Under-aged Americans have been crossing the border into Canada to enjoy the Great White North’s 19-year-old drinking age limit for decades. Besides the drunken debauchery and an exceptionally better view of Niagara Falls, Americans could enjoy a favorable exchange rate, making their experience cheaper in Canada than it may have been here in the U.S. Unfortunately for dedicated border crossers, smug smiles that seem to say “It’s our turn, now” await them at currency exchange centers. It’s finally happened—the heavy hitting American greenback has to take a back seat to the Canadian loonie.
On September 21, the Canadian loonie overtook the American dollar for the first time in 31 years. In 2002 you would only receive 61.99 American cents for one Canadian dollar. Since then, the dollar has plummeted and the loonie has inversely soared. The currency exchange rate is particularly pertinent to both retailers and consumers that live in Western New York, due to the fact that Canadians have taken a renewed interest in American goods, and are eager to travel across the border to discover bargains in American retail stores and shopping malls. Though it seems the renewed business in the region is a positive effect, some economists warn that it isn’t necessarily a good thing when a government inflates its money, which is exactly what has happened in the United States.
Kristen Martis, manager at Bath & Body Works in Galleria Mall, explains how lucrative Canadian business has been since the loonie reached parity with the U.S dollar. “[Canadians] will come in to the store and spend over 100 dollars on soap, body spray and holiday products.” According to Martis, 80 percent of the customers that come into that particular Bath & Body works are Canadians. “They definitely spend more money than Americans,” said Martis. Unlike most other stores in the mall, they do accept Canadian currency, but they only accept 95 cents Canadian to every one American dollar. One of the biggest reasons that Canadians are so willing to spend a lot of money in Bath & Body Works is because there isn’t such a store in Canada. Fervent Canadians stream across the border and drop loads of money in stores that do not do business in Canada, such a Victoria’s Secret or The Limited.
A couple stores down from Bath & Body Works is Express, another American-only business that does not accept Canadian currency. Irina Dmitriyev, sales representative at Express, describes the way you can distinguish a Canadian shopper from an American. “They buy a lot more stuff, and look for bargains.” She explains that they get a lot of Canadian business, more now that the dollar is worth less than the loonie. “They usually pay in American dollars, so [the currency exchange] is not a problem,” explains Dmitiriyev.
What does it mean for Americans that the loonie is now more valuable than the U.S. dollar? According to Dr. Larry Southwick, University Research Scholar from the Management School at the University at Buffalo, “The Federal Reserve has inflated the dollar, and in doing so we are losing our money pools.” The inflation of the greenback is unhealthy and not very beneficial to the United States. “Our money is becoming less attractive,” said Southwick. Even though this region is seeing a boom in business, the country as a whole will suffer from the inflation of the dollar. He explains that this will benefit the government because it can now pay off its massive debt with cheaper dollars, but it is hurting the average American consumer because our dollar can no longer go as far at home or school.
According to Southwick, countries like Saudi Arabia have such an excess of money that they have to invest somewhere, so they place it in American reserve currency, and the United States makes money off of those investments. When the Federal Reserve inflates the money, investors are likely to pull their funds out of our currency because it is losing value, and their money won’t be worth as much. So they invest it elsewhere, such as Great Britain, where their currency is currently at 2.04 U.S dollars for every one pound.
The American Federal Reserve’s decisions are only one side of the story in the financial parity phenomenon. According to Southwick, contrary to popular belief, America’s largest source of oil is not the Middle East, it isn’t even Venezuela or Texas; it’s Canada. The U.S and Canada have both seen benefits from the North American Free Trade Agreement (NAFTA), which removes major tariffs from goods being traded over the border. NAFTA has helped boost Canada’s economy as the United States increasingly relies on Canada for oil and other natural resources. But America is no longer the only industrial giant that is vying for Canada’s rich oil and lumber resources. The economic giant to the east, China, is now purchasing large amounts of natural resources from Canada and playing a major part in sending the loonie’s value through the roof. As long as China is importing huge amounts of resources from Canada, the loonie is likely to remain dominant over the dollar.
Michael Kawzenuk, a Canadian born in Oshawa 30 miles outside of Toronto who is now living in the United States, thinks the increased value of the loonie is a double-edged sword. “Canadians are going to the United States to shop, but they are hurting their own economy by taking the business away,” said Kawzenuk. He thinks that it depends on the prices of oil whether the loonie maintains its dominance over the greenback.
One area that is not seeing the benefits of the currency parity is the book industry. Many Canadian customers are angry that book prices have not reflected the exchange rates. Books usually have fixed prices on the back or on the jacket with two separate prices, one in U.S. dollars and one in Canadian. This has become a source of discontent for Canadians as they come to the U.S searching for bargains, and are seeing the same price disparity on books they have always seen. One book that was recently released, Alan Greenspan’s The Age of Turbulence: Adventures in a New World is listed as 35 dollars American, but 42 dollars Canadian. Derek Wailer, editor of Quill & Quire, told USA Today that “currencies are very volatile, [and] you can’t be changing the price of books every day or so.”
An unforeseen byproduct of the Canadian shopping spree has been the interactions between American retailers and Canadian shoppers. Carrie Babcock, manager at Aldo shoe store in the Galleria Mall, a Montreal based company, vents her frustration about Canadian customers. “They [Canadians] are awful at the mall,” said Babcock. “They are rude and demand things, and they always talk down to me and my staff.” She explains that since the currency has reached parity, there has been a big increase in Canadian consumers. One of the biggest problems she has is that when they purchase the shoes, they leave the boxes behind with the receipt, so when they cross the border they don’t have to pay tax on the purchased products. “It’s insane; we have piles of empty shoe boxes in the back room that they expect us to take care of. If they don’t give the boxes to us they will leave them in the parking lot all over the mall.”
Rachel Sorg, a Canadian from Ottawa and junior Exercise Science major at UB illustrates the mentality of Canadian shoppers. “A lot of people come down to do their shopping. People are in a rush and they just want to shop,” said Sorg. It’s more convenient for her since the exchange rate has hit equilibrium. Although she admits she used to shop a lot in the U.S., she hasn’t taken part in the huge Canadian shopping spree that has recently hit Buffalo. “I don’t think it’s an American or Canadian thing. Some people are just rude, some aren’t,” said Sorg.
Babcock is not the only retailer who experiences this sort of problem. Kelly Morgan sales associate at Urban Outfitters in the Galleria Mall, explains that they wear everything home so they don’t have to pay the tax. Dan Victor, Morgan’s co-worker at Urban Outfitters, has no reservations when speaking about the problem. “They are so inconsiderate when they shop. They throw things everywhere. I don’t know how they act up there when they shop but here they’re awful. Retail is miserable enough, I can’t imagine what it’s like in Canada,” Victor said.
Kawzenuk can’t explain the shopping behavior either. “Maybe those are people from Toronto. Big city people tend to be a little more rude. I can understand people leaving the tags and shoe boxes to save money. What can I say? People are pigs.” Accoring to Kawzenuk, Canadians are generally pretty nice people, and Babcock somewhat agrees. “I can’t imagine the whole country is like that. Maybe they feel cool because they are in another country.”
The future of the Canadian loonie depends largely on the price of oil and other natural resources. As long as the loonie and the dollar remain at parity, we can expect Canadians to continue shopping here throughout the upcoming holiday season. How will the United States return the greenback to its dominant position over the loonie? “It depends on what we do,” said Southwick. “Will we continue to inflate? I see no end, I’m sorry to say. The Federal Reserve is not being a responsible organization.”
Jon Davenport is a senior Political Science major and Assistant Features Editor of Generation.
