10 ms·

Money Flooding Out of Canada at Fastest Pace in Developed World

138 points by kspaans 11y ago

bigethan 11y ago
I'm currently living in Tunisia, which does not allow currency to leave the country in any meaningful way. You can change a maximum of 10,000 TD at a time, equivalent to ~$5,000 USD, and if you did it many times, they'd probably stop letting you do so. As the Tunisian economy reels from the crash of the tourism industry due to terrorism, all of the new startups are starting to cater to entrenched upper middle class Tunisians who's family money is stuck here. The policy kind of enforces saving money, and buys a bit of time for the economy if things go awry. It also creates a lot of animosity for the Tunisians who'd much rather have Euros to invest properly. Economic policy is fascinating stuff. Any other fun stories out there?
- azernik 11y ago
  In Israel, Rabin was actually Prime Minister twice; the first time was in the 1970s, when similar currency controls were in effect, including a ban on Israelis holding foreign bank accounts. He resigned after a journalist caught his wife withdrawing from an (illegal) US dollar account in Washington, DC.
  - danielbln 11y ago
    "Do as I say, not as I do" seems to be the prevelant credo among politicians.
    - draw_down 11y ago
      Strike that- humans.
    - azernik 11y ago
      Well, he had the grace to accept responsibility and resign, even though it seems to have been purely his wife's initiative, so in the end the affair only increased the Israeli public's faith in his integrity.
- pjc50 11y ago
  The UK had capital controls until the 1970s. I see the GBP far up there on the opposite side of the chart; presumably that represents all the money rushing into the property bubble. I'm coming round to the belief that the big downside of free movement of goods/people/capital is the possibility of "sloshing": rapid change that capsizes the economy. Entire areas can dry up or become booms overnight. And because there isn't and can't be free movement of real estate to compensate, we get craziness in the property market.
  - keithpeter 11y ago
    How much damping is needed to stop the sloshing but still allow 'organic' free trade, the kind of free trade that lets industries build up but without the short term bubbles? An aside UK property at the low end: the move from HA/Council rents to private rents (i.e. from around 350 to 750 per month outside the Great Wen) is going to make the current debate about livable wage interesting. Some Tories already coming round to rent cap/build for controlled rent.
  - osullivj 11y ago
    Yes - the abolition of exchange controls was one of the first things Margaret Thatcher did when she became PM in May 1979.
  - leohutson 11y ago
    Excess isolationism also makes the economy more vulnerable. For example, primary industries are more exposed by gluts in production flooding the market and driving down the value of goods, and shortages of domestically produced goods will obviously have a more severe impact on consumers. Obviously no protectionist scheme is going to tax goods that it's market cannot produce, but there is always a tendency to put industry above consumer, and assymetric/mercantile style protections in place. People often have intellectual debates about ideology/philosophy here, but nationalism is the real political force. If a government can be seen to steer its economy in the right direction, and its people feel well off compared to their neighbours, it will be popular, regardless of ideology, and regardless of how fairly it has treated other nations in trade negotiations. Likewise, a state will inevitably favor free trade when it will profit over other states, and protectionism when it won't. In the rare case when both states will benefit from an arrangement, there's usually some third party getting screwed, i.e. https://en.m.wikipedia.org/wiki/OPEC https://en.m.wikipedia.org/wiki/OPEC I'm conflating capital controls with trade, but my point is more that they are often negotiated at the same time, and in the with the same ultimately selfish and unideological outlook.
- spacecowboy_lon 11y ago
  In the UK Back in the 60's you could not take more than small amount £50 out of the country.
- WalterBright 11y ago
  The purpose of currency controls is so you can inflate the currency and not suffer the consequences. Of course, the piper gets paid sooner or later, and a sharp and ugly correction becomes inevitable.
- NicoJuicy 11y ago
  I'm actually wondering ( since you live there), what the public opinion is about the West, since tourism crashed... Do you see any radical changes in the behaviour? ( i wondered about this when i realized the attacks would hurt Tunisia a lot)
- Mimick 11y ago
  The same on Morocco and politicians say so people who got money by corruption will not get them out, since here it's legally to not justify where you got your money from. So no need for money laundry. The real reasons is just because it's not healthy for a developed economy who can't compete with the world to not monitor the ins and outs... Also we don't have a real currency but our is called Dirham and it's basically 40% USD and 60% EURO, They adjust it by time to time and change those values depends on how EU or US doing so if one of those currency crushed hard ours don't (It was 20% USD, and 80% EURO so relax my US fellas you're doing fine :P). And if you got caught trying to speak even like DH10 ($1) out of Morocco it's a serious crime (while you can take it in another currency, that's why you find Dirham only on Morocco). Years ago I got my first credit card that world internationally (I tried 4 banks, it was just released, and they had too much technical issue AKA it's not working at all only one of them worked for me...) and it's capped at $1000 a year... you my think is nothing but it's like a dream for me... being able to get a couple of domains and servers is the dream.
  - eveningcoffee 11y ago
    Do you have a black market for currency exchanges?
    - Mimick 11y ago
      You don't need it, you can do it legally on any bank or exchange office. Since getting money out is the illegal thing and not using another currency inside Morocco. If you're a politician or with a bit of power you can get money out of Morocco easily. Even when politicians caught doing that (no foreign nationality but owning stuff outside of Morocco) newspaper write about them and they respond with stuff like I really needed that since I have to send my son to study there... TL;DR: law don't apply on them...
      - LordKano 11y ago
        I think what he's asking is if there is some unofficial way to get money out. If someone who is very affluent wishes to visit Paris or New York for two weeks, how would he or she go about taking enough money to rent a room in a luxury hotel?
