Exchange Rates and the Ugly Facts

I try not to blog about politics or anything close to, but this is something a great many Canadians are getting affected by and either are choosing to be silent or simply have not gotten any support from their elected officials.

Okay so you ask “CWG what are you talking about?”

I am talking about the fact that over the past 3 years the Canadian dollar has continued to gain strength compared to the US dollar but yet prices have not shown the same volatility, usually in the vendor’s favour.

Before we get into it anymore, let me state a few facts (to see where you can find the rate changes go here):
02 Jun 2003 0.73 US dollars
02 Jun 2004 0.73 US dollars
02 Jun 2005 0.80 US dollars
02 Jun 2006 0.91 US dollars
02 Jun 2007 0.94 US dollars

As you can see over the past 5 years the Canadian dollar has steadily risen in comparison to the US dollar, and despite this rise Canadians are still paying prices based on exchange rates of 5 years ago for most products, INCLUDING WINE!! What it means to the average Canadian is, despite the fact that importers (be it the LCBO, Automobiles, Computer products) are able to buy more with the same Canadian dollar (or buy the same product for less money) the cost savings is not being passed on to the consumer. Shall we look at some examples?

We will start with big ticket items, cars:
Domestic: we will pull out a vehicle that we can choose the exact same options, for this I chose the Chevy Corvette Z06 fixed roof (CDN site, US site), prices pre-options: Canadian $90,485 MSRP and US $70,000.00 MSRP. This is for a Buffalo NY zip code, which puts the “real” exchange rate at around 0.77 not the 0.94 that it currently is. In even terms it means that a Canadian buying their Corvette in St Catherines instead of in Buffalo pays $16,000 real dollars more for the same car.
Foreign: for this example we will choose the BMW M5 sedan, US site and Canadian site for your references. The MSRP in Canada is $113,300 and in the US is $82,500. This equates out to a “real” exchange rate of 0.73 or an out of pocket difference of $25,534.

Without a doubt this has been going on for years as even the Toronto Star had an article on it in their weekend Automotive section a year or so ago. Let’s take the exchange rate for something as simple as wine. For this exercise I choose wine.com (shipping to NY state) and the LCBO prices.

Australian: Wolf Blass 2004 Gold Label Shiraz; wine.com: $19.99, LCBO: $30.85, “real” exchange rate of 0.65, out of pocket $9.68
Californian: Beringer 2002 Knights Valley Alluvium Red; wine.com: $27.99, LCBO: $50.15, “real” exchange rate of 0.56, out of pocket $20.37
Bordeaux: Christian Moueix 2003 Merlot; wine.com: $10.79, LCBO: $15.95, “real” exchange rate of 0.67, out of pocket $4.47.

What does all this mean? It means that until a public stink is made retailers will continue to fleece the average Canadian consumer over what amounts to large amounts of money. Think this is important to you? Pass on this blog and/or share the information, until then try not to think of the extra money you are paying.

Cheers