More Loonies Abroad?

Here's an interesting possibility I found out via James Nicoll.  Iceland, which has been severely effected by economic problems since the 2008 collapse of its banks, is considering adopting a foreign currency to replace its current krona.  Surprisingly, it seems that not only is the Canadian dollar one possible choice, it's a very popular idea amongst Icelanders.  And Canada's ambassador to Iceland, Alan Bones, is going to tell them tomorrow that Canada is interested in the idea.  Iceland won't get a say in Canadian fiscal policy, which will limit how much they could control their economy.  But given the problems with the krona apparently many in Iceland are willing to take the risk.

The possibility is a bit ironic given that there have been various calls over the years for Canada to adopt the US dollar as its currency.  Unlike with Iceland however Canadians who supported the idea believed it would have to involve joint US-Canadian control of fiscal policy.  That always struck me as a highly unlikely possibility, and is why I never saw such a union happening.  Funny to see the shoe on the other foot.

Gas in Saskatoon, December 5, 2008.

This week saw yet another drop. Gas is now 83.9 cents a litre. It was interesting to see a Macleans(Canada's equivalent of Time and Newsweek)cover shot from mid June the other day on speculations of how your life might be with 200 buck a barrel oil. No doubt we will see oil at that price eventually, barring a major breakthrough in alternative energy, but it seems a lot further away now than it did when that issue was printed. Unfortunately a lot of economic ministries in various places, including here in Saskatchewan, were banking on the revenue higher prices was going to bring, so their budgets have gotten a wee bit screwed up as a result, as have the plans of anyone who bought a lot of petroleum product at price X expecting it to get a lot more expensive by now, not drop. Just goes to show that economics is far less predictable than some would like us to believe.

Shut Up Week.

Unless you just came out of a sealed capsule at the bottom of the ocean, or have been running around with your fingers in your ears shouting "Lalalala, not listening!" for the past while(a not unreasonable response right now) you no doubt have heard the regular stream of dire predictions coming from various quarters on the economy. The Organisation of Economic Cooperation and Development is the latest group to release a negative outlook for the world economy. And with each one the markets seem to go on a rollercoaster. So perhaps it's time for all of them to shut up. Keep their predictions of doom and gloom to themselves just for a week and see what happens. What's the worse that could happen? I can't see it being much worse than the Dow Jones and TSX dropping 400 points one day because of some prediction from an expert, followed by them going back up 250 points the next day because those involved realise there's still money to be made.

Modern media doesn't help things. It allows almost immediate dissemination of such material, and hence an almost immediate reaction from the markets. If this blog for example was in any way influential with the movers and shakers in international markets there could be a response from some interested parties within a few minutes of this post being published. The pundits and organisations that create such material might want to consider that fact before flapping their big mouths.