A Note on the Canadian Dollar
| Date | 01 March 1951 |
| Published date | 01 March 1951 |
| Author | W. A. Mackintosh |
| DOI | 10.1177/002070205100600107 |
| Subject Matter | Article |
A
NOTE
ON
THE
CANADIAN DOLLAR
WV.
A.
Mackintosh
F
OLLOWING
THE
SUSPENSION
of
foreign exchange
transactions
over
the
weekend
at
the
end
of
September
last,
the
Canadian Govern-
ment
and
the
Foreign
Exchange
Control Board
withdrew
the
official
quotations
for
the
United States
dollar
as
from October
2.
It
had
been
widely
expected
that
a
change would
be
made
and
that
sooner
or later
the
Canadian
dollar
would
return
to
the
historic
parity.
The
public
generally,
however,
was
unprepared for
the
announcement
that
official
quotations
would
be
withdrawn
and
the
dollar
allowed
to
find
its
own
level
in
the
market.
It
is
useful
to
recall briefly
some
background
of
our
recent
exchange
experience.
On
the
outbreak
of
war in September
1939
the
Canadian
dollar
went
to
a
discount
and
on
the
passing
of
the
Foreign
Exchange
Control
Order
and
the
quick
organization
of
the
Board the
buying
and
selling
rates for
U.S.
dollars
were
set
at
premiums
of
11
and
10
per
cent.
Except
for
a
narrowing
of
the
spread
no
change
took
place
in
these
rates
until July
1946.
The
chief
object
of
the
Control
Order
was
to
prevent
withdrawals
of
capital
from
raiding
Canadian
reserves
or
creating
such
movements
in
the rates
as
would
have
disrupted
trade
and
undermined
confidence
in
a
very critical period.
In
July
1946
the
government
was
faced
with
heavy
United
States
buying
of
Canadian
securities and
rapid
accumulation
of
the
Board's
holdings
of
United
States
dollars.
It
was
also reasonably
certain
that
the
United
States
was going
to
experience
a
strong
rise
in
prices
as
post-war
influences
grew
stronger and
as
Congress insisted
on
rapid
demolition
of
price
controls.
In
these
circumstances and
desiring
to
follow
a
policy
of
more orderly
and
gradual
decontrol,
the
Canadian
dollar
was
brought
back
to
par
in
the
hope
that
further
accumulation
of
reserves
would
cease
and
that
the
rise in
our
exchange
rate
would
protect
us
to
that
degree
from
the
United
States
price
rise.
Our
balance
of
payments changed
very
quickly.
There
were
many
factors
but
a
significant
way
of
describing
the situation
which
arose
is
to
say
that
for
the
next
couple
of
years
we
tried
to
export,
under
the
British
and
Western
European
loans,
above
$800
million
a
year.
There
was
little
capital
import
to
offset
this
and
with
mounting
imports
arising
from
free
consumer
spending,
heavy
reconstruction
investment
of
capital
and more
liberal
supplies
in
the
United States,
we
failed
by
a
wide
margin to
achieve a
favourable
balance on
our
current
inter-
national account
sufficient
to
make
good
our
capital
export.
The
de-
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