- AnAfrican 11y ago
  In my country, even legitimate transfers by commercial entities have to be "authorized". The idea is to try to keep some money in our economy but at the end of the day: - the process gets rigged anyway - it's costly to enforce - most of the cost of compliance is passed to us citizen
- wallzz 11y ago
  I was living in Algeria, now I live in France, and things there are worst comparing to Tunisa in term of economy freedom, we can exchange maximum of 15000DA the equivalent of 130 euro per year, so if you want to leave the country for holidays, you will for sure ends up in the black market.
- bby 11y ago
  same bro. i'm shorting tunisian currency right now
- njs12345 11y ago
  You might find the Wikipedia articles on international economics interesting - e.g. the "impossible trinity": https://en.wikipedia.org/wiki/Impossible_trinity https://en.wikipedia.org/wiki/Impossible_trinity
moonshinefe 11y ago
I'm not necessarily convinced oil investment leaving Canada is a major blow after all. It will leave some unemployed, but most of that oil from what I've read was being exported abroad and the profits pretty much exclusively went to private businesses and the elite. The employment benefits locally were a drop in the bucket. It wasn't like Canada was living in a golden age during this 'boom', in fact housing prices across most of Canada and costs in general have skyrocketed. If there was a 'boom', it wasn't being felt in most of the country. With globalization I just fail to see how it helps the average person, it just seems to mainly help the extremely wealthy. The rest of us are just left in a race to the bottom.
- nitrogen 11y ago
  The "average person" helped by globalization doesn't live in North America.
  - JDDunn9 11y ago
    I have no problem with improving the prospects of the poor in China/India. The issue is the savings in salary costs doesn't go to the consumer, it goes to the executives.
    - maratd 11y ago
      > The issue is the savings in salary costs doesn't go to the consumer, it goes to the executives. This is a bit simplistic. Some of the savings do and some go to the consumer by way of competition among firms. Inflation has been pretty flat in recent years and that's not because governments stopped printing money. It's because prices on goods and services have been under a lot of pressure due to globalization. That means consumers are paying less than they would be if that weren't the case. Granted, those at the top are raking in the cash. But money is worthless unless you spend it and when they spend it, somebody has to do the work that the money is being spent on. That creates jobs. Certainly everybody wishes they were making more money and in some cases, the grievance is legitimate.
agiamas 11y ago
Canada, meet Greece, the King of Capital Controls in European Union :)
- alex_anglin 11y ago
  I don't get the comparison: What capital controls has Canada put in place? The newly elected government has pledged an anti-austerity budget for the next few years and the debt level is much more sustainable than Greece given surpluses from the late nineties to late 2000s (plus a small one this year from the outgoing government).
cdnsteve 11y ago
I would seem to think this is the case for China, not Canada. https://news.ycombinator.com/item?id=10499126 https://news.ycombinator.com/item?id=10499126
- jrgv 11y ago
  In financial markets, China is usually considered an emerging markets country, not a developed markets country, so this is not necessarily a contradiction.
Mikeb85 11y ago
Thankfully I had my money in HKD and Euros for several years now... Seriously though, this is what happens when you base your economy on primary industries (aka. resource extraction) and commodities take a huge hit. Canada has a major infrastructure deficit, no competitive industries, major brain drain (and why not, you can go to the US or Europe and get paid way more, and pay less in cost of living), and absurdly expensive real estate. Even the cost of meat has gone up to the point where it'll make an Albertan think about going vegetarian (then again, a cabbage costs like 3$). Not sure I'd even want to start a tech company here - people are too cheap to pay for services, and good luck ever getting any funding - maybe a small government grant or something...
- guiomie 11y ago
  Considering the CAD is so weak to the USD and there are skilled software engineers up there, wouldn't it make sense for VC's to fund Canadian startups? If you can get a software engineer at 30-50% of the price in the US with state funded healthcare ...
  - chrstphrhrt 11y ago
    One would think so. Doing open source consulting in Montreal I've discovered that Canada is pretty backwards on average when it comes to having access to lots of forward-thinking companies to trade with. Many investments seem to be very focused on cheapness and "deliverables" with bad specs as a preferred approach to software development, when most engineers have acknowledged for a long time that working iteratively is better. The Canadian environment is extremely fertile for exploitation by US companies though, and we're having some success working with them already. It helps that the exchange rate is favourable. I would like to see much more competition and American money around here if only to teach the crusty old guard what it means to be innovative. I'd love to see services overtake natural resources as a main export because it would be more sustainable and it would improve the lives of regular people a lot more than, say, unrefined oil or softwood lumber do.
    - guiomie 11y ago
api 11y ago
Isn't this a really positive indicator that Canada is acquiring more foreign holdings? Isolationism is generally a path to irrelevance. The most powerful countries are porous and actively engaged with the world, allowing capital and people to flow in and out. Isolated countries wither.
- kspaans 11y ago
  Agreed. The savvy Canadian investor (even a retail investor planning for their retirement) wouldn't invest 100% in Canadian investments. I think this is a natural rebalancing of the admittedly enery- and commodity-heavy sectors of the Canadian market.
thomnific 11y ago
For some context ... http://alberta.ca/budget/ http://alberta.ca/budget/ Long story short ... it's about really, really poor prospects for the oilsands going forward, added to a very uncertain fiscal situation: http://www.cbc.ca/news/canada/calgary/alberta-budget-debt-with-spending-affects-credit-optics-1.3292983 http://www.cbc.ca/news/canada/calgary/alberta-budget-debt-wi... For what it's worth, yes, this is what we get for being hewers of wood, drawers of water, etc. Traders don't call CAD a commodity currency for nothing. Edit: wrong link!

