Where was my Discount With a Strong Dollar?

[Warhippy]

I just read this off of the CBC. I used to work in the US and travel there frequently and this was something I wondered constantly when I would go down there with a strong dollar or dollar on par.

Now with the sudden rush and fast decline of the dollar, apparently in part by talk from the BoC and Finance Minister to hep precipitate its fall; we are being warned very clearly prices on everything will rise

So I thought this was an interesting read when we can already see the prices going up, surcharges being added to everything already and all while our government and the BoC tell us wonderful spinning lies about inflation.

Enjoy the read, try not to lose it when you realize the truth of it all.

==============================================================

Having lived for so long in the savagely competitive American marketplace, I'm always amazed when I return to Canada at how some of my more bovine fellow citizens are willing to rationalize being milked.

Whenever the discussion drifts to how just about everything in Canada costs more than it does across the nearby American border, some trusting soul pipes up with something like: "Well, that's just the price we pay for our health-care system."

Or: "If that's what it costs to have a more caring society, then I'm willing to pay it."

Even a few years ago, when the loonie was powerful and rising, you'd hear nonsense like that.

For some reason, Canadians tend to conflate the higher taxes we pay, which do go toward financing social programs like health care, and the higher prices we pay, which simply go into some greedy company's bank account.

If you had the gall, as I did after the loonie shot well past the U.S. dollar in 2007, to call one of those companies — say, a clothing retailer, or a big car company like Honda — and ask why Canadian prices were so slow to drop, you'd run into a trained shill who'd rattle off practiced talking points.

Such as: "We still have a lot of inventory in the system that we paid for when the Canadian dollar was weaker."

Or: "We discounted for many years when the Canadian dollar was weaker, so it's only fair that we'd want to recoup some of those losses now."

Well, now that the loonie is down and dropping fast, this "price stickiness" is vanishing. Suddenly, the market is a picture of flow-through efficiency.

Canada's travel industry is now deploying the wonderfully self-referential euphemism "currency surcharge" to cover itself from the falling dollar.

Air Canada, always brilliant at using its market position to maximize profits, is tacking the "surcharge" onto its vacation packages for those trying to escape winter. Other tour operators are doing the same.

• 
  Canadian dollar sinks, currency surcharge added to winter travel
  
• Loonie hits 4-year low as Bank of Canada holds rate at 1 %
  

It's a way to jack up prices without explicitly admitting it. And you can bet corporate directives are being issued at Canadian retailers and manufacturers to pile on.

Where was the currency discount?

Fair enough, I suppose; businesses pretty much always pass on rising costs of production to consumers.

• Why do Canadians pay more? It's complicated
  

But I don't recall anyone inventing a "currency discount" back when the loonie was strong.

"It's pure greed," says Bruce Cran of the Consumers' Association of Canada, which monitors a basket of dozens of goods available in both the Canadian and American markets.

Cran says the prices of those goods did narrow somewhat over the years, but Canadians always paid at least 15 per cent more than Americans, even when the U.S. dollar was at its weakest.

A study by the Senate of Canada agreed, although it was unable to articulate any definitive reasons.

A common excuse, says Cran, is "It's the cost of shipping." That one, he says, was particularly rich coming from retailers of Canadian-made goods that sold for less all over the U.S.

Canadian retailers, who have been losing business to internet and cross-border shoppers, may do better if the lower loonie means consumers spend their money closer to home. That's provided that their suppliers don't want to be paid in the U.S. greenback. (Canadian Press)

The Acura MDX sport utility vehicle, manufactured in Ontario, is one example.

Another, says Cran, is Bombardier's snowmobiles, which it sold for up to 40 per cent less in North Dakota than neighbouring Manitoba, and "turned handsprings to prevent Canadians from crossing the border to purchase them."

Cran says Canadian retailers are not always greed-heads, and that sometimes they are dragged into price-fixing schemes against their wills.

