The Canadian Dollar in an independent Quebec

This article by Claude Castonguay appeared in French in La Presse. It is translated here by myself.
If you read French please do the author the courtesy of reading the original article HERE at LaPresse

Currency is an important symbol a people's identity. An independent Quebec should have its own currency, a Quebec dollar. With the prospect of a referendum, it is important to analyze the effects entailed with replacing the Canadian dollar by a Quebec dollar.

The Quebec dollar value and stability are the two main issues. The value of a currency is related to the strength of the economy, public finances and the debt of a country. But the value and stability of a currency depends on the level of trust that citizens, investors and speculators place in that currency.

Given these factors, a new Quebec dollar would inevitably have a lower value than the U.S. and Canadian dollars. Currently, the Canadian dollar is worth 90 cents against the U.S. dollar, analysts consider this difference as justified. Similarly, we can assume that the value of a new Quebec dollar would be about 85 cents against the Canadian dollar and 75 cents against the U.S. dollar.

During the changeover, Quebecers would have their savings and assets decline by around 15 %. Before such an eventuality, Quebecers would probably take all possible measures to prevent the devaluation of their savings and their assets. They would move away their assets outside of Quebec into U.S. dollars. This would add to the instability of the new currency and would lead to a further decline in its value.

In other words, should Quebec make a declaration of independence, it would have no choice but to keep the Canadian dollar. This is what the Parti Québécois recognized on the eve of the 1995 referendum . The use of the Canadian dollar would normally require the conclusion of a monetary union between the newly independent Quebec and Canada, divided by the departure of Quebec. The conclusion of such an agreement would be highly problematic.

We would see this in Britain if the Scots vote in September for their independence. The British Chancellor of the Exchequer warned them they could not keep the pound, the British public would not accept it. It is clear that the Canadian Prime Minister would be in the same situation in the event of a vote for Quebec independence.

Quebec would thus have no choice but to continue to use the Canadian dollar , however, without the benefit of the protection of a monetary union. That is to say that monetary policy would be established by the Bank of Canada strictly according to the situation in the rest of Canada.

Twenty years ago, Argentina had embarked on this path. It allowed its citizens to exchange, according to a predetermined exchange rate their pesos against the U.S. dollar . Argentines rushed to exchange their pesos for U.S. dollars and move it out of the country, which led to the fall in the value of the peso and a real crisis.

We conclude that in the event of Quebec independence, it would be necessary to negotiate in a hostile environment, an agreement to eventually return to the bosom of the Bank of Canada under conditions less favorable than those currently prevailing.

In the current electoral context, some issues may possibly be carried forward to an eventual White Paper on sovereignty. This is not the case for the currency issue. Voters are entitled to know, before exercising their voting intentions what the Parti Québécois' currency policy will be in an independent Quebec.

But apparently Pauline has other ideas.

"A sovereign Quebec would use the Canadian dollar and request a seat on the Bank of Canada’s decision-making body, Parti Québécois Leader Pauline Marois said Wednesday on the campaign trail.
The PQ Leader pointed to several studies on the matter conducted in the early 1990s which showed that there would be no obstacles for an independent Quebec to using the Canadian dollar. However, getting a seat on the Bank of Canada’s Governing Council would be more difficult.

“Obviously we may wish to get a seat at the Bank of Canada but we would accept the Canadian monetary policies,” Ms. Marois said.

Liberal Leader Philippe Couillard said Ms. Marois is living in a dream world.
“The PQ always tries to take us to an imaginary world, Alice in Wonderland, where everything is going to be so great. No borders, no passport, it’s fantastic. Everybody’s going to be great friends,” said Mr. Couillard. Link

So it seems that Pauline Marois has made a choice, that is to use the Canadian Dollar with or without Canada's permission, a permission that is very likely to be denied, even if it is a paying proposition for Canada.
Having Quebec maintain the use of the Canadian Dollar is worth about a billion dollars a year to Canada because of the outstanding float. Quebecers have about $10 billion in cash in their wallets and cash drawers, money that actually represents an interest free loan to Canada.
At any rate there is no reason to believe that Canadians would be in a mood to provide new dollar bills to Quebec as they fall into 'Canadian' hands. Such an assumption by Marois is utter bravado.
In the article above it is important to note that the Brits have already told the Scots that a free Scotland would not be allowed to use the English currency and perhaps it is appropriate for Ottawa politicians to burst Pauline's pipe dream as well!

In the meantime in Scotland: Currency union ‘unlikely’

Concerns over the future of an independent Scotland’s fiscal position, the size of its banking sector and its monetary regime have been highlighted in a report by a global banking group. The publication from Citi also looks at the possible currency and debt arrangements in the event of a yes vote, and considers the strength of Scotland’s credit rating.

It found that an independent Scotland’s fiscal position would be “relatively weak and risky” while a monetary union between Scotland and the rest of the UK is “unlikely”. The report has been compiled jointly by Citi’s economics, rate strategy and political analysis teams ahead of the September referendum.

Citi’s report says: “We regard a sterling monetary union as unlikely but we are genuinely unsure what currency and monetary policy would be adopted by an independent Scotland.“In our view, it is astonishing that the Scottish Government, in seeking independence, has reached this stage: seeking a currency union without agreement with the rest of the UK and without a clear alternative plan.”

It continued: “Overall, we believe an independent Scotland would have a relatively weak and risky fiscal position. This might well produce a sizeable borrowing premium.....

