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Jim Stanford, CAW/CALM

Canadian politics has been dominated recently by a tremendous gnashing of teeth and wringing of hands over the state of our poor loonie. The eye of this storm has hovered steadily over the financial district of downtown Toronto. Since the mavens of finance make their living by maximizing the value of paper wealth, it’s natural they should be the most upset about the diminishing value of Canada’s national paper.

But their fulminations on the loonie’s plight are less convincing all the time. They used to argue that by fixing our economic fundamentals (low inflation, balanced budgets, lower taxes), we’d regain the confidence of the markets. Well, we did all those things, and the loonie is still in the toilet. Higher interest rates would boost the dollar, but everyone agrees they would be economically disastrous.

Some argue we should just accept the U.S. greenback as our currency. But, even as these thinkers predict the demise of national currencies, corporations have decided there is big money in issuing their own private currencies. Think of the customer loyalty cards that clutter up your wallet: frequent flyer points, coffee cards, department store points plans. These are alternative currencies that companies issue to encourage customers to buy more of their product.

Maybe we should think of the loonie as one big loyalty program that rewards customers for buying in the Canadian store. We could call it Club Loonie. And it’s probably the most generous loyalty program going.

Your Esso Extra points can save you about one per cent on your gasoline. Canadian Tire money will save you two per cent. Your Second Cup coffee card gets you a free coffee for every six you buy, an effective saving rate of 14 per cent. Play your Aeroplan cards right, and you save 17 per cent on your air travel. But Club Loonie allows you to use 62-cent dollars to buy goods and services in Canada that are worth 80 cents (U.S.), for an effective saving rate of 22 per cent. Here’s how.

Contrary to Bay Street mythology, the real standard of living of Canadians does not depend on the value of the loonie. Like most Canadians, my standard of living depends exclusively on how much I earn in my job and the prices of the things I buy. My salary is in Canadian dollars. And most of the things I buy, my house, almost all private services, all public services, which I buy through my taxes, and about half of my manufactured products, are made right here.

Even imported purchases reflect the value of the loonie only gradually and partially. To see this, go to a bookstore and pick out any volume that lists prices in both U.S. and Canadian dollars-like Stephen King’s latest paperback, Dreamcatcher. The U.S. price is $7.99. At a 62-cent dollar, it should cost me $12.89 Canadian. But the Canadian price is only $10.99. I am saving almost two dollars.

The apparent savings are all the greater on big-ticket items, like cars. A new Impala LS sedan lists for about $24,000 in Boston. At 62 cents, it should cost me $38,000 in Canada. But I can buy one in Toronto for $29,500. Cars, like most other goods and services, are much cheaper in Canada than they should be, given the apparent exchange rate.

Economists call this phenomenon a deviation of the exchange rate from its "purchasing power parity." Most studies suggest a Canadian dollar buys goods and services in Canada equivalent to 80 cents (U.S.) worth of equivalent purchases in the U.S. Yet the loonie is worth only 62 cents on financial markets. So, the further the exchange rate diverges from its real-world spending power, the greater are the seeming bargains.

We aren’t getting richer as the loonie sinks. But we certainly aren’t getting poorer. Our well-being depends on our real work and our real productivity-not on the mood swings of the paper traders. In 1991 we had a strong currency and a weak economy. Ten years later we have a weak currency but a stronger economy, a state of affairs I much prefer.

Don’t get me wrong. I’m not advocating a lower dollar. We certainly don’t need it to keep our exports selling like hotcakes, and it makes it too easy for foreigners to buy Canadian companies and resources. But since there’s nothing much we can do about it in the short run anyway, why worry? Go shopping instead. Earn valuable Club Loonie points. Be happy.

· Jim Stanford is an economist with the CAW