Canada and the
United States (a la European Central Bank) would be acceptable to Canadians.

In sum, the status quo is the only politically acceptable solution for Canada, even if it may not be
the best economic solution (in fact, it is second best). Until this reality changes, the debate
concerning the loonie and monetary integration with the United States will continue to be sterile.
Let's rather focus our energies on finding ways to make trade easier within Canada, as well as
with the United States.

--- - Patrick Leblond is Assistant Professor of International Business at HEC Montreal

Fix the loonie

Cure Canada's Dutch disease by setting the dollar at par

Herbert Grubel, Financial Post Published: Friday, January 18, 2008

David Laidler's recent defence of Canada's flexible exchange rate system misses completely the
point made by Nobel Prize winning economist Robert Mundell in his famous article on optimum
currency areas. Mundell's article has been widely credited with providing the intellectual base for
the European Monetary Union and merits attention.

Mundell's point is simple and straightforward. If flexible exchange rates are best for Canada on
the grounds presented by Laidler, why would flexible rates not be best also for Alberta, Ontario
or New Brunswick? Like Canada, these jurisdictions encounter economic shocks the impact of
which would be minimized by the exchange rate buffer.

Milton Friedman's response to Mundell was that he would not advocate flexible rates for every
possible region. He told me once that he did not think that Panama would benefit from flexible
rates and that its hard currency fix, the use of U.S. dollars, served the country best.

Clearly, the standard Friedman-Laidler analysis misses essential ingredients needed to decide the
case for Panama and, I would insist, Canada. The following analysis considers the costly burden
suffered by Canadian manufacturing through the strong appreciation of the dollar during the
recent boom in commodity exports, the short-comings of all suggested remedies, and the
permanent cure to the problem by the adoption of a hard currency fix.

As Laidler notes, Canada has a bad case of the dreaded Dutch disease, which is named after the
problems that developed in the 1960s when the Netherlands sold natural gas that had been
discovered on its coast. The increases in Dutch exports of resources, like those of Canada in
recent years, resulted in a strong appreciation of exchange rates, which was reinforced by interest
rate policies of central banks and currency speculators.

The disease manifests itself through the loss of domestic manufacturers' ability to compete
abroad and with imports. In both countries many workers in these manufacturing firms lost their
jobs. Some became unemployed but many undertook the desirable move into the booming export
and steadily growing service sectors.

Less desirable was the move of some of the unemployed into public-sector employment, which
was facilitated by fiscal surpluses due to the economic boom. During the year ending October
2007, Canadian public sector employment rose by 4.9% while private sector employment rose
only .9%

This increase in public-sector employment reduces the growth in productivity because of the
perverse incentives facing civil servants: punishment if innovations fail, no rewards if they
succeed. Moreover, productivity growth in the private sector is slowed by the proclivity of civil
servants to design and administer onerous private-sector regulations.
There are no simple remedies for Canada's Dutch disease. Subsidies for manufacturers are
complex to administer, inefficient and likely to become permanent.

The government can use fiscal surpluses to retire public debt, a large part of which is held by
foreigners. While such foreign-debt retirement lowers the exchange rate and thus helps
manufacturers, it comes at the expense of tax reductions.

The Bank of Canada can keep interest rates low to discourage capital inflows and thus exchange
rate increases, but at the cost of fuelling inflationary pressures.

The most promising remedy for the Dutch disease is the increased importation of labour-saving
capital by the private sector, taking advantage of the favourable exchange rate. The problem is
that the resultant higher productivity and international competitiveness would grow only slowly.

While all of the opportunities for dealing with Canada's Dutch disease have some merit as quasi
palliatives, there is only one permanent cure: inoculation of the system by fixing the exchange
rate at a level that allows manufacturers to be competitive, perhaps at the rate the Bank of
Canada research identifies as the long-run equilibrium, around US90¢.

The Netherlands and Austria in the years before the introduction of the euro successfully
operated such a system and enjoyed near perfectly stable exchange rates against the German
currency. The essential ingredient in this success was the official commitment of the central
banks of these two countries to maintain the same interest rate as that of the German central
bank.

An analogous commitment by the Bank of Canada with respect to U.S. interest rates may not be
credible, tested by speculators and therefore ultimately doomed to failure.

However, there is a solution to this lack of credibility. In Europe, it came through the creation of
the euro and formal end of the ability of national central banks to set interest rates. The
analogous creation of the amero is not possible without the unlikely co-operation of the United
States.

