Currency and Economic Integration
What's in Your Wallet (And Who Controls It)?
Healthcare determines whether you can see a doctor. Taxation determines how much you keep. Firearms policy determines your relationship with the state.
But currency? Currency determines everything else.
The money in your pocket isn't just a medium of exchange—it's a statement of sovereignty, a tool of economic policy, and a daily reminder of which nation you belong to. When you pay for coffee with a bill featuring a dead prime minister or president, you're participating in a national project whether you think about it or not.
South Alberta must decide: Whose face goes on our money? Or more precisely—do we even have our own money?
THE CURRENT SITUATION
The Canadian Dollar (CAD):
Albertans currently use the Canadian dollar, managed by the Bank of Canada in Ottawa. The loonie floats freely against other currencies, rising and falling based on commodity prices (especially oil), interest rate differentials, and global risk appetite.
Key characteristics:
- Petrocurrency behavior: CAD tends to strengthen when oil prices rise, weaken when they fall—Alberta's economy amplified in currency form
- Bank of Canada independence: Monetary policy is set in Ottawa without Alberta consultation
- Current exchange rate: Approximately $0.70-0.75 USD (fluctuates)
- Inflation targeting: Bank of Canada targets 2% inflation, adjusting interest rates accordingly
The US Dollar (USD):
Texans use the world's reserve currency, managed by the Federal Reserve. The dollar's status gives Americans privileges no other nation enjoys—the ability to borrow in their own currency, to settle international trade in their own money, to export inflation to the rest of the world.
Key characteristics:
- Global reserve status: ~60% of foreign exchange reserves worldwide are held in USD
- Federal Reserve independence: Monetary policy is set in Washington without Texas consultation
- Relative stability: The dollar fluctuates less than most currencies because global demand provides a floor
- Petrodollar system: Oil is priced in USD globally, creating structural demand
The incompatibility:
South Albertans would currently reach into their pockets and pull out different-colored paper representing different nations, different central banks, different monetary policies, and different values. A Calgary business selling to Houston must convert currencies and manage exchange rate risk. A San Antonio resident visiting Edmonton faces the same friction.
This cannot persist. A nation needs a currency. The question is: which one?
OPTION 1: ADOPT THE US DOLLAR Dollarization
What this means:
South Alberta abandons the Canadian dollar entirely and adopts the US dollar as legal tender. Albertans exchange their loonies for greenbacks. The Bank of Canada becomes irrelevant. The Federal Reserve becomes our central bank—without South Alberta having any representation on its board.
Precedents:
Several nations have dollarized:
- Ecuador (2000): Adopted USD after currency crisis; stabilized inflation but lost monetary policy tools
- El Salvador (2001): Dollarized to reduce transaction costs with the US; recently added Bitcoin as parallel legal tender (not a model to follow)
- Panama (1904): Has used USD since independence; functions smoothly but entirely dependent on US monetary policy
Arguments in favor:
- Eliminates exchange rate friction with the United States, our largest trading partner
- USD stability provides predictability for business planning
- No need to build central banking infrastructure from scratch
- Global reserve currency status means easy international transactions
- Texas experiences zero currency transition—they're already using dollars
Arguments against:
- Loss of monetary sovereignty: We cannot set interest rates, control money supply, or respond to South Alberta-specific economic conditions
- Federal Reserve serves US interests: When America needs loose money and South Alberta needs tight money (or vice versa), we get whatever America gets
- Seigniorage loss: The US government profits from printing money; we'd be giving that profit to Washington
- No lender of last resort: If South Alberta banks fail, the Fed has no obligation to bail them out
- Symbolically subordinate: Our money would literally feature American presidents, not South Albertan identity
The Alberta adjustment:
Albertans would need to exchange approximately $400 billion CAD in circulation for USD. At current exchange rates, every Albertan effectively takes a 25-30% haircut on their savings—unless the transition is managed with a fixed conversion rate, which creates other distortions.
OPTION 2: ADOPT THE CANADIAN DOLLAR Reverse Dollarization
What this means:
South Alberta adopts the Canadian dollar as legal tender. Texans exchange their greenbacks for loonies. The Federal Reserve becomes irrelevant. The Bank of Canada becomes our central bank—though South Alberta would have separated from Canada, so our influence there is... complicated.
Arguments in favor:
- Eliminates exchange rate friction with Canada, our northern neighbor and trading partner
- CAD's petrocurrency behavior may actually align with South Alberta's oil-dependent economy
- Texans get a currency that strengthens when oil prices rise—good for an oil state
- Maintains some continuity for Alberta's economy
- Smaller adjustment than creating something new
Arguments against:
- USD is the global reserve currency; CAD is not. International transactions become more complex
- Texas economy dwarfs Alberta's. Texans would be adopting the currency of a smaller economy—psychologically and practically awkward
- Bank of Canada would be a foreign central bank. We'd have no representation in monetary policy decisions
- Exchange rate volatility: CAD fluctuates more than USD; Texans would experience more currency risk than they're used to
- Symbolically odd: Would we keep the Queen's portrait (now King's)? Canadian imagery? For a nation that just left Canada?
