What the what? The RCMP have been called in to investigate missing gold – potentially millions of dollars’ worth – from The Royal Canadian Mint in Ottawa. What does this mean for consumers & citizens? consumer? I’m on the case, and Stephen Sapp, associate professor of finance and Bank of Montreal Faculty Fellow at the Richard Ivey School of Business, in London, Ont., helps me out with just the facts, and gives me a quick lesson on the loonie.
Q: What does the missing gold mean for the Canadian economy?
A: There isn’t a direct impact at all. If this missing gold had been from the Bank of Canada, then it could have actually meant something. Instead, this is much more like any other company that is missing the inputs into its production. It’s not a good thing, because gold’s valuable, and this is essentially a crown corporation that has lost something very valuable, and in that respect that’s where the problem lies: If they don’t find the missing gold, the Canadian taxpayer may be on the hook for it. Although as a corporation that’s self-sustaining, it will probably just record a loss this year.
Q: Is there still a connection between gold and the dollar: Are we on a gold standard?
A: If Canada were on a gold standard, basically for every dollar the bank of dollar the Bank o Canada would have to have a certain amount of gold in its vaults. We were on that system up to around 1917 and briefly in the 1920s, but since then, we haven’t been. One of the reasons the bank keeps the gold is for worst case scenarios: If Canada has some obligations it has to meet and people lose confidence in the Canadian dollar, they still have confidence in gold. It means the country still has a certain amount of purchasing power, and that’s why it would have potentially been more of an issue if the bank had lost the gold. But that’s a vague thing, because it’s not a formal support.
Q: So what is our dollar backed by?
A: It’s the same sort of thing as the U.S. dollar, which is backed by the full faith and confidence of the U.S. government. The Canadian dollar is freely floating so its value moves up and down based on the supply and demand of Canadian assets. When we see it rising, like it is now, that’s because the price of oil is going up. Canada is a net exporter of oil and people have to buy oil from Canada and they do it with U.S. dollars that then get converted to Canadian dollars. That pushes the demand for Canadian dollars up, so the dollar goes up in value.
One Response to “ Ask an expert: The Mint’s missing millions ”
I am glad to see the bosses bonuses are being “put on hold”! How can anyone who loses somethign so important expect a bonus?! If a store clerk’s till comes up short, she pays!
Why does anyone feel bonuses are necessary to keep these bigwigs, and others in the financial industry (citing quotes of “bonuses are needed to keep these top people”) when they lost money for their companies! They should be kept to their salary or pay a % penalty when their work is so poor. We need to stop paying educated losers big bonuses!
By Janet Power on Jun 30, 2009