This leaves the credibility issue to be solved by the unilateral adoption of a currency board,
which would ensure that international payments imbalances automatically lead to changes in
Canada's money supply and interest rates until the imbalances are ended, all without any actions
by the Bank of Canada or influence by politicians.

It would be desirable to create simultaneously the currency board and a New Canadian Dollar
valued at par with the U.S. dollar. With longer-run competitiveness assured at US90¢ to the U.S.
dollar, the creation of the new currency would reduce present incomes, prices, assets and
liabilities from their current Canadian dollar value by the same 10%, leaving real incomes and
wealth unchanged.
The public would readily use the new Canadian and the U.S. dollars interchangeably and enjoy
savings in the conversion of one currency into the other. The present exchange risk premium on
Canadian interest rates would be eliminated completely.

The creation of the New Canadian dollar and its credible fix against the U.S. dollar is not a
panacea.

Fluctuations in global demand for natural resources will always result in competition for labour
and capital among Canadian manufacturers and producers of resources. But, at least, the firms in
these sectors would no longer have to concern themselves with exchange-rate fluctuations and
policies of the Bank of Canada.

There will also always be changes in the U.S. (and Canadian) dollar exchange rate against the
euro and other major currencies. But these changes would have minor effects on the Canadian
economy because 80% of the country's trade is with the United States.

--- - Herbert Grubel is Professor of Economics Emeritus, Simon Fraser University.

< 12 >

The U.S. dollar might be destined to disappear, replaced by a regional currency called the amero,
reports the Tokyo correspondent for the Singapore Business Times today.

"Truth is said to be stranger than fiction sometimes, and what I hear about the future of the U.S.
dollar may sound like pure fiction, but the sources from whence the reports spring are, as they
say, 'usually reliable' ones, and so they do have a ring of truth to them," writes Anthony Rowley.

Rowley says the slide of the U.S. dollar in relation to other foreign currencies makes such a
transition more likely.

"And, looking at the size of U.S. debt to all those foreign central banks and private investors who
obligingly finance the American current account deficit, similar conclusions might be drawn," he
writes.

Because the U.S. is not going to stand by and watch its currency depreciate forever, he says his
sources in the monetary and financial establishment plan a new currency that would take trade
and investment cooperation within the North American Free Trade Agreement, or NAFTA, into
new areas of monetary cooperation – leading ultimately, perhaps, to a common currency for the
U.S., Canada and Mexico.

In addition to the name "amero," Rowley says the name "americo" is also under consideration for
this new currency.

"It would be a currency more likely to be judged worth the paper it is written on than the
obligations of a highly indebted U.S.," he writes
Rowley says there is also talk of an Asian monetary union and common currency.

The commentary follows what appeared to be confirmation of the common North American
currency plan by former Mexican President Vicente Fox, who told CNN's Larry King this week
that he and President Bush had agreed on a regional currency for the Americas.

White House spokeswoman Dana Perino told WND she's not aware of any plan for such a
currency either.

The statement by Fox was perhaps the first time a leader of Mexico, Canada or the U.S. openly
confirmed a plan for a regional currency. Fox explained the current regional trade agreement that
encompasses the Western Hemisphere is intended to evolve into other previously hidden aspects
of integration.

According to a transcript published by CNN, King, near the end of the broadcast, asked Fox a
question e-mailed from a listener, a Ms. Gonzalez from Elizabeth, N.J.: "Mr. Fox, I would like to
know how you feel about the possibility of having a Latin America united with one currency?"

Fox answered in the affirmative, indicating it was a long-term plan. He admitted he and
President Bush had agreed to pursue the Free Trade Agreement of the Americas – a free-trade
zone extending throughout the Western Hemisphere, suggesting part of the plan was to institute
eventually a regional currency.

The idea to form the North American Union as a super-NAFTA knitting together Canada, the
United States and Mexico into a super-regional political and economic entity was a key
agreement resulting from the March 2005 meeting held at Baylor University in Waco, Tex.,
between President Bush, President Fox and Prime Minister Martin.

A joint statement published by the three presidents following their Baylor University summit
announced the formation of an initial entity called, “The Security and Prosperity Partnership of
North America” (SPP). The joint statement termed the SPP a “trilateral partnership” that was
aimed at producing a North American security plan as well as providing free market movement
of people, capital, and trade across the borders between the three NAFTA partners:

We will establish a common approach to security to protect North America from external threats,
prevent and respond to threats within North America, and further streamline the secure and
efficient movement of legitimate, low-risk traffic across our borders.