The Texas adjustment:
Texans would need to exchange approximately $2 trillion+ USD for CAD. This is vastly larger than the Alberta-to-USD conversion. The logistics are staggering.
OPTION 3: CREATE A NEW CURRENCY The South Alberta Dollar / The Petrodollar
What this means:
South Alberta establishes its own central bank and issues its own currency—call it the South Alberta Dollar (SAD... unfortunate acronym), the Continental Dollar, or the evocatively named Petrodollar.
The Petrodollar name isn't just branding. It could signal that the currency is explicitly backed by or indexed to oil reserves—a commodity currency with the commodity stated plainly.
Arguments in favor:
- Full monetary sovereignty: South Alberta sets its own interest rates, controls its own money supply, responds to its own economic conditions
- Seigniorage capture: The government profits from issuing currency rather than giving that profit to the US or Canada
- National identity: Our money, our symbols, our faces on the bills (or ducks on the bills—we'll get to that)
- Lender of last resort: Our central bank can backstop our banks in crisis
- Policy flexibility: Can devalue to boost exports, tighten to fight inflation, whatever the moment requires
Arguments against:
- Zero track record: A new currency has no credibility in international markets; establishing trust takes decades
- Exchange rate volatility: Until credibility is established, the Petrodollar would fluctuate wildly on speculation
- Transaction costs: Every international transaction requires conversion; neither Americans nor Canadians would hold Petrodollars casually
- Central bank construction: Building monetary policy expertise takes time; mistakes are expensive
- Inflation risk: New nations with new currencies have historically struggled with inflation (see: every post-colonial currency ever)
The Petrodollar concept:
A currency explicitly linked to oil reserves is conceptually interesting. Venezuela tried this with the Petro (a cryptocurrency); it failed spectacularly. But a properly managed commodity-linked currency—perhaps with reserves required to be held in oil futures or strategic petroleum reserves—could provide stability that pure fiat currency lacks.
Alternatively, "Petrodollar" is just a good name and the currency operates like any other fiat currency. Branding matters.
Design considerations:
- What's on the bills? Founding figures don't exist yet. Landscapes? Wildlife? Abstract designs?
- Do we put ducks on the currency? (This question will recur.)
- Coins or bills for small denominations? What denominations?
- Physical currency or primarily digital?
OPTION 4: DUAL CURRENCY SYSTEM Parallelism
What this means:
Both USD and CAD (or USD and a new currency, or CAD and a new currency) circulate as legal tender simultaneously. Businesses accept either. Prices may be posted in both. Citizens hold whichever they prefer.
Precedents:
Several jurisdictions operate dual-currency systems:
- Cuba: CUP (peso) and formerly CUC (convertible peso); recently unified after decades of distortion
- Panama: USD is legal tender alongside the balboa (which is pegged 1:1 to USD and rarely seen)
- Cambodia: USD circulates freely alongside the riel; most significant transactions in dollars
- Border regions everywhere: Canadian border towns often accept USD; Mexican border towns often accept USD
Arguments in favor:
- Transition flexibility: Citizens and businesses adapt at their own pace
- No forced conversion: Albertans keep their CAD; Texans keep their USD
- Market discovery: Let the market determine which currency dominates over time
- Psychological comfort: Nobody's money becomes worthless overnight
- Hedge capability: Citizens can hold both currencies and shift based on conditions
Arguments against:
- Accounting nightmare: Businesses must track two currencies, manage two sets of books
- Gresham's Law: "Bad money drives out good"—if one currency is expected to depreciate, everyone spends it and hoards the stable one, creating circulation problems
- Price confusion: Is this item $50 CAD or $50 USD? Menu costs multiply
- Monetary policy impotence: If citizens can switch currencies freely, central bank policy loses teeth
- Perpetual transition: Dual systems tend to either converge (one currency wins) or calcify into permanent awkwardness
The transition question:
Perhaps dual currency is appropriate for a transition period—5 years? 10 years?—after which South Alberta commits to a single currency. This delays the hard choice but doesn't avoid it.
OPTION 5: CURRENCY BOARD Fixed Exchange Rate Mechanism
What this means:
South Alberta issues its own currency but fixes its value to another currency (USD or CAD) at a permanent, unchanging rate. A currency board holds foreign reserves equal to 100% of domestic currency in circulation, guaranteeing convertibility.
Precedents:
- Hong Kong: HKD pegged to USD since 1983 via currency board; remarkably stable
- Bulgaria: BGN pegged to EUR via currency board since 1997; stabilized post-crisis economy
- Estonia (pre-Euro): EEK pegged to DEM, then EUR; successful until Euro adoption
Arguments in favor:
- Credibility through commitment: The peg is absolute; speculators can't break it because reserves fully back the currency
- Inflation discipline: Money supply expands only when foreign reserves expand
- Transaction simplicity: If pegged 1:1 to USD, it's effectively dollarization with our own branding
- National identity preserved: Our symbols on the money, even if value tracks another currency
Arguments against:
- Monetary policy surrender: Like dollarization, we import another country's monetary policy
- Reserves requirement: 100% reserve backing requires massive foreign currency holdings
- No flexibility in crisis: When the economy needs stimulus, the currency board prevents it
- Exit is difficult: Breaking a currency board peg destroys credibility permanently
THE ECONOMIC INTEGRATION QUESTION
Currency is only one element of economic integration. Related questions include:
Trade policy:
- Does South Alberta join CUSMA/USMCA, or negotiate new trade agreements?
