The Toronto Star

August 2, 1998

It's déjà vu for loonie lamentations

Government forced to duck flak in 1962 when buck dove 7 1/2¢

by Alan Barnes

Opposition MPs forecast economic doom.

Consumers feared that the cost of travel abroad and imported goods would soar.

And the federal Progressive Conservative government of John Diefenbaker was almost tossed out of office.

The year was 1962. The Canadian dollar was devalued to an unheard-of 92.5 cents U.S. - and thus was born the Diefendollar or Diefenbuck.

The howls of protest over a few pennies may seem extreme now, especially with today's loonie hitting a new low of 66.15 cents and economists foreseeing a lower standard of living.

Well, it was a shock to many Canadians in 1962, who remembered that in 1960 the Canadian dollar was worth five cents more than the American greenback.

Devaluation to fight economic recession came on the eve of a June federal election and was fodder for the Liberals, who were anxious to return to power after losing in 1957.

Diefenbaker said the devaluation would produce ``a tremendous upsurge'' in exports, greater prosperity and more jobs.

Trade minister George Hees said it would cause American tourists to ``pour across the border.''

But the devalued dollar became an ``in-your-face'' election issue after Mitchell Sharp coined the word ``Diefendollar'' while running as a Liberal candidate in Eglinton.

He said the Canadian dollar, ``once the strongest currency in the world, is in danger of becoming known as the `Diefendollar' in which, like the Diefenbaker government, there is less and less public confidence.''

Cartoonists were quick to pick up on this, but it was Peter Kuch, editorial page cartoonist for the politically Liberal Winnipeg Free Press, who ``minted'' the first Diefendollar.

It was ``issued'' by the Bunk of Canada and worth 92.5 cents. One corner was marked 7 1/2 cents and not negotiable.

Thousands of Diefendollars were printed and passed out around the country by politicians hoping to defeat the government.

On the back of the note was written, ``guaranteed pre-shrunk genuine devalued Diefendollar.''

The debate over devaluation resulted in some odd comments.

Liberal party economist Walter Gordon asked why finance minister Donald Fleming didn't round out the number instead of using a fraction, which he said would cause mathematical difficulties.

Diefendollar wordsmith Sharp was defeated by Fleming in the election, but Diefenbaker ended up with a minority government of 165 MPs, compared with the party's 208 of 265 seats in Parliament before the vote.

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