Quote:
Originally Posted by Spoon
Not sure if this argument holds. (sorry this is incorrect money supply actually goes up) With a lower currency, this usually drives foreign investments. I think you're forgetting that this also means the cost to invest in infrastruture and labour are also cheaper.
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The main problem is future outlook and the long term value of CAD.
Canada is very small as far as manufacturing goes. Thus, we import most of the equipments and raw materials.
Unless you are in the export business, you are still selling in CAD. With CAD losing value in the near terms, it means that unless your profitability is higher than the currency fluctuation, you are actually better off borrowing CAD and invest elsewhere.
Think Japan in the early 90s. It's the exact same problem; sky high property prices, little real economic activities domestically and 0% interest. And investors all went into Japan to borrow fund to invest elsewhere.
What did that give Japan? The infamous lost decade.