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by Michael Arbow MBA
Partner, RSD Solutions Inc.
As the world's Western economies drag themselves out of the Great Recession; fueled in part by "cheap" money and plenty of global quantitative easing, commodity prices have appeared to confirm their uptrend. In parallel to this is the European debt crisis which just won't go away despite the best efforts of the PIIGS dramatically reduce government debt levels. The contagion that is the European debt crisis continues to move from fringe country to fringe country. As was laid out last year by some economist and now seemingly confirmed by those at Merrill Lynch the US will be the last stop on the tour. The expectation (pushed back from original forecast) is late this year.
With the US in the sights of debt holders who demand higher rates of interest to cover inflation and perceived risk, the US will be placed in an uncomfortable position. With its +9% unemployed and high government and consumer debt levels the Federal Reserve will be reluctant to raise rates. The fallout will be a devalued dollar (predicted by the likes of Peter Schiff for the last two years) and the accompanying ramp up of commodity prices. According to Merrill (echoing noted Canadian economist Patricia Croft last year) we can expect to see the Canadian dollar reach the $1.10 level to the USD. This news is great for going to Disney but not good for Canadian manufacturers or service providers already struggling to remain competitive in the US market. It may be time for Canadian exporters to seriously consider a redirection of your marketing efforts in the longer term and move to currency and commodity insurance to survive in the immediate term.
Link to Globe and Mail Merrill article: http://tinyurl.com/6exewl9
