From mid-2007 to early 2012 the Canadian dollar was riding high vs. the US dollar and many saw their opportunity to establish a life in Panama that would offer abundant rewards for their income. Today the value of the Canadian dollar has dropped by approximately 30%, and coupled with the decreased buying power in Panama it is altering the paradigm of the future.
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@Val. As a European we went crazy with all different currencies, devaluations and different interest levels. On holidays by car from Holland to Spain I had to carry 4 types of currencies. At the start of Thatchers rein the Pond Sterling (originally 1 Pound of silver for 1 Pound paper note) devalued by 25% in a single day. Then the European currencies were pegged to a maximum of 10% fluctuations and the ECU system started as a basket of the European currencies. The ECU was not a real currency. But one could buy for example bonds in ECU's or World Bank Debt notes. Then eventually the EURO came to life. The problem of the EURO was that Spain, Greece, Italy, Ireland and Portugal were used to very high interest rates for borrowing. Euro borrowing became half as cheap. Resulting people and governments borrowing like crazy at these low interest rates, resulting in a Boom Burst of housing etc. I am not a Gold Bug. But holding some 5% in physical gold of your savings as a hedge might be a good insurance. Bitgold (they took over Goldmoney) from Canada offers physical gold storage in your name even with a debit card for shopping etc.
For those who moved to Panama when the C$ was strong, there should have been a realization that Pension income was in $C but expenses was in $US and therefore a risk. Given the general phenomenon of cross-border shopping by Canadians and the ubiquity of US media in Canada, we all knew that the US$1.04 Canadian dollar in1970 (and $1.10 under Diefenbaker) went to under 60 cents and then back up briefly to $1.10 recently when Canadian exports were highly price in US$.
The solution to this is to hedge, or to get more sources of income, especially if you can't live on your pension when the $C is weak (and it will stay weak as long as Canadian petroleum and minerals are not priced highly in world markets).
It is not especially wise to hedge with the Loonie near to an historical low. You do this when it is near a high. Unless Canadian banks have changed, you can buy $US "forward", meaning for future delivery (sometimes at a discount sometimes at a premium). You can also hedge your US$ needs using securities that track the US$/$C conversion rate.
Regrettably for people who only have govt. pension income, the amounts required tend to be too small to be practical.
People with investments, RRSPs, RLIFs etc. can (or could have) hedged by changing to companies cross-listed in the US and Canada or they could have bought Canadian companies that pay dividends in US$. Or US companies listed on Canadian exchanges. I think banks also have US$ denominated funds.
Obviously, each person's situation is different and I am not giving advice in this post...just outlining some ideas that may be advantageous for some of you to look into before you do anything. Getting income in 1 currency and having your expenses in another is likely to be more challenging than not having to concern yourself with this and most people prefer to ignore it until they are forced to pay attention. That can be too late, especially if you throw up your hands in despair and don't bother to educate yourself in how you may be able to protect yourself more than you are.
A Special Note to any of you who are one of the many Canadians who disapprove of the petroleum industry, mining, and forestry: You should be aware that these export industries employ thousands of Canadians, are a significant boost to Canadian Govt revenues that fund programs, and one of the major determinants of the value of the $C. The $C will not recover its value unless and until the value of crude oil and minerals, like copper, climb significantly and nothing impedes their export from Canada.
Very good and informative post.
It would be sound advice that before making the commitment of moving to a country that uses a currency different to your source of income to have a discussion with a financial advisor in order to guide you in a direction that helps protect your buying power from possible future currency instability.
Plenty of currency wars again. The US Dollar covers 62% of the world trade. The Euro 25%. In 1975 I sold my apartment in The Netherlands in Dutch guilders. Interest 4.75% on bank deposit.I changed it into US$ with 6.25% interest. Exchange rate 2.67. I put the deposit for 3 months and then I negotiated a new rate every 3 months. The exchange rate went even down to 1,65. But the interest went finally up to 19% per year. After 10 years the exchange rate was back to 2,67 and I doubled the original amount in Dutch Guilders. No taxes as I worked and lived in Spain. The Euro started at about 0.90 for a US$. A few years ago the highest was Euro 1 for $ 1.60. Last year went down to 1.05. Now 1.11. The Canadian economy is much like Australia depending on export of raw materials. The Aussie Dollar is now almost at parity with the CAN$.
It is a daunting task trying to gage what is needed for future life off a fixed income when operating within the same currency, but when you throw a second currency into the equation the difficulty is increased. Fluctuation of homeland currency to the currency of future foreign home has to be a factor in decision making.
That is true A.J. We planned retirement when interest rates were much higher and seemed a dependable source of income over social security. Now interest is nothing. Also the U.S. govt. decided the cost of living hasn't gone up (do they ever go to a grocery store?), so they didn't raise ss this year. There is a saying, "We make plans, and God laughs."
Food went up and oil came way down which caused a slight negative in the consumer price index, so the second time in history no cost of living increase to SS.
So true. How much is enough? That question is frustrating and stressful in all honesty.