He says he was once shown correspondence between a Canadian retailer and the U.S. firm that supplied it with jeans.

"The American company was tacking on 35 per cent because they thought they were entitled to it in Canada. The Canadian company was advised they would lose the franchise if they raised a problem."

Still, Cran suspects the real reason Canadians pay more is that in the end they're willing to: "Some people seem to regard it as some sort of patriotic gesture.

"As a consumer advocate, I find that very frustrating, but that is the thinking on the part of a surprising number of people.

"I've actually received hate calls, from Canadians, for pointing out the lower prices charged in the United States."

Bye-bye purchasing power

Now that Canada's already-high prices are on the rise, though, consumers who've endured years of erosion to their real incomes will have to either band together and get assertive, or strangle.

As Cran points out, "we've lost 10 per cent of our purchasing power. It's happened like lightning. People have to be prepared to do whatever they can to protect themselves."

The Consumers' Association suggests using the internet to find out what an item is selling for elsewhere in Canada and in the U.S., and then using that information to bargain.

At least be aware before making a spending decision, advises Cran.

What Canadian consumers really need to do is assert their collective power, which, even if the will were there, would be more difficult that it sounds.

Big retailers make a tonne of money by keeping the North American markets separate, and aim to keep it that way.

Also, ordinary Canadians can do very little about the international forces that determine what their dollar is worth.

It wasn't so long ago, 2002 in fact, that the Canadian dollar was only worth 62 cents American.

Bank of Canada governor Stephen Poloz seems to be in no hurry to raise interest rates, which would boost the dollar, any time soon. (Reuters)

I don't remember any credible prediction it would ever go that low, and I don't remember many macroeconomists predicting a loonie worth $1.10 US just five years later.

Some suspect Canada's central bank is promoting a weaker loonie, to boost Canadian exports — and the jobs that might come along with them. (There may be something to that. Lots of other central banks, America's included, have pursued the same goal with winks and nudges.)

But Canadian consumers can do something about being treated like a herd of cows by retailers. It just takes a little un-bovine anger.

[The Colt 45s]

Infrastructure is one reason why prices in the US are cheaper.

Low wages is another reason.

Government subsidy lowers prices further.

Finally, competition and population size are other reasons too.

[Absent Canuck]

The inflated Canadian GDP economy couldnt last forever. It was a bubble.

[aGENT]

Infrastructure is one reason why prices in the US are cheaper.

Low wages is another reason.

Government subsidy lowers prices further.

Finally, competition and population size are other reasons too.

Those certainly factor in, I'll even add population density as an issue (we're fairly spread out as a country). For most similarly priced goods those are likely the majority of reasons for the moderate price differences.

For some items though (as referenced in the article), there's definitely some price gouging going on. As always, do your research.

[taxi]

Infrastructure is one reason why prices in the US are cheaper.

Low wages is another reason.

Government subsidy lowers prices further.

Finally, competition and population size are other reasons too.

Price fixing and increased taxes are a huge issue too. When you have ridiculously high fuel taxes the taxes get passed onto all areas of the economy. The Canadian government also loves to give out monopoly licenses. See telecommunications, the dairy board, taxis etc... You need a license to do anything. Only the wealthy can afford to bid for those licenses.

The government needs to bust up the price fixing and monopolies. It then needs to regulate less. Way too many barriers to entry into the market place in Canada. The government also needs to curb foreign ownership. It's not competition when the other side is buying up huge amounts of Canada with money they've made from Asian slave labour.

[Warhippy]

Infrastructure is one reason why prices in the US are cheaper.

Low wages is another reason.

Government subsidy lowers prices further.

Finally, competition and population size are other reasons too.

Those certainly factor in, I'll even add population density as an issue (we're fairly spread out as a country). For most similarly priced goods those are likely the majority of reasons for the moderate price differences.

For some items though (as referenced in the article), there's definitely some price gouging going on. As always, do your research.

