Currency differences???

Okay, I’m not sure how to phrase what I’m asking, but I’ll give it a shot.

Recently the Canadian dollar has gained parity (in fact it is slightly more valuable) than the U.S. Dollar.

The last time I was in Canada, you could get $1.50 Canadian for $1 US in exchange.

I remember seeing a price on something saying, for example, $12, and I would think, “Damn, that is expensive!” but then I would realize that it was only 8 “real” dollars (the term that I had to remind the boy to quit using around the locals :wink: ).

How is is now? Have the prices come down to 8 dollars or are they still 12 meaning the U.S. dollar is less valuable?

Ok, I’m sure at this point many of you are screaming, “Yes, the U.S. Dollar IS less valuable!!!” But, if that is the case, then why isn’t inflation rampant here? Last I saw it is only 3 to 4 percent, and we are promised that under the cautious eye of the federal reserve, we don’t have to worry about inflation.

Lunch at a fast food joint is 5 to 6 bucks. The same price it has been for the last 10 or so years. Are American vendors undervaluing their products?

On the same front, I was watching Gordon Ramsay’s Kitchen Nightmares show and he was asking a guy on a ladder hanging a sign if 18GBP was a good price for a 3 course meal, and the guy said, “Of course”.

Now, my handy calculator tells me that this is almost $36 US per person. $72 for dinner for two. I don’t know of many guys in the US that hang signs who takes his wife for $72 dinners.

I guess my question is, how much is the relative currency values related to the actual purchasing power of that money in the local economy. Can I make a basic calculation like that? Can I say that if something cost $4CAN in New Brunswick that it would be like an American paying $4 US for that same thing in Kansas?

There’s an index you’re missing called “purchasing power parity”: how much people’s income is relative to what they can buy, within a given currency. ETA: you should stop thinking in dollars - Yen or Rupees are totally different types of nomenclature, but PPP still remains the same.

Disclaimer: IANAEconomist or anything approaching one. But in the simplistic manner in which I understand it, if the economy is tanking, inflation will not rise because people will not be getting the pay-rises that fuel inflation. Dropping the interest rates can stimulate the economy, but if the economy is already contracting, this will have a post-hoc effect and merely decelerate the contraction.

Things in the US will go up in price if they’re imported, or have a large imported component. Also, the rising cost of gas will effect things due to transport costs. I’d imagine this is being offset by a) protectionist policy on domestic industries, b) already huge markups (e.g. on Chinese clothes) being squeezed, but not visible to the consumer.

That said, things in the UK are a hell of a lot more expensive than the US even with PPP taken into account, relative to our incomes - it’s just that we’re used to it. I’d think nothing on spending £50 a head (or quite a bit more) regularly on a nice meal out for me and the mrs.

Prices have not, with few exceptions, come down and people are up in arms about that. Some Canadian companies have threatened US retailers sanctions (that is, they will not supply them) if they sell to Canadians. Car manufacturers and also Bombardier (snowmobiles). Books are still priced about 50% higher and I am holding off buying until I get to the states in a few weeks. I haven’t tried ordering from Amazon.com (instead of amazon.ca) but I see no reason they wouldn’t ship. Eventually, businessmen will realize they are shooting themselves in the foot. They claim that it is the wholesalers who are racking up the profits; I certainly cannot refute them.

Fairness compells me to admit that it took months or even years for publishers to adopt differential pricing when the C$ started falling 30 years ago. So maybe there is just a lot of drag in the system. Still, what companies like Bombardier have done is unconscionable.

Thanks for the response, and this is right down the path of what I was looking for. So you and the Mrs. would think nothing of spending 50 quid each, or 100GBP for a meal out? I’m not sure of your personal wealth, and it is none of my business, but this hits at the point of my question.

You tell me to stop thinking in terms of dollars, but that is the only frame of reference I have in terms of money. Is it fair for me to assume that you and the wife spend the equivalent of $200US for a meal out, and you “think nothing” of it; At times you spend “quite a bit more”.? I will assume that you are an upper middle class person, because obviously if you are a mega-rich, then your examples are outside the scope of the discussion. As a middle class US person, a nice meal, at a nice restaurant for two would be around 50 USD total, or 25 GBP…

Am I missing a factor somewhere? What USD value should I assign to the purchase price of your average meal out compared to the GBP value of a meal out at a restaurant?

Of course, then it gets down to how many GBPs would be paid as a wage for a similar job in the US that is paid in dollars which confuses it even more.

