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After a couple of first-round defeats, the Ottawa Senators are now the lone Canadian team still standing – and they’re in tough against one of this year’s favourites to win the Cup, the talent-laden Pittsburgh Penguins.

CHRIS WATTIE/Reuters

As we gaze upon another Stanley Cup playoffs with the sad, forlorn eyes of a nation whose teams are mostly already eliminated, we have to wonder how the elusive hand of economics has deceived us once again.

Of the seven National Hockey League teams based in Canada, only four made the playoffs at all. After a couple of first-round defeats, the Ottawa Senators are now the lone Canadian team still standing – and they're in tough against one of this year's favourites to win the Cup, the talent-laden Pittsburgh Penguins. It's been 20 years since the last time a Canadian franchise won Lord Stanley's oversized goblet, and the odds are long for that losing streak to be broken this year.

How is this an economic story? Well, it kind of isn't. And that's the problem. It was supposed to be.

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Back a decade ago, when the Canadian dollar was floundering below 65 cents to the U.S. dollar, Canadian teams were moaning loudly and often that their woefully undervalued currency made it near-impossible for them to compete with their U.S. counterparts. After all, salaries throughout the league are doled out in U.S. dollars, but Canadian teams had to pay for those with Canadian-dollar revenues that simply didn't measure up. Many of the Canadian teams, especially the ones in smaller cities, simply couldn't compete for top on-ice talent; many were forced to lose players to U.S. teams when it came time to renew contracts of superstar players.

Indeed, the numbers show that a decade ago, Canadian teams' player payrolls were generally well below the league average (the deep-pocketed Toronto Maple Leafs being the notable exception) – evidence that the currency gap had put a strain on their overall ability to pay competitive salaries. (We've excluded the Winnipeg Jets from our data as the franchise wasn't based in Canada for most of the time period in question.)

But after the 2004-2005 labour dispute that wiped out the entire season, the NHL brought in a salary cap system, meant to level the playing field among all teams. At the same time, the Canadian dollar had begun a lengthy appreciation that would eventually bring it up to par with its U.S. counterpart.

The effect on the Canadian teams' payrolls was, as one would expect, positive. While the salary cap moved all team salaries closer together, the Canadian teams overall had payrolls that generally exceeded the league average. (Indeed, the small-market Calgary Flames even had several years when they were at or near the top of the NHL's biggest-payrolls list.)

But the promise of a resulting improvement in on-ice competitiveness has proven an empty one. Canadian teams' average wins per year have actually been lower in the parity-era years than they had been earlier in the decade. The total number of Canadian teams reaching the playoffs, as well as the total number of playoff wins by Canadian teams, have also generally deteriorated.

On the other hand, maybe the economics the Canadian NHL owners were talking about referred not to on-ice success, but to off-ice. On that front, dollar parity has helped make them immensely competitive in terms of profitability and franchise value.

The Toronto Maple Leafs last year became the first NHL team to reach the $1-billion mark in value, according to Forbes. The Leafs rank first in the league in value, while the Montreal Canadiens are third ($575-million) and the Vancouver Canucks are seventh ($342-million). Canada's seven teams are all in the top 20 in the league based on franchise value; their average franchise value of $400-million is almost double the overall league average of $220-million.

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Still, it would be nice if some of that wealth could translate to a Stanley Cup parade down a Canadian Main Street, wouldn't it?

[Mobile readers: Download Canadian dollar and NHL performance table as a csv file here.]

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