One of the largest fallacies is infrastructure, travel and population.

The vast majority of the population in Canada lives within a 3 hour drive of the border, by Direct contrast prices in Hawaii, Alaska and even in North Dakota and Wyoming are still cheaper per unit in most respects than in Canada

Infrastructure as well means very little as items get into Canada far faster via rail, ship and truck than items into the US from all points of entry, added our highway and rail systems are twinned and we share the largest undefended border in the world and this also adds to that myth

Lastly, one of the largest cries is about population. The main issue with this is that the big items in question are either made in Canada (cars) or produced in Asian markets and therefore shipped in. This makes the process of population vs demand a moot point as the US becomes a simple middle man and in most cases the products are shipped directly into canada anyways but as they're made for or purchased originally by American companies carry the same price tag regardless.

Tarriffs and Taxes have very little to do with anything in the overall scheme of things.

The sad thing is, our government did nothing to protect consumers let alone get to the bottom of it. Business accepted large tax breaks and we received none of the promised trickle down and are now subject to rising prices due to lower buying power.

I for one am not really mad as my large purchases tend to be for camera gear and I have a US drop box 40 minutes from my house and I can tell you that saving $400 on a 12-24 mm lens is worth it every single time. because NOBODY can convince me that the Nikon lens produced in canada should be more expensive than the Nikon lens produced in the US.

Sorry did I say produced? I meant made in an Asian country and shipped directly to canada with a higher price tag

[aGENT]

Yup I buy camera gear from the US as well. As I said, do your homework.

For instance TV's (another electronic) are almost a wash for pricing once you factor in exchange, shipping etc. If you're making a major purchase, you're simply better off doing a quick Google search to see if you'll be getting screwed in Canada.

Vehicles are probably my largest beef as the manufacturers and dealers actually collude to price fix in Canada and punish anyone who tries to cross border shop. By all means, our government should be nailing those arses and any companies like them to the damned wall with public investigations.

For most things like camera gear that you can easily import, it's less of an issue. Just import it. If Canadian companies see their sales drop, they'll be forced to remain competitive.

[Warhippy]

Yup I buy camera gear from the US as well. As I said, do your homework.

For instance TV's (another electronic) are almost a wash for pricing once you factor in exchange, shipping etc. If you're making a major purchase, you're simply better off doing a quick Google search to see if you'll be getting screwed in Canada.

Vehicles are probably my largest beef as the manufacturers and dealers actually collude to price fix in Canada and punish anyone who tries to cross border shop. By all means, our government should be nailing those arses and any companies like them to the damned wall with public investigations.

For most things like camera gear that you can easily import, it's less of an issue. Just import it. If Canadian companies see their sales drop, they'll be forced to remain competitive.

I do agree yes. The discrepancy on the largest ticket items is disgusting when you realize it is a top down process and we are getting screwed since there is no honest reason for the price difference.

Camaro made in Ontario $4700 cheaper 10 minutes away in Michigan.

Sadly though we had 3 or 4 full years where canadians were spending tens of billions a year in the us apparently by reports to the loss of billions to canadian retailers in cross border shopping yet there was no price drop. Finance minister promised to do something about it, spent almost $400k on a report and said he couldn't do anything about it

Troubling.

Enjoy those US drop boxes and shop online with EU and US sites. You'll save

[Offensive Threat]

Companies sell items for what they can get people to pay for them. Not what they are worth. This is particularly true with Tech items and automobiles.

Apples entire business model is based on this.

[taxi]

One of the largest fallacies is infrastructure, travel and population.

The vast majority of the population in Canada lives within a 3 hour drive of the border, by Direct contrast prices in Hawaii, Alaska and even in North Dakota and Wyoming are still cheaper per unit in most respects than in Canada

Infrastructure as well means very little as items get into Canada far faster via rail, ship and truck than items into the US from all points of entry, added our highway and rail systems are twinned and we share the largest undefended border in the world and this also adds to that myth

Lastly, one of the largest cries is about population. The main issue with this is that the big items in question are either made in Canada (cars) or produced in Asian markets and therefore shipped in. This makes the process of population vs demand a moot point as the US becomes a simple middle man and in most cases the products are shipped directly into canada anyways but as they're made for or purchased originally by American companies carry the same price tag regardless.