And, again, I am thinking in dollars. What should I think of? Gold bullion? Silver? Cattle? He asses and she asses? Not trying to be a smart ass, but just looking for info…Thanks

As a Canadian, I am, for some reason, aware of curerency movements lately.

Prices here haven’t come down a lot, but they are starting to. If the Canadian dollar stays high for a year or more, that will give things time to adjust. The change will have proven to be a real change, rather than just some kind of froth in the price chart.

The Canadian dollar went up 1 cent yesterday relative to the US dollar, and down one cent today. That’s the kind of froth I mean. What business could adjust prices that fast? A business might be selling something now, that was made from parts bought two months ago, when prices were different again. How do you take that into account?

People need time to adjust, time to figure out what’s real. Is the Canadian dollar actually increasing in value, or is the US dollar dropping? Both could be rising, one more quickly then the other. Or vice versa. Looking only at them in isolation, you can’t tell! You only know the relative difference.

You have to look at the prices of things on the outside. When the US announced that interest-rate cut in September, the Canadian dollar rose relative to the US.

I looked at the price of other currencies relative to the US and Canadian dollars. The US dollar was dropping relative to most of them, so I figured that there was a good chance that it was actually decreasing in value. However, most of the rise of the Canadian dollar in recent weeks has been relative to a whole bunch of currencies, so I figured that it is actually increasing in value, more than the US dollar is going down.

That doesn’t mean that both couldn’t be happening, though. The media here tend to concentrate on the US/ Canadian dollar rate to the exclusion of other currencies, so we’ve been a little disoriented lately. Is the US budget deficit running the US dollar into the ground? Or are we just doing well because we have surpluses and are selling oil?

And come to think of it, there’s the rising price of oil. If it’s denominated in shrinking US dollars, is it really getting that much more expensive? I’d like to see the price of oil in euros as well on the news, to have some comparison. I do know that the cost of gasoline hasn’t gone up all that much here; it’s been between 94c and 99c Canadian a litre for the past couple of months, and only recently touched $1 a litre again. What’s it been doing in the States?

But even if the US dollar is going down (or up), that doesn’t matter if all your costs and sales are in US dollars, from and to people in the US. You and your neighbours all float up and down together, and the relative price doesn’t change.

The Economist magazine occasionally publishes their Big Mac Index, which tries to do this kind of thing by comparing the different prices of Big Macs in various places and currencies.

An interesting task might be to figure out how long the average person needs to work at average wages to earn a set amount of the average local bread. That might give some indication of whether $2.59 per 650-gram loaf of multigrain is expensive or not.

I’d say think in terms of percentage. I’d put myself currently in the lower-middle class (in US terms, not British class-conscious terms, where I’m frankly a mess). I’m in middle management and my wife is a PA.

Let’s say I earn £40,000 per annum, and my wife earns £25,000. After tax, we’re bringing in about £4,000 per month between us. We have a mortgage of £1,000. Our utilities and local tax cost another £500 on top of that. So we’ve got about £2,500 left to spend (we’re really bad at saving). Therefore £100 for a nice meal for the two of us represents 4% of our monthly disposable. (And in our particular case you also have to figure that we each spend £6 each per day on cigarettes - £360 a month!)

Now do the calculation yourself, and see if your $50 meal is 4% of your monthly disposable for people doing similar jobs. I’m guessing it’s a lot lower.

Wow. You have a lot more money moving through your life than I do, even relatively. And you call yourself lower middle class in US terms?

Let’s see. I make about $50,000 Canadian. After taxes, I bring home about $3200 a month, out of which I pay:
$680 rent.
$300 utilities (cable TV, hydro, internet, phone)
$200 transport (mostly bus passes)
:: drags out pay stub ::
$400 for RRSP (registered retirement savings plan) and other miscellaneous deductions, like insurance

So that gives me $1600 a month for everything else, from food to clothing to travel to books to counseling to the gym to computer stuff. And I think I spend $400 a month on food, because I eat at the company caf most days (1 meal = $8 ish).

4 % of $1600 = $64, which is about the price for two at a “decent value but not expensive” restaurant. Most places I’ve been to are more along the lines of “inexpensive”, I’ve paid $15 to $20 for a meal, mostly because I don’t drink alcohol. If you want “nice and becoming expensive”, that might be $100-$150 for two.

If I was more organised and cooked more, I think I could live a lot more cheaply.

:: ponders a resolution ::

Now we are getting to my point that I can’t articulate. You make $50k Canadian per year. How much did you make 5 years ago when 1USD bought 1.5CAD?

