It’s no secret that America has a serious inflation problem. Though the Federal Reserve insists that our inflation rate is only at around .5%, we’ve all seen the price of food, rent, healthcare, and energy skyrocket over the past 10-20 years. However, this has been a gradual shift. Canada, on the other hand, has just seen the price of everyday goods rise precipitously over a very short period of time.
The crash in oil prices has crippled their economic growth, and led to the decline of the Canadian dollar, as well as a predictable increase in the cost of imports like food. For those of us living in the US, this provides a really good example of what life may be like should the dollar take a plunge in the near future. Here’s what our northern neighbors have been dealing with:
It is often said that a free-floating currency acts as a shock absorber.
But when Canadians go shopping for groceries these days, they’re getting nothing but the shock—sticker shock, that is.
On Tuesday, the Canadian dollar, commonly known as the loonie, broke below 70 U.S. cents for the first time since May 1, 2003.
For America’s northern neighbor, which imports about 80 percent of the fresh fruits and vegetables its citizens consume, this entails a sharp rise in prices for these goods. With lower-income households tending to spend a larger portion of income on food, this side effect of a soft currency brings them the most acute stress.
James Price, director of Capital Markets Products at Richardson GMP, recently joked during an interview on BloombergTV Canada that “we’re going to be paying a buck a banana pretty soon.”
Canadians took to Twitter this week to share their collective horror over the rising cost of food. Cucumbers are $3 each. A head of cauliflower is $8. A large container of pepper cost $19 and some Canadians are paying $16 for a single bell pepper. A container of laundry detergent is $32.
This gives us a pretty good idea what would happen in the US, even if there was a minor shock to the value of the dollar. Despite the rising cost of goods and services, our currency has been doing really well on the global stage for the past two years. I shudder to think of what will happen when our economy runs into another recession, which we are way overdue for. When it does hit, the cost of our imports will rise the most, much like they have in Canada.
So what are our main imports? Fortunately, most of our food is homegrown, but there are quite a few American food staples that are also raised abroad, such as bananas, coffee, nuts, and seafood. And even though we’re one of the world’s largest meat producers, we still import a lot of pork and beef from Canada, New Zealand, and Australia. However, that doesn’t mean homegrown food wouldn’t become more expensive as well.
Even though we’ve become one of the world’s leading oil and natural gas producers in recent years, we still import a significant amount of oil from abroad. Since our agricultural industry is heavily reliant on oil, we could expect the price of all our foods, both domestic and imported, to rise.
If you want to understand how our economy would hurt from inflation or a dollar dump, take a look a this list of America’s biggest imports. We ship in a ton of electronics, which are worth about $315 billion per year. For a high-tech society like ours, this would be crippling.
The other items that stand out in that list are healthcare related. When put together, medical equipment and pharmaceuticals amount to 6.3% of our imports. Our medical system is already the most expensive in the world, so a plunge in the dollar’s value would make that situation significantly worse.
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All told, a dollar dump would be really bad. That may sound obvious, but when it happens you can expect our government and media to tell us the same thing the leaders in Canada are trying to tell their citizens. Here’s how Steven Poloz, the head of Canada’s central bank, is trying to spin this situation.
Nonetheless, Mr. Poloz insisted that the Canadian dollar, which has plunged to near 70 cents (U.S.), is helping to offset the billions in lost revenue from exports of oil and other commodities. The drop makes Canada’s non-resource exports more competitive in world markets. A lower dollar is generally beneficial to exporters because they pay for their inputs, such as labour, in Canadian dollars, while their sales are generated in the higher U.S. dollar.
This is how all central bankers talk. They could find a silver lining in any situation, even if there was blood in the streets. They’ll say the same thing in the US when the next recession hits and the dollar slips. But it won’t change the fact that everything we need for our survival will be more expensive, and the average person will be making less (or no) money.
Joshua Krause was born and raised in the Bay Area. He is a writer and researcher focused on principles of self-sufficiency and liberty at Ready Nutrition. You can follow Joshua’s work at our Facebook page or on his personal Twitter. Joshua’s website is Strange Danger.
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Some interesting times ahead.
The Canadian socialist economy relies heavily on their oil and gas industry’s taxes. Oops!!! Where did all of these products go!?!? Relying on a stable tax income is one of the failings of communism:: Margaret Thatcher – Socialism is OK until you run out of other people’s money.
That is actually capitalism and free market that are at play as well as our reliance on imported foods. We still have free health-care, unemployment insurance, government pensions, government sponsered mortgage insurance, old age security, etc. How did the crash of ’08 work out for many American homeowners/workers?
Actually that is completely incorrect, the real reason we are in trouble is because of so called “Free markets’ and deregulation of our economy. Outsourcing, free trade, private banks lending money to the government at interest and all sorts of fascist nonsense is what caused this, its time to break up the banks, the monopolies and re-regulate…all we have to do is go back to the way things were before the 70’s.
The entire world needs to prepare for much of the same, the present flawed financial system based on infinite growth is coming to its predictable end and we need to clean house and start over with a new system(s).
I predict a third World War within the next two years. That should sort things out.
What goes up must come back down. The only cure for this is terminate some of these so called free trade treaties that only benefit the 1% and go back to the way things were before 1980.
$315 billion buys only a ton of electronics? Seriously sloppy writing.