Jay Currie

A year ago I wrote a longish post suggesting that Canada had the potential to become a sort of bulked up Switzerland. I noted:

On the income side Canada’s huge resources of oil, natural gas, coal, assorted minerals and – though we are not allowed to say this – water – means we are racking up trade surpluses with the US. But, more importantly, we are also exporting significant amounts of our resources to non-US markets.

At the same time, while the CPC is hardly the picture of fiscal rectitude one would hope it would be, so much money is flowing into the national coffers that deficit spending is a distant, and ugly, memory and surpluses are the order of the day.

Our banking system – while irritating and stodgy – at least had the wit to limit its exposure to dodgy securitized mortgages and while we have private equity folks we have not, as a matter of national business, bunged a lot of money in hedge funds. While some of our banks have exposure to sub-prime risk and assorted doubtful corporate paper, these risks appear to be manageable within the private sector without calls on either the Bank of Canada or the federal government.

Our national debt is declining, not fast enough; but declining. moi

I quote myself at length simply because in the midst of the apparent meltdown in the US, Canada is looking even better. A year later Canadian banks have written off the several billions in crappy – but lucrative – paper they were gulled into buying from American and Euro counterparties. Our debt is down a couple of billion more and our federal and most provincial budgets are in rough balance. The Loonie – and let’s not be too somber, a currency should have a fun name – is significantly underpriced at 93.5 USD.

As a safe haven, Canada is pretty much unmatched in the world. Realistically, if the US goes on nationalizing really shitty mortgages and the maxed out credit cards of a grateful nation the US dollar will collapse. (At the moment, rather like Steve Harper, the only reason the USD is holding its own is there are so few good alternatives. Think of the Dion as the Euro.)

There is going to be an adjustment. For Americans it will be, and already is, wrenching. For the American dollar and America’s stock exchanges it will be a nasty, and possibly rather quick, marking to market.

So where does the smart money go? Well EVG (with whom I work, full disclosure and all) might be a start. But, more generally, the TSX-Venture Exchange is where it was at at the beginning of 2003. The Canadian dollar is poised (as the financial pundits always put it) on the brink of a breakout. (My personal bet is around 1.10. However, I can certainly imagine circumstances which will drive the Canadian dollar to 1.25, or frankly, $2.00 USD.)

For people who think that is just nuts, take a look at the Swiss franc. In the early part of this year it came very close to parity with the USD from a position of 4:1 back in the 1960s.

Taking USDs and putting them into the pounded TSX-V as well as the sound Canadian banks, oil companies, media giants and various other sectors would do three things for our American friends.

Keep their wealth intact.
Ground it in productive activity.
Create the possibility of significant currency gains.

Canada, at the moment, occupies precisely the position that Switzerland did in the post World War II European world: safe banks, safe currency, moderate government, smart business, relatively low taxation, political stability. A fact which is, shall we say, significantly underreported in US mainstream or business media.

Campaign themes:

For the WSJ: Canada: We Still Have Banks
For the NYTimes: Canada: Where a Buck Really is a Buck
For Forbes: Get Sober – No Geniuses, No Fraud – Canada: Just Value!
For Wired: RIM|Canada|Got it?
For China Daily: Canada: Keep a Dollar – We won’t Tell
For the Economist: Canada =>Switzerland
For CNN: Canada: We Elected Obama in 1968

By all means contribute your own in the comments.