A working agenda was established:

We will establish working parties led by our ministers and secretaries that will consult with
stakeholders in our respective countries. These working parties will respond to the priorities of
our people and our businesses, and will set specific, measurable, and achievable goals.
The U.S. Department of Commerce has produced a SPP website, which documents how the U.S.
has implemented the SPP directive into an extensive working agenda.

Following the March 2005 meeting in Waco, Tex., the Council on Foreign Relations (CFR)
published in May 2005 a task force report titled “Building a North American Community.” We
have already documented that this CFR task force report calls for a plan to create by 2010 a
redefinition of boundaries such that the primary immigration control will be around the three
countries of the North American Union, not between the three countries. We have argued that a
likely reason President Bush has not secured our border with Mexico is that the administration is
pushing for the establishment of the North American Union.

The North American Union is envisioned to create a super-regional political authority that could
override the sovereignty of the United States on immigration policy and trade issues. In his June
2005 testimony to the U.S. Senate Foreign Relations Committee, Robert Pastor, the Director of
the Center for North American Studies at American University, stated clearly the view that the
North American Union would need a super-regional governance board to make sure the United
States does not dominate the proposed North American Union once it is formed:

NAFTA has failed to create a partnership because North American governments have not
changed the way they deal with one another. Dual bilateralism, driven by U.S. power, continue
to govern and irritate. Adding a third party to bilateral disputes vastly increases the chance that
rules, not power, will resolve problems.

This trilateral approach should be institutionalized in a new North American Advisory Council.
Unlike the sprawling and intrusive European Commission, the Commission or Council should be
lean, independent, and advisory, composed of 15 distinguished individuals, 5 from each nation.
Its principal purpose should be to prepare a North American agenda for leaders to consider at
biannual summits and to monitor the implementation of the resulting agreements.

Pastor was a vice chairman of the CFR task force that produced the report “Building a North
American Union.”

Pastor also proposed the creation of a Permanent Tribunal on Trade and Investment with the
view that “a permanent court would permit the accumulation of precedent and lay the
groundwork for North American business law.” The intent is for this North American Union
Tribunal would have supremacy over the U.S. Supreme Court on issues affecting the North
American Union, to prevent U.S. power from “irritating” and retarding the progress of uniting
Canada, Mexico, and the U.S. into a new 21st century super-regional governing body.

Robert Pastor also advises the creation of a North American Parliamentary Group to make sure
the U.S. Congress does not impede progress in the envisioned North American Union. He has
also called for the creation of a North American Customs and Immigration Service which would
have authority over U.S. Immigration and Customs Enforcement (ICE) within the Department of
Homeland Security.

Pastor’s 2001 book “Toward a North American Community” called for the creation of a North
American Union that would perfect the defects Pastor believes limit the progress of the European
Union. Much of Pastor’s thinking appears aimed at limiting the power and sovereignty of the
United States as we enter this new super-regional entity. Pastor has also called for the creation of
a new currency which he has coined the “Amero,” a currency that is proposed to replace the U.S.
dollar, the Canadian dollar, and the Mexican peso.

If President Bush had run openly in 2004 on the proposition that a prime objective of his second
term was to form the North American Union and to supplant the dollar with the “Amero,” we
doubt very much that President Bush would have carried Ohio, let alone half of the Red State
majority he needed to win re-election. Pursuing any plan that would legalize the conservatively
estimated 12 million illegal aliens now in the United States could well spell election disaster for
the Republican Party in 2006, especially for the House of Representative where every seat is up
for grabs.

Mr. Corsi is the author of several books, including "Unfit for Command: Swift Boat
Veterans Speak Out Against John Kerry" (along with John O'Neill), "Black Gold
Stranglehold: The Myth of Scarcity and the Politics of Oil" (along with Craig R.
Smith), "Atomic Iran: How the Terrorist Regime Bought the Bomb and American
Politicians," and most recently, "Minutemen: The Battle to Secure America's
Borders." He will soon author a book on the Security and Prosperity Partnership of
North America and the prospect of the forthcoming North American Union.