....“It’s absolutely clear independence would be a big problem for Scotland rather than the solution - and not having any sort of currency plan makes it an even bigger problem.” Link

According to Bloomberg, Separatist Revival is Raising Quebec Borrowing Costs

By Hugo Miller

Quebec’s borrowing costs are rising as independence once again becomes an election issue in Canada’s second largest and most indebted province.
Quebec Premier Pauline Marois called this week for an election on April 7 in a bid to turn her minority government into a majority, renewing speculation she will press for a referendum on splitting from Canada. The spread, or extra yield demanded by investors, on Quebec’s 10-year bond over debt from neighboring Ontario has widened 7 basis points to 17 basis points since the Quebec bond was issued in December, data compiled by Bloomberg shows. The spread has widened three basis points since the start of last week. Read more at Bloomberg

No International recognition for Crimean referendum

Quebec sovereigntist suffered a brutal lesson in realpolitik as the world has announced that it will not recognize a referendum on Crimean Independence.

"The Group of 7 world leaders say they won't recognize results of a referendum for the Crimea region to split from Ukraine and join Russia.

A statement from the seven nations released from the White House on Wednesday calls on Russia "to cease all efforts to change the status of Crimea contrary to Ukrainian law and in violation of international law." It says the referendum scheduled for this weekend "would have no legal effect" and the process is deeply flawed.

The leaders said they would take further action, individually and collectively, if Russia tries to annex Crimea.

The statement was from the leaders of Canada, France, Germany, Italy, Japan, Britain and the United States, along with the European Council and the European Commission." ABC News

As always, recognition is based on politics and not international law as sovereigntists maintain. Unless Canada recognizes a new state of Quebec, nobody else but a handful will either.

More PQ election nonsense

Lisée offers a lesson in PQ Economics 101

Here's a quote from Jean-François Lisée that caught my attention for its utter and complete stupidity.
He said it in English to a CTV news reporter and it aired on the six o'clock news last Tuesday.

"We're putting a billion and a half towards the debt.
We could have decided to have a lower deficit by not putting a billion and a half on the debt. But it was a billion and a half last year and a billion and a half this year and a billion and a half next year.

What kind of sheer nonsense is that?
So let's understand this, the PQ is paying off the debt with money it doesn't have.
In the PQ world of make-believe finances, it is increasing the deficit to lower the debt! Fabulous!

How clever! Perhaps Quebec can also resort to some creative cheque kiting as well.

Here's another idea that Jean-François Lisée can float in order to make an independent Quebec some money.;

"an undoctored stolen passport – increasingly used by the gangs, who are now dealing in such high volumes that they can afford simply to wait until a potential client shows up of approximately the right age and appearance – typically sells for between $1,500 and $3,000, depending on its condition, nationality, and the number of years it has left to run. Italian, British, Spanish and other European passports fetch about $1,000, Tinawut said, while Israeli passports cost $1,500-$2,000 and Canadian can go for up to $3,000. Link

In the light of a Quebec referendum win, the new Quebec government could collect the now worthless passports and sell them on the Black market for a tidy sum!

ELECTION JOKE: The Liberals accuse the PQ of trying to divide Quebecers with the Charter of Values, so why do the Liberals also hope for the return of the Nordiques, whose rivalry with the Canadiens still divides Quebec after 20 years of absence. Where is the consistency?- Mathieu Charlebois

Idiot PQ minister lies about having Twitter account hacked

After sending out a rather innocuous tweet, Quebec Family Minister, Nicole Léger made the mistake of not sending the next Tweet privately as well and sent out a crude message about being obliged to tweet. It was obviously meant to be private communication

Realizing her mistake, she took down the offending tweet quickly, but not before some grabbed a screen shot.

She then tweeted that (gasp!) her account had been momentarily hijacked, but that all had returned to normal.

HA!!!!! What a load of bullshit, that fooled nobody!!!

The last tweeter warned that if Madame Léger was ever in a car accident, it would be the car's fault. Link{fr}

Quebec Language police decamp on salad store

"A Montreal salad bar, Mandy’s, is under fire from Quebec’s language police because its decor features vintage English signs. The Office québécois de la langue française told sisters Mandy and Rebecca Wolfe they would have to remove the purely decorative signs from their shop in traditionally anglophone Westmount (they have a second location in the predominately francophone Plateau). Rebecca Wolfe, who doesn’t plan to remove the signs, spoke to the National Post‘s Hillary Robert on Wednesday:" Link

Journal de Montreal FAIL!

Fun with Election Signs

Probably the best campaign poster defacement EVER!!!

Wanna see more? CLICK HERE and HERE

Here are some not so funny vandalisations;

Say what you want, I've always maintained that Quebecers, English, French or Ethnic, have the sharpest sense of humour in Canada and where sarcasm reigns supreme!!!
Quebec humour crosses all language and political lines, where fun of smug big shots is a national pastime!

Whispering politicians

We all know politicians and news anchors use tele-prompters to read prepared text, but the Parti Quebecois gave a throwback view to the old days of theatre where an actual person would hide in a crawl space at the foot of the stage, hidden from fans, feeding words to actors who had forgotten their lines.

Watch this video of Pauline Marois feeding lines to a candidate and then in turn having line fed to her by the finance minister Nicholas Marceau.
You don't need to understand French to see whats going on. The fun starts at 30 seconds;