Tarriffs and Taxes have very little to do with anything in the overall scheme of things.

The sad thing is, our government did nothing to protect consumers let alone get to the bottom of it. Business accepted large tax breaks and we received none of the promised trickle down and are now subject to rising prices due to lower buying power.

I for one am not really mad as my large purchases tend to be for camera gear and I have a US drop box 40 minutes from my house and I can tell you that saving $400 on a 12-24 mm lens is worth it every single time. because NOBODY can convince me that the Nikon lens produced in canada should be more expensive than the Nikon lens produced in the US.

Sorry did I say produced? I meant made in an Asian country and shipped directly to canada with a higher price tag

You have no idea what you are talking about.

Are you saying that CEOs in Canada make less than the USA or that corporations in Canada get fewer tax breaks than they do in the USA?

The truth of the matter is that Canada has huge tariffs and those translate directly into increased costs for the consumer. Another major cost is increased fuel taxes. It sounds great to put 40% taxes on fuel to combat climate change. The other side of the coin is that anything that requires an energy input to produce or transport becomes more expensive.

The other issue is the strength of the unions, oligopolies, and licensing bodies Canada. There is no competition in Canada when Rogers and the Auto Workers Union control the government.

The reason your camera gear is cheaper in the US is a matter of overhead and bulk purchase. You're buying from a large corporation that ships from a giant wearhouse. The local mom and pop store is much more expensive to run and gets a much worse deal/unit.

Ironic that you complain about big business as the issue, yet aren't willing to support the local shop.

[Lancaster]

It's a scam when companies claim higher costs due to currency fluctuation. Small business I can understand... but medium and large businesses dealing with foreign exchanges and not hedging? That's idiotic.

Businesses always have a reason to raise prices. Remember a few years back when the CAD was very high... yet gasoline prices was high? There was some explanation about how oil prices were also high and that refineries had to buy some oils at high CAD prices, thus gas is expensive. Now when oil is much lower and CAD much lower, gas prices still remains high.

Winter = Cold = High prices

Spring = more drivers = high prices

Summer = more energy for air-cons/vacationers = high prices

Fall = starting to get colder = high prices

The whole rationale saying Canada is less dense and lower population doesn't hold water as most cities are literally just across the US border. I can understand if you're living in a smaller remote town and stuff being pricier, but there's no reason why stuff across in Bellingham or Detroit be way cheaper than Vancouver or Southern Ontario respectively.

If it's a duty/tax issue, then that 25-50% difference in pricing should be going directly to the government, right? If so, how can there even be a deficit?

It seems that many businesses are just using the whole tax, duty, regulations, geography as a crutch to scam consumers. Just refer back to the Verizon thinking about enter Canada and how domestic companies teamed up to fight it. It's time to cut back on competitive red-tape and increase competition!

[Ghostsof1915]

I can't answer for cars. But for consumer goods I'll give one simple answer.

Distributors. I swear Canada has the worst distribution system. They are the middle men, and all they do is hold the product before it gets shipped to the stores. The US distributors charge less, and are more efficient.

Cut out the middleman, and I bet there's your 10% right there. I've said it before and I'll say it again.

Canada: 21st century country with a 19th Century economy.

[Brick Tamland]

Price fixing and increased taxes are a huge issue too. When you have ridiculously high fuel taxes the taxes get passed onto all areas of the economy. The Canadian government also loves to give out monopoly licenses. See telecommunications, the dairy board, taxis etc... You need a license to do anything. Only the wealthy can afford to bid for those licenses.

