It is often said that a free-floating currency acts as a shock absorber.
But when Canadians go shopping for groceries these days, they're getting nothing but the shock—sticker shock, that is.
On Tuesday, the Canadian dollar, commonly known as the loonie, broke below 70 U.S. cents for the first time since May 1, 2003.
For America's northern neighbor, which imports about 80 percent of the fresh fruits and vegetables its citizens consume, this entails a sharp rise in prices for these goods. With lower-income households tending to spend a larger portion of income on food, this side effect of a soft currency brings them the most acute stress.
From coast-to-coast-to-coast, Canadians have taken to social media to express displeasure with soaring produce prices:
While some Canadians might think this is a regional phenomenon ...
... folks in the northern parts of the Great White North have the most cause to cry foul:
Some gripe about the grapes (gr-eh-pes?) of wrath:
And others are getting a tad hyperbolic about the situation:
The currency's meltdown has even gone mainstream. Take this, Conan O'Brien:
There is perhaps no more fitting emblem for the theme of imported inflation than fresh fruits and vegetables.
That's because the scope for import compression and import substitution—reducing inbound shipments in response to a lower currency, or producing those goods domestically—is more limited than for other categories. It's less disruptive to people's lifestyles to forego buying a new Maytag washer than to change their diets. Moreover, climate constraints render it highly unlikely that large-scale production of all the fruits and vegetables Canadians eat could occur with any reasonable degree of efficiency.
As Can-sternation about the low loonie mounts, however, it's essential to look at the counterfactual. A scenario in which the Bank of Canada were to hike interest rates or intervene in currency markets to support the value of the loonie would reduce the attractiveness of the nation's good and services on the world stage.
The lower Canadian dollar has been supporting foreign demand, which in turn sustains domestic production, employment, and aggregate income.
This dynamic has helped the labor market remain surprisingly resilient amid the collapse in crude prices, with annual employment growth stronger in 2015 than it was in either of the two previous years.
So while groceries may be more expensive, the wherewithal of Canadians to purchase them has been, at least in many cases, diminished, not destroyed.