At least, that is what one must conclude from the recent agitation, mostly in conservative quarters, over the lowly state of the Canadian dollar, otherwise known as the Big Dipper.

The dollar's deep dive against its U.S. counterpart in recent months – at less than 68 cents U.S., it has never been lower – is being held up as an indictment of all that is wrong with Canadian economic policy: proof, it is said, that taxes are too high, regulations too burdensome, the Supreme Court too liberal.

Now, I yield to no one when it comes to uncritical acceptance of the judgment of the market. But if a low dollar is sufficient evidence of an unsound policy regime – either as an indicator of some general failing, or indeed, as a policy choice in itself – then it surely follows that a high dollar is the market's seal of approval on an exceptionally wise period of stewardship of the nation's finances.

In 1991, for example, the dollar hit 89 cents U.S., the highest it had been in many years. Yet the notion that Canada in 1991 was the acme of a well- managed economy would, one suspects, come as news to a lot of Canadians.

With inflation at 6 per cent and rising, a federal deficit of $34-billion, provinces borrowing at will, a current account sinking ever deeper into the red, and Quebec, in the angry aftermath of the failed Meech Lake accord, threatening to secede under a federalist government, Canada has seldom presented a worse prospectus to investors.

1975, likewise, was hardly a year to inspire nostalgia, least of all among conservatives. The ills of inflation, then in excess of 10 per cent, had been assigned to the quack remedies of the new Anti-Inflation Board. The federal government, ominously, had just recorded an operating deficit, its first in some years. Federal taxes, at nearly 20 per cent of GDP, were at an all-time high. Productivity actually fell. And Quebec was just a year away from electing its first avowedly separatist government. Yet the currency spent much of the year above par with the U.S. dollar.

Now, either everything we know about what moves markets is wrong, or a high dollar is not always an indication that the "fundamentals," as baseball coaches and finance ministers like to say, are in good order. As it happens, it is not hard to find other explanations for either episode of dollar mania. In 1991, the currency was being supported by massive inflows of foreign capital, the better to finance our enormous public sector deficits: it was a sign of weakenss, not of strength.

In 1975, the explanation was even simpler: oil, of which we are a net exporter, was fetching record prices, after the first OPEC crisis.

If a high dollar is not necessarily a sign that all is well, could it be that a low dollar should not automatically be taken to mean all is lost? That would better fit the facts of our current situation. Though the dollar has fallen 7 per cent since last October, it's hard to see how Canada's prospects have suddenly darkened in the same degree: not with inflation at 1 per cent, federal and provincial governments in surplus, taxes on the way down, and support for separatism in free-fall.

That's not to say that we should be wholly unconcerned by a fall in the value of the dollar. So far as it makes imports more expensive, all of us are indeed that much poorer. And so far as the U.S. dollar exchange rate has been persistently in decline over many years, that can only be because Canadian productivity growth has failed to keep pace with that of the U.S. Indeed, the falling dollar may well have contributed to that very weakness, insofar as it protected trade-sensitive sectors from foreign competition.

But to ascribe the dollar's latest bout of weakness to the failings of domestic policy seems a stretch, especially given the ready availability of more compelling explanations: namely, the collapse of commodity prices, owing to the crisis in the Asian economies. It isn't really the dollar that makes us poorer: as a major exporter of commodities like gold and oil, Canada could hardly avoid suffering a decline in its net worth. The exchange rate is merely the means by which that is passed through to the general population.

But just as the ice storm, though it destroyed a good part of Quebec's capital stock, carried a built-in economic stimulus in the work of rebuilding, so the decline in the dollar, if not quite a blessing in disguise, nonetheless has some offsetting benefits. As earnings from commodities decline, so earnings from other exports, spurred by the cheaper dollar, rise to take up the slack. And while sales to Asia may be off, sales to the U.S. can only be given a lift by the discount on the exchange rate.

That doesn't mean a cheaper dollar is to be welcomed, any more than we should be happy to endure an ice storm every other month. But under the circumstnances, it is quite tolerable.