The government needs to bust up the price fixing and monopolies. It then needs to regulate less. Way too many barriers to entry into the market place in Canada. The government also needs to curb foreign ownership. It's not competition when the other side is buying up huge amounts of Canada with money they've made from Asian slave labour.

You should see the multi-billion dollar chicken industry right... It would blow peoples minds. Even the Aquilinis can't break into that cash cow, no matter how much money they throw at it.

[Warhippy]

You have no idea what you are talking about.

Are you saying that CEOs in Canada make less than the USA or that corporations in Canada get fewer tax breaks than they do in the USA?

The truth of the matter is that Canada has huge tariffs and those translate directly into increased costs for the consumer. Another major cost is increased fuel taxes. It sounds great to put 40% taxes on fuel to combat climate change. The other side of the coin is that anything that requires an energy input to produce or transport becomes more expensive.

The other issue is the strength of the unions, oligopolies, and licensing bodies Canada. There is no competition in Canada when Rogers and the Auto Workers Union control the government.

The reason your camera gear is cheaper in the US is a matter of overhead and bulk purchase. You're buying from a large corporation that ships from a giant wearhouse. The local mom and pop store is much more expensive to run and gets a much worse deal/unit.

Ironic that you complain about big business as the issue, yet aren't willing to support the local shop.

I have every idea what I am talking about.

I never once said anything about CEO's

I am blaming supply, and corporations as well as the willingness for Canadian businesses to rip off their consumers.

Tarriffs do not count for much of the total cost overage we see in Canada as opposed to the USA.

Check it out, there's a ton of reports that say just that from Flaherty's own hand picked economists. They've done 3 of these reports since 2009.

I buy a camera lens it says made in Taiwan. Not america. Therefore production costs are cheap. It gets shipped to Canadian wholesaler and American wholesaler. I pay almost 34% more here in canada for it.

That has nothing to do with tarriffs nor with fuel prices as it comes off of a boat in Vancouver and then gets shipped from central sources.

So before you go spouting off about ignorance and then make random accusations I suggest you read these economic reports.

[Warhippy]

http://www.huffingtonpost.ca/2013/02/06/canada-us-price-gap_n_2632510.html

http://www.thestar.com/business/personal_finance/2013/02/06/canadaus_price_gap_senate_report_due_today.html

http://www.ctvnews.ca/canada/senate-report-calls-for-review-of-tariffs-fees-to-close-canada-u-s-price-gap-1.1145009

Here are a few reports stating that Tarriffs are one of but not the main contributor to the price gap.

Since then flaherty cut rates and the taxes on some imports. And this failed to do anything and in some cases the prices rose. This is much like the HST fallacy. HST will lower prices on goods, yet Ontario Nova Scotia and BC showed us that was a lie as prices dropped on nothing. Then once the HST was repealed in BC prices that rose in accordance with the HST stayed at HST levels and did not drop back to pre exemption HST levels.

http://www.cbc.ca/news/politics/import-tariff-elimination-fails-to-benefit-consumers-1.2506831

http://ca.news.yahoo.com/import-tariff-elimination-fails-benefit-consumers-225422622.html

http://www.huffingtonpost.ca/2014/01/22/import-tariff-elimination_n_4647789.html

Unions play little or no part in the price discrepancy on every day items as Unions do not affect everyday items only large ticket items.

This amounts to nothing but pure and simple greed in a lot of aspects from canadian retailers.

You say it is ironic that I do not support local business. Yet...you don't find it ironic why I and literally tens of millions of other Canadians don't.

Ironic.

[taxi]

http://www.huffingto..._n_2632510.html

http://www.thestar.c..._due_today.html

http://www.ctvnews.c...e-gap-1.1145009

Here are a few reports stating that Tarriffs are one of but not the main contributor to the price gap.

