By Justin Spittler
The Canadian dollar is collapsing…
Today, the price of oil dropped to $29 in the U.S. Oil hasn’t been this cheap since 2003. It’s even cheaper in other parts of the world, as The Wall Street Journal reported yesterday (emphasis added):
A basket of crude oils sold by the 13 members of the Organization of the Petroleum Exporting Countries fell Wednesday to $25.69 a barrel. Oman crude-oil futures on the Dubai Mercantile Exchange, a benchmark for crude exports from the Middle East to Asia, fell to $25.88 a barrel Wednesday. And some of the cheapest crude oil in the world, in Canada, costs less than $15.
• At less than $15 per barrel, cheap oil is destroying Canada’s economy…
Canada is the world’s sixth-largest oil producer. Oil makes up 25% of its exports.
Last year, revenues for Canada’s energy sector plunged an estimated 22%.
Over the past 18 months, the stock price of Suncor Energy (SU), Canada’s largest oil company, has plunged 48%. Enbridge (ENB), Canada’s second-biggest oil company, has plunged 37%.
• Canadian stocks are in a bear market…
Canada’s Toronto Stock Exchange Index is down 21% since hitting a record high in September 2014. A bear market “officially” begins when a price falls 20% from a previous high.
The oil crisis is also hitting Canadian real estate. Vacancy rates in Calgary, Canada’s third-largest city, hit a five-year high last fall. And rental rates are at their lowest level in a decade.
• Low oil prices are crushing the Canadian dollar…
Less than five years ago, one Canadian dollar was worth more than one U.S. dollar. Today, the Canadian dollar is worth only US$0.69.
The Canadian dollar has lost an incredible 25% of its value since the price of oil peaked in June 2014.
When a currency collapses, everyday things get more expensive. Bloomberg Business reports that food prices in Canada are soaring. One Canadian grocery is selling cucumbers for C$3 each. Another is charging C$8 for a dozen eggs, C$15 for a box of Frosted Flakes, and C$18 for a gallon of chocolate milk.
According to Bloomberg Business, Canada imports about 80% of its fruits and vegetables. However, prices for other basic goods have also skyrocketed. At least one Canadian store is charging C$32 for a bottle of Tide laundry detergent, according to Zero Hedge.
• E.B. Tucker, Editor of The Casey Report, predicted big problems for Canada…
E.B. and Casey Research founder Doug Casey visited Canada’s oil country in September, when oil was $45. In The Casey Report, E.B. explained that Canadians were in denial about low oil prices:
All over Calgary, people told us the price of oil was “coming right back.” They said they’d “been through this before.” It was almost as if they’d all read the same propaganda.
But E.B. knew the crisis was far from over. He wrote that Canada’s economy was in for a “major wake-up call”:
While energy only makes up 25% of the province’s GDP, Albertans will be shocked when they see what happens to other sectors now that the oil business has been cut in half. Construction, finance, real estate, and services all benefited from a 15-year oil boom. These other sectors will start shrinking soon. And it’s not going to be pretty.
• Other major world currencies are crashing…
Since 2014, the Japanese yen has lost 12% against the U.S. dollar, the euro has lost 20%, the Australian dollar has lost 17%, and the Mexican peso has lost 24%. The peso is at an all-time low against the U.S. dollar.
These are huge moves for major currencies. After all, we’re not talking about small, volatile stocks. We’re talking about the value of money in people’s bank accounts.
• Doug Casey thinks we’re headed for a global currency crisis that could erase trillions of dollars in wealth…
It’s going to be much more severe, different, and longer-lasting than what we saw in 2008 and 2009…The U.S. created trillions of dollars to fight the financial crisis of 2008 and 2009. Most of those dollars are still sitting in the banking system and aren’t in the economy. Some have found their way into the stock markets and the bond markets, creating a stock bubble and a bond super-bubble. The higher stocks and bonds go, the harder they’re going to fall.
Doug has lived through a currency crisis. He was in Argentina in 2001, when the country had the largest sovereign debt default in history. By making smart investments before the collapse, Doug made big gains, including a 700% return in the aftermath.
We recently put together a video with Doug Casey’s best advice on how to protect and grow your money during a currency collapse. Click here to watch this free video.
Chart of the Day
Gold is soaring in Canada…
Today’s chart shows the price of gold in Canadian dollars. It’s up 23% over the past two years.
Dispatch readers know gold is a safe haven asset. Investors buy it when they’re nervous.
With the Canadian dollar collapsing and Canadian stocks plunging, we expect gold in Canadian dollar terms to continue higher.