THE HIGH-FLYING LOONIE.

Back in the days of the falling dollar, and predictions that it would hit the 62-cent level, proponents of a common North American currency were often scolded for raising the idea at a time when the Canadian currency was under particular pressure. Respected advocates, like Tom Courchene (senior scholar at the Institute for Research on Public Policy) and Richard Harris (Simon Fraser University) argued that a falling dollar was used to buttress natural resource exports, even as it made the purchase of machinery or technology from abroad more expensive. Now the dollar is rising more quickly than expected, driven by more relaxed interest rate policies in the U.S. than Canada and apprehended weakness in the short-term prospects of the American economy. If we look at the period between 1962 and 1970, when Canada's monetary policy was based on a fixed exchange rate with the American dollar (at 92.5 cents), our real exchange rate with the world was essentially set by the U.S. Federal Reserve and not the Bank of Canada. During that time, as Courchene and Harris have pointed out, Canada initiated some of its most compelling nation-building undertakings at both the federal and provincial levels, including the Canada Pension Plan, post-secondary student loans, and Quebec's Caisse de dép (tm) t. All were distinctly Canadian models. It's easy to understand why the governor of the Bank of Canada, whose primary task is the defence of the currency, or campaigning politicians (who need monetary policy debates about as much as they need toe fungus), wouldn't want to engage on this issue. The Canadian dollar is unlikely to be one of the four or five dominant world currencies in 25 years. A reasoned, open debate, at a time of political transition, makes immense sense. Putting the matter off, and hoping it will go away, makes no sense at all.