A country with a strong economy will attract investment from around the world. Investors will recognise safety and the promise of an acceptable rate of return on investment. Since investors seek out the highest yield, an increase in investment from abroad creates a strong capital account and a higher demand for dollars. And so, our dollar stays strong and holds its value.Sadly however, the value of the Canadian dollar has fallen due to Liberal mismanagement, making all imports more expensive and adding to our general inflation rate — the cost of goods and services.Canada’s benchmark comparison is mainly with the US dollar, as it is our largest trading partner, and our economies are entwined. Like any other fiat currency, the Canadian dollar's value depends on Canada's economic activity and general outlook. As the Canadian dollar slides in value on the world market, everything costs more.In addition to supply and demand and market factors, sentiment and opinions about political stability and government economic policy all influence the dollar's value on the global market. Investors are people who make choices. They are not choosing Canada like they used to.Consumption through imports of goods and services from other countries causes dollars to flow out of the country. If Canada imports more than it exports, the country will have a deficit in its current account.But with a strong economy, a country can attract foreign capital to offset the trade deficit. That allows Canada to continue its role as a consumption engine that fuels other economies, even though we are a debtor nation that borrows money to consume. This also allows other countries to export to Canada and keep their economies growing. Canada ranks about tenth in the world in terms of the size of its economy.Currencies are traded just like goods. When the dollar is traded, factors can drive its value, including supply and demand, market sentiment or beliefs about a country's economic management, and technical market data such as unemployment rates and consumer demand.Traders can follow the Dollar Index chart to see how the dollar fares against other currencies. By watching the patterns on the chart and listening to the major fundamental factors that affect supply and demand, traders can develop a sense of the flow of dollars and form insights into how best to select profitable trading positions. The changing value of our dollar is a bellwether about our economic health.Canadians don’t hear much about how the Liberal government has hurt Canada’s international standing, and they seem unaware of where we stand among other countries. Are we moving ahead, holding our own, or sliding back? The Canadian dollar is not doing great in comparison to the US dollar, and this is an important measure to watch. The online Bank Calculator says that as of July 8, 2024, it takes $1.39 to buy $1.00 US.How is Canada doing in the world rankings? Concerning overall output, Canada stands in the tenth spot. However, it is a distant tenth, as we are less than the State of California and about one-twelfth compared to the USA, or about 8% of their size. Canada is a small player and, therefore, must be careful with its internal economic behaviour.More telling are the rankings of the cost of living for each citizen, which more closely compare standards of living between countries. Looking at those rankings is an eye-opener.A country's gross domestic product (GDP) at purchasing power parity (PPP) per capita is the PPP value of all final goods and services produced within an economy in a given year, divided by the average (or mid-year) population for the same year. On that score, Canada is in a dismal 25th place behind notables as Ireland, Switzerland, USA, Norway, Denmark, Taiwan, Netherlands, Sweden, Germany, Australia, and Finland.The international rankings should be recognized. It is the world’s judgment about us in economic terms.Nevertheless, Canada has a history of political stability due to its Westminster model of Parliament, which affects the economy and investor confidence. Additionally, many waves of immigration over the years have brought peoples and cultures with positive values and an ethic of industriousness.The bottom line is that the Canadian economy is not nearly as strong as it should be or could be. Wise economic management and leadership have been sorely lacking. A simple, undeniable measure is how our dollar now buys less. The world makes its judgment about us. Since national leadership sets the conditions for economic activity and the recipe for higher living standards and opportunities for our children, Canada needs a change soon.