138 points by kspaans 11y ago

I'm currently living in Tunisia, which does not allow currency to leave the country in any meaningful way. You can change a maximum of 10,000 TD at a time, equivalent to ~$5,000 USD, and if you did it many times, they'd probably stop letting you do so. As the Tunisian economy reels from the crash of the tourism industry due to terrorism, all of the new startups are starting to cater to entrenched upper middle class Tunisians who's family money is stuck here. The policy kind of enforces saving money, and buys a bit of time for the economy if things go awry. It also creates a lot of animosity for the Tunisians who'd much rather have Euros to invest properly. Economic policy is fascinating stuff. Any other fun stories out there?

azernik 11y ago
In Israel, Rabin was actually Prime Minister twice; the first time was in the 1970s, when similar currency controls were in effect, including a ban on Israelis holding foreign bank accounts. He resigned after a journalist caught his wife withdrawing from an (illegal) US dollar account in Washington, DC.
- danielbln 11y ago
  "Do as I say, not as I do" seems to be the prevelant credo among politicians.
  - draw_down 11y ago
    Strike that- humans.
  - azernik 11y ago
    Well, he had the grace to accept responsibility and resign, even though it seems to have been purely his wife's initiative, so in the end the affair only increased the Israeli public's faith in his integrity.
pjc50 11y ago
The UK had capital controls until the 1970s. I see the GBP far up there on the opposite side of the chart; presumably that represents all the money rushing into the property bubble. I'm coming round to the belief that the big downside of free movement of goods/people/capital is the possibility of "sloshing": rapid change that capsizes the economy. Entire areas can dry up or become booms overnight. And because there isn't and can't be free movement of real estate to compensate, we get craziness in the property market.
- keithpeter 11y ago
  How much damping is needed to stop the sloshing but still allow 'organic' free trade, the kind of free trade that lets industries build up but without the short term bubbles? An aside UK property at the low end: the move from HA/Council rents to private rents (i.e. from around 350 to 750 per month outside the Great Wen) is going to make the current debate about livable wage interesting. Some Tories already coming round to rent cap/build for controlled rent.
- osullivj 11y ago
  Yes - the abolition of exchange controls was one of the first things Margaret Thatcher did when she became PM in May 1979.
- leohutson 11y ago
  Excess isolationism also makes the economy more vulnerable. For example, primary industries are more exposed by gluts in production flooding the market and driving down the value of goods, and shortages of domestically produced goods will obviously have a more severe impact on consumers. Obviously no protectionist scheme is going to tax goods that it's market cannot produce, but there is always a tendency to put industry above consumer, and assymetric/mercantile style protections in place. People often have intellectual debates about ideology/philosophy here, but nationalism is the real political force. If a government can be seen to steer its economy in the right direction, and its people feel well off compared to their neighbours, it will be popular, regardless of ideology, and regardless of how fairly it has treated other nations in trade negotiations. Likewise, a state will inevitably favor free trade when it will profit over other states, and protectionism when it won't. In the rare case when both states will benefit from an arrangement, there's usually some third party getting screwed, i.e. https://en.m.wikipedia.org/wiki/OPEC https://en.m.wikipedia.org/wiki/OPEC I'm conflating capital controls with trade, but my point is more that they are often negotiated at the same time, and in the with the same ultimately selfish and unideological outlook.
spacecowboy_lon 11y ago
In the UK Back in the 60's you could not take more than small amount £50 out of the country.
WalterBright 11y ago
