By: KENNETH MAXWELL

Folha de São Paulo - Op-ed section - page A2      

Canadians tend to be self deprecating people not given to the sort of the boosterism they associate with their neighbors to the South.This behavioral difference shows up vividly in the way Americans and Canadians portray their respective currencies. To Americans the US dollar was "almighty" but the Canadian dollar is known affectionately as "the looney," after a Canadian bird. Yet this week the US dollar and the Canadian dollar reached parity. The "looney" is not so looney any more, nor the US dollar any longer so "almighty," It is one more dramatic indication of just how weak the US currency has become.

The US massively imported over two trillion dollars worth of goods and services last year, creating huge trade and balance of payments deficits. This consumption was fueled by foreign borrowing and domestic borrowing against housing stock; and not just by means of the now notorious sub prime scams in the mortgage sector. Still grossly underestimated is the equity stripping from well established households which probably exceeded 900 billion dollars of overvalued obligations based on declining assets.

The theory has always been that a weaker dollar will stimulate US exports, hence employment and consumer income; but the sort of manufactured exports that a weak dollar encouraged in the past have long since disappeared: Smoke stack industries are now no more than decaying empty buildings across the "rust belt" of the States of the upper mid west. And this week that great icon of American industry, General Motors, under massive competitive pressure in the US market from imported automobiles and trucks, was shut down by the United Auto Worker Union in its first nation wide strike since 1976. Investors are rushing into emerging markets this week, Brazil among them.

But beware. The insatiable appetite of the US consumer kept the global economy expanding over the past decade. A recession in the US would have an equal and opposite effect. A prudent person would look to the Canadian "looney" and see rough times ahead.

KENNETH MAXWELL is a weekly op-ed columnist (every Thursday) for Folha de São Paulo, Brazil's leading newspaper.