Since then flaherty cut rates and the taxes on some imports. And this failed to do anything and in some cases the prices rose. This is much like the HST fallacy. HST will lower prices on goods, yet Ontario Nova Scotia and BC showed us that was a lie as prices dropped on nothing. Then once the HST was repealed in BC prices that rose in accordance with the HST stayed at HST levels and did not drop back to pre exemption HST levels.

http://www.cbc.ca/ne...umers-1.2506831

http://ca.news.yahoo...-225422622.html

http://www.huffingto..._n_4647789.html

Unions play little or no part in the price discrepancy on every day items as Unions do not affect everyday items only large ticket items.

This amounts to nothing but pure and simple greed in a lot of aspects from canadian retailers.

You say it is ironic that I do not support local business. Yet...you don't find it ironic why I and literally tens of millions of other Canadians don't.

Ironic.

The issue is that you're making this overly political. You're picking and choosing the stats which promote your opinion. Are you honestly going to tell me the main issue that Canadian retailers are making too much money compared to their US counterparts?

Cmon, retailers in Canada are closing down all over the place. The issue is that the means of production and setting up and maintaining a retailer have become too expensive. Rent is ridiculous, fuel prices are ridiculous, labour costs are high, it all adds up. We need open up the competitive market in Canada and work to allow more Canadians into the marketplace. This means simultaneously decreasing the tax burden on local businesses and increasing restrictions on Asian investment.

[key2thecup]

20 Piece chicken nuggets at McD's in US...... $5

10 Piece in Canada...... $7

[aGENT]

20 Piece chicken nuggets at McD's in US...... $5

10 Piece in Canada...... $7

A lot of that is the completely wrong-minded (and corrupt) farming subsidies in the US though. Same reason their milk/cheese and corn products are so cheap.

[The Colt 45s]

A lot of that is the completely wrong-minded (and corrupt) farming subsidies in the US though. Same reason their milk/cheese and corn products are so cheap.

The Farm Bill down here is so bloated.

[Ronalds.Kenins41]

I just read this off of the CBC. I used to work in the US and travel there frequently and this was something I wondered constantly when I would go down there with a strong dollar or dollar on par.

Now with the sudden rush and fast decline of the dollar, apparently in part by talk from the BoC and Finance Minister to hep precipitate its fall; we are being warned very clearly prices on everything will rise

So I thought this was an interesting read when we can already see the prices going up, surcharges being added to everything already and all while our government and the BoC tell us wonderful spinning lies about inflation.

Enjoy the read, try not to lose it when you realize the truth of it all.

I really think that macroeconomics should be in the high school curriculum. Before I took it I shared the common distrust for the government that many have because I thought I knew how the economy worked. You have to know how the economy works before making claims like that.

All people care about are that they will be paying more and will have less money to afford things.

You have to realize that inflation is very important to the economy in fact without most of us wouldn't even have a job without out.

Principle # 10 of Macroeconomics: Society faces a short-run Tradeoff between Inflation and Unemployment

Inflation occurs when the overall quantity of money increases in the economy and what does this result in?

• Increasing the amount of money in the economy stimulates the overall level of spending and thus the demand for goods and services
  
• Higher demand may, over time, cause firms to raise their prices, but in the meantime, it also encourages them to increase the quantity of goods and services they produce and to hire more workers to produce those goods and services.
  
• More hiring means lower unemployment
  

This effect has compounded over many years increasing the likelihood of employment. The government actually aims for inflation of between 1-3% a year because of all these advantages. The latest data showed it was at 1.1% so they are below target median of 2%.

Don't complain about the government, they know a lot more than you do about what is right to do economically. I really feel macroeconomics should be taken in high school cause 90% of people have no clue how the economy really works.

The guy who wrote the article has no clue how the economy really works. I laughed so hard reading the article these guys(including the people he interviewed) are all part of consumer groups.

If there were an economist that this guy interviewed he would say one line that destroys the whole article;

"The reason USA has lower prices in everything compared to Canada has nothing to do with greed and more to do with their output and productivity which is much higher than ours"

The whole article is just BS.