- What tariff structure applies to goods crossing what used to be international borders?
- How do we handle agricultural supply management (Canada) vs. free market agriculture (Texas)?
Banking regulation:
- Are banks chartered federally or regionally?
- What deposit insurance exists, and at what levels?
- How do we handle the integration of Canadian and American banking systems?
Securities regulation:
- One stock exchange or two?
- Which accounting standards apply?
- How do we handle cross-border investment?
Tax harmonization:
- Covered in the Taxation forum, but interacts with currency—if we have our own currency, we can collect taxes in that currency and create demand
Labor mobility:
- Can workers move freely between former Alberta and former Texas?
- Do professional credentials transfer?
- What happens to pension systems?
THE BITCOIN QUESTION
We should address this because someone will raise it: Should South Alberta adopt Bitcoin (or another cryptocurrency) as legal tender?
The El Salvador experiment:
In 2021, El Salvador made Bitcoin legal tender alongside USD. Results have been mixed: the government claims tourism benefits; critics note minimal adoption, significant losses on government Bitcoin holdings, and IMF pressure to reverse course.
Arguments in favor:
- Decentralization: No central bank means no central bank mistakes
- Inflation immunity: Fixed supply prevents currency debasement
- Tech-forward branding: South Alberta as a crypto haven attracts certain investment
Arguments against:
- Volatility: Bitcoin's value fluctuates 20% in a week routinely; no business can plan in this environment
- Scalability: Bitcoin processes ~7 transactions per second; Visa processes ~24,000; this is not close
- Environmental concerns: Proof-of-work mining consumes enormous energy—ironic for an oil-producing nation, perhaps, but still
- Regulatory nightmare: AML/KYC compliance becomes nearly impossible
- This is not serious monetary policy. It's a meme. We're doing satire here, but not that kind of satire.
Verdict: No. But we should discuss why not, because the arguments illuminate what currency actually requires: stability, scalability, and broad acceptance.
QUESTIONS FOR THE FORUM:
On currency choice:
- Which option do you favor: dollarization, CAD adoption, new currency, dual system, or currency board?
- If we create a new currency, what should it be called?
- What should appear on South Alberta currency? Landscapes? Founding figures we haven't identified yet? Ducks?
- Should denominations match USD/CAD conventions, or start fresh?
On monetary policy:
- How important is monetary sovereignty—the ability to set our own interest rates and control our own money supply?
- Are you comfortable importing another nation's monetary policy decisions?
- If we create a central bank, where should it be located? (Another capital question...)
- What inflation target is appropriate for a resource-based economy?
On transition:
- How long should a dual-currency transition period last?
- How do we handle conversion of savings, contracts, and debts denominated in the old currencies?
- What exchange rate should apply at transition—market rate, historical average, or negotiated rate?
On economic integration beyond currency:
- Should South Alberta seek to join existing trade agreements or negotiate fresh?
- How do we handle the integration of banking systems?
- What role should cryptocurrencies play, if any?
On the Petrodollar concept:
- Is an oil-backed or oil-indexed currency genuinely innovative or just marketing?
- How would oil-backing actually work mechanically?
- Does tying currency to oil double down on resource dependence, or appropriately reflect economic reality?
THE SOVEREIGNTY QUESTION
Ultimately, currency choice is a sovereignty choice.
Full dollarization says: We accept dependence on American monetary policy in exchange for stability and simplicity.
Full CAD adoption says: We accept dependence on Canadian monetary policy (from a country we just left!) in exchange for continuity and commodity alignment.
A new currency says: We claim full sovereignty, accept full risk, and bet on our ability to manage our own economic destiny.
Dual systems or currency boards represent compromises—partial sovereignty, partial dependence, partial risk.
There is no costless option. Every choice trades something for something else. The question is which tradeoffs align with South Alberta's vision of itself.
Are we a genuinely new nation, willing to build institutions from scratch and accept the growing pains? Or are we a practical merger, adopting existing tools and focusing energy elsewhere?
The currency you carry answers that question every time you make a purchase.
A NOTE ON DUCKS
Multiple contributors have suggested, not entirely in jest, that South Alberta currency should feature ducks.
The CanuckDUCK platform does not officially endorse any particular currency design. However, we note that:
- Canada features a loon on its one-dollar coin
- The loon is not a duck, but is duck-adjacent (same order: Anseriformes... actually, no, loons are Gaviiformes; this ornithological tangent is getting away from us)
- A currency featuring actual ducks would be distinctive, memorable, and on-brand for this platform specifically
- The "quacker" as a nickname for whatever denomination features a duck would be inevitable and delightful
This is not a serious policy proposal. But also, it's not not a serious policy proposal.