The story of the past couple of weeks has been the meltdown of the U.S. currency. The U.S. Dollar Index
which should actually be referred to as the Federal Reserve Note Index has now fallen to 82.42 as of this
Friday. The Index appears to be breaking down and will probably test the all time low which is around the
80 mark. If we see the Index fall below this mark we can expect to see it fall much further.

There is no question that we could very well be on the brink of a major slide in the value of Federal
Reserve Notes. One of the reasons why I believe this to be true is because the mainstream media is now
introducing the public to the idea of a new currency called the Amero. The Amero is a proposed fiat
currency that will replace the Canadian, U.S. and Mexican currencies as all three countries are merged
into a North American Union. Even though the idea of a North American Union and the Amero has been
talked about for quite sometime, there are still people who believe that these are conspiracy theories. For
any skeptics, let me assure you that the possibility of a North American Union and the Amero currency is
very real. Below is an excerpt from a World Net Daily article that quotes a CNBC interview with Steve
Pervis, Vice President at Jefferies International Ltd where he urges a move to the Amero and a North
American Union.

London Stock Trader Urges Move to Amero

In an interview with CNBC, a vice president for a prominent London investment firm yesterday urged a
move away from the dollar to the "amero," a coming North American currency, he said, that "will have a
big impact on everybody's life, in Canada, the U.S. and Mexico."

Steve Previs, a vice president at Jefferies International Ltd., explained the Amero "is the proposed new
currency for the North American Community which is being developed right now between Canada, the
U.S. and Mexico."
The aim, he said, according to a transcript provided by CNBC to WND, is to make a "borderless
community, much like the European Union, with the U.S. dollar, the Canadian dollar and the Mexican
peso being replaced by the amero."

Previs told the television audience many Canadians are "upset" about the amero. Most Americans
outside of Texas largely are unaware of the amero or the plans to integrate North America, Previs
observed, claiming many are just "putting their head in the sand" over the plans.

More proof of the coming North American Union comes from a publication written in 2005 by the
communists at the Council on Foreign Relations. The publication talks about building a North American
Community by the year 2010. Don’t be fooled by the politically correct terminology, they go into
considerable detail about building a North American Union with governing agencies that will set policy for
all three countries. This is the CFR’s official plan and it is being implemented as we speak.

Building a North American Community

Getting back to the main point, I don’t see why CNBC would bring somebody on to talk about the Amero if
things were going so great with our present currency. I believe that the value of Federal Reserve Notes is
going to be manipulated in such a fashion that it makes it easy for the central bankers to implement the
Amero. If they continue to inflate the currency and escalate a currency crisis, they can more easily gain
public support to introduce a new currency.

Either way, the Amero is a terrible idea. It is going to be an entirely fiat currency which will help further
consolidate power to the banking cartel. It will give them control over the entire North American region
through their power of currency creation.

Besides this public introduction to the Amero, all of the fundamental factors driving the devaluation of U.S.
currency remain. We still have a huge mess in the U.S. housing market, a government debt in the trillions,
a huge trade deficit with China, foreigners diversifying into other currencies, out of control inflation, a
mess in Iraq and of course the fact that our currency is no longer backed by a tangible asset. Federal
Reserve Notes as of this past Thursday were trading at 15-year lows against the pound sterling. With all
of these fundamentals to consider, I would be very surprised if we don’t see a currency crisis take place
within the next few years.

All of this has been extremely bullish for gold and silver the past few weeks. Gold is now trading for $645
an ounce and silver is trading for $13.97 an ounce. I’m very bullish on both precious metals but I continue
to see much more upside with silver.

U S. Bush administration's Amero Dollar Plan may make

certain personal saving and investments worthless
Submitted by MichaelVail on Fri, 2007-08-17 08:01.

• American Union
• amero

• Bank of Canada Govenor

• borderless community

• Enslavement

• Fraser Institute
 • Land Grab

• losing the freedom to manage our own economy

• military industrial complex

• national security-driven police state

• National Sovereignty

• NAU

• Spotlight

• SPP

• World News

The Canadian
Posted : 2007-08-17 02:50:17

Project for a New America plan for new currency promises to be corporate theft by conversion
toward commercial profit

by Jenn Jones, Business Editor

The Amero is not being pursued by various elite-driven "Security and Prosperity Partnership"
(SPP) related interests because of alleged benefits to the general Canadian, U.S. and Mexican
public. The Amero is an apparent agenda to introduce a new "continental" currency that will
enable corporate elites to steal investment gains and savings from individuals.
Make sure you cast your vote on the Amero Currency