The purpose of currency controls is so you can inflate the currency and not suffer the consequences. Of course, the piper gets paid sooner or later, and a sharp and ugly correction becomes inevitable.
NicoJuicy 11y ago
I'm actually wondering ( since you live there), what the public opinion is about the West, since tourism crashed... Do you see any radical changes in the behaviour? ( i wondered about this when i realized the attacks would hurt Tunisia a lot)
Mimick 11y ago
The same on Morocco and politicians say so people who got money by corruption will not get them out, since here it's legally to not justify where you got your money from. So no need for money laundry. The real reasons is just because it's not healthy for a developed economy who can't compete with the world to not monitor the ins and outs... Also we don't have a real currency but our is called Dirham and it's basically 40% USD and 60% EURO, They adjust it by time to time and change those values depends on how EU or US doing so if one of those currency crushed hard ours don't (It was 20% USD, and 80% EURO so relax my US fellas you're doing fine :P). And if you got caught trying to speak even like DH10 ($1) out of Morocco it's a serious crime (while you can take it in another currency, that's why you find Dirham only on Morocco). Years ago I got my first credit card that world internationally (I tried 4 banks, it was just released, and they had too much technical issue AKA it's not working at all only one of them worked for me...) and it's capped at $1000 a year... you my think is nothing but it's like a dream for me... being able to get a couple of domains and servers is the dream.
- eveningcoffee 11y ago
  Do you have a black market for currency exchanges?
  - Mimick 11y ago
    You don't need it, you can do it legally on any bank or exchange office. Since getting money out is the illegal thing and not using another currency inside Morocco. If you're a politician or with a bit of power you can get money out of Morocco easily. Even when politicians caught doing that (no foreign nationality but owning stuff outside of Morocco) newspaper write about them and they respond with stuff like I really needed that since I have to send my son to study there... TL;DR: law don't apply on them...
    - LordKano 11y ago
      I think what he's asking is if there is some unofficial way to get money out. If someone who is very affluent wishes to visit Paris or New York for two weeks, how would he or she go about taking enough money to rent a room in a luxury hotel?
AnAfrican 11y ago
In my country, even legitimate transfers by commercial entities have to be "authorized". The idea is to try to keep some money in our economy but at the end of the day: - the process gets rigged anyway - it's costly to enforce - most of the cost of compliance is passed to us citizen
wallzz 11y ago
I was living in Algeria, now I live in France, and things there are worst comparing to Tunisa in term of economy freedom, we can exchange maximum of 15000DA the equivalent of 130 euro per year, so if you want to leave the country for holidays, you will for sure ends up in the black market.
bby 11y ago
same bro. i'm shorting tunisian currency right now
njs12345 11y ago
You might find the Wikipedia articles on international economics interesting - e.g. the "impossible trinity": https://en.wikipedia.org/wiki/Impossible_trinity https://en.wikipedia.org/wiki/Impossible_trinity

moonshinefe 11y ago

I'm not necessarily convinced oil investment leaving Canada is a major blow after all. It will leave some unemployed, but most of that oil from what I've read was being exported abroad and the profits pretty much exclusively went to private businesses and the elite. The employment benefits locally were a drop in the bucket. It wasn't like Canada was living in a golden age during this 'boom', in fact housing prices across most of Canada and costs in general have skyrocketed. If there was a 'boom', it wasn't being felt in most of the country. With globalization I just fail to see how it helps the average person, it just seems to mainly help the extremely wealthy. The rest of us are just left in a race to the bottom.

nitrogen 11y ago
The "average person" helped by globalization doesn't live in North America.
- JDDunn9 11y ago
  I have no problem with improving the prospects of the poor in China/India. The issue is the savings in salary costs doesn't go to the consumer, it goes to the executives.
  - maratd 11y ago
    > The issue is the savings in salary costs doesn't go to the consumer, it goes to the executives. This is a bit simplistic. Some of the savings do and some go to the consumer by way of competition among firms. Inflation has been pretty flat in recent years and that's not because governments stopped printing money. It's because prices on goods and services have been under a lot of pressure due to globalization. That means consumers are paying less than they would be if that weren't the case. Granted, those at the top are raking in the cash. But money is worthless unless you spend it and when they spend it, somebody has to do the work that the money is being spent on. That creates jobs. Certainly everybody wishes they were making more money and in some cases, the grievance is legitimate.

agiamas 11y ago

Canada, meet Greece, the King of Capital Controls in European Union :)

alex_anglin 11y ago
I don't get the comparison: What capital controls has Canada put in place? The newly elected government has pledged an anti-austerity budget for the next few years and the debt level is much more sustainable than Greece given surpluses from the late nineties to late 2000s (plus a small one this year from the outgoing government).

cdnsteve 11y ago

I would seem to think this is the case for China, not Canada. https://news.ycombinator.com/item?id=10499126 https://news.ycombinator.com/item?id=10499126

jrgv 11y ago
In financial markets, China is usually considered an emerging markets country, not a developed markets country, so this is not necessarily a contradiction.

Mikeb85 11y ago

Thankfully I had my money in HKD and Euros for several years now... Seriously though, this is what happens when you base your economy on primary industries (aka. resource extraction) and commodities take a huge hit. Canada has a major infrastructure deficit, no competitive industries, major brain drain (and why not, you can go to the US or Europe and get paid way more, and pay less in cost of living), and absurdly expensive real estate. Even the cost of meat has gone up to the point where it'll make an Albertan think about going vegetarian (then again, a cabbage costs like 3$). Not sure I'd even want to start a tech company here - people are too cheap to pay for services, and good luck ever getting any funding - maybe a small government grant or something...

guiomie 11y ago
Considering the CAD is so weak to the USD and there are skilled software engineers up there, wouldn't it make sense for VC's to fund Canadian startups? If you can get a software engineer at 30-50% of the price in the US with state funded healthcare ...
- chrstphrhrt 11y ago
  One would think so. Doing open source consulting in Montreal I've discovered that Canada is pretty backwards on average when it comes to having access to lots of forward-thinking companies to trade with. Many investments seem to be very focused on cheapness and "deliverables" with bad specs as a preferred approach to software development, when most engineers have acknowledged for a long time that working iteratively is better. The Canadian environment is extremely fertile for exploitation by US companies though, and we're having some success working with them already. It helps that the exchange rate is favourable. I would like to see much more competition and American money around here if only to teach the crusty old guard what it means to be innovative. I'd love to see services overtake natural resources as a main export because it would be more sustainable and it would improve the lives of regular people a lot more than, say, unrefined oil or softwood lumber do.
  - guiomie 11y ago

api 11y ago

Isn't this a really positive indicator that Canada is acquiring more foreign holdings? Isolationism is generally a path to irrelevance. The most powerful countries are porous and actively engaged with the world, allowing capital and people to flow in and out. Isolated countries wither.

kspaans 11y ago
Agreed. The savvy Canadian investor (even a retail investor planning for their retirement) wouldn't invest 100% in Canadian investments. I think this is a natural rebalancing of the admittedly enery- and commodity-heavy sectors of the Canadian market.

thomnific 11y ago

For some context ... http://alberta.ca/budget/ http://alberta.ca/budget/ Long story short ... it's about really, really poor prospects for the oilsands going forward, added to a very uncertain fiscal situation: http://www.cbc.ca/news/canada/calgary/alberta-budget-debt-with-spending-affects-credit-optics-1.3292983 http://www.cbc.ca/news/canada/calgary/alberta-budget-debt-wi... For what it's worth, yes, this is what we get for being hewers of wood, drawers of water, etc. Traders don't call CAD a commodity currency for nothing. Edit: wrong link!