If you weren’t in the workforce then or had a different job, then how much did a person in a job just like yours make then? Was it $75k? Was it less or the same?

I know, I know, I’m still using US dollars as a starting point, but as I think about it, why shouldn’t I?

I know that within a society the currency is standard and balances, but I can go to my local bank and change my USD to CAD, GBP, Japanese Yen, Rubles, Gold, Silver, or whatever. I could exploit a discrepancy in the local market if it becomes too protectionist…

So, if I am too focused on USD, then I can get rich by trading my “overvalued” USD relative to my local markets to pounds, Euros, or Yen… Then trade back and make $$$…

I was puzzled by that too, because £40,000 is way above the average salary in the UK, which is more like £27K or £28K (although in London and the surrounding area, the average is probably well into the £30Ks). I guess “lower middle class” means different things to different people.

But like the OP I have wondered how a large disparity between PPP and real exchange rates can exist. According to PPP, the British pound buys about $1.60 worth of stuff. How can a pound buy more than two dollars, then?

I always thought Lower Middle Class was a polite way of saying Lower Class.

You all are still fighting my ignorance. The “average” salary in the UK is about 27 or 28GBP, which would be about 55 or 56K USD. No WAY! is that the average salary here. The average salary here is about $35k USD or about 17kGBP.

So, it seems that things are more expensive in the UK, but people get paid more?

Or am I wrong?

You’re in luck. Five years ago, I had just moved into this apartment and was working at the same job. :slight_smile:

I was paying $600 a month for rent, and making $43,000 a year. Taxes out of my paycheque were somewhat higher, but I believe that food and transport were less expensive relatively. I was paying less in utilities (no cable TV and only dial-up internet), but my web-hosting costs were much higher. And I was paying $500 a month to my debt, and much more than I am now to counselling.

About that web-hosting fee… I’ve been hosting with the same place for ten years, and the price has been in constant US dollars for at least the past six. I’ve been paying $100 US every three months (yes, I know; it’s expensive).

In 2001 it was over $160 Canadian, and I had to struggle to afford it at times, especially since I was paying so much else. These days it’s about $100 Canadian, and may well be less next time I pay it in January.

I think “middle class”, technically, was defined as “people who own houses but work for wages instead of living off investment income”.

These days, though, I think the difference between “lower class” and “middle class” is cultural and has more to do with the type of job rather than the amount of money. Am I wrong?

You are right, assuming that your average US salary figure is correct (surely it’s higher than that?). In PPP terms the average Brit is as well-off as the average Canadian, no more, no less. It’s just that the exchange rates seem to allow us to buy dollars at knock-down prices, for some reason. And conversely make it very expensive for you guys to buy pounds.

Maybe I should sell up completely and buy a ranch in Montana with my GBP personal wealth. Seems like a bargain right now.

Yes, I remember this. When I was in England in 2000, the pound was worth $2.50 Canadian. But it was very deceiving, because all the prices for comparable items were about the same as on the same item in Canada: £6.99 for chicken strips and a drink at KFC, £24.95 a night at the Rotherhithe hostel, etc. It felt completely normal, and I had to remind myself that these “normal” prices were draining my money 2.5 times faster than usual.

Well, if you want to be next to* the supervolcano when it goes off, be my guest. :slight_smile:

[sub]*where “next to” means “within 500 km of”.[/sub]

(too late for edit window)

Bear in mind that “average salary” does not mean “the salary that a regular Joe might expect to receive”. It is skewed upwards by the large number of people on handsome-but-not-spectacular salaries, like managers and consultants earning in the 60K - 90K range. For an “average Joe” kind of job in the UK, you’d be looking at more like £20K, maybe quite a bit less.

Average industrial weekly wage (2006 figure) for a male in Ireland was at current exchange rate $865 a week. However nearly everything, especially housing starts at a far higher price here than its equivalent in the United States. My mother’s house is worth about $935,000 and is a four-bedroom semi-detached in one of the less expensive parts of Dublin. When I visit my gf in Ohio I feel like an American must feel when visiting Mexico (price-wise I mean).

There’s a whole world of high finance and currency trading that needs to know changes in value down to the cent. People with more money than I can comprehend can set up arbitrage trading scenarios that are worth the effort for that 1 penny more. So, the prices don’t make too much difference now, for manufactured goods, but eventually, those markets will be affected too.

Self-declared middle-class Americans on this board were worrying about not having $500K in assets for their retirement. Whereas although my salary is above the national average, and I’m a homeowner, apart from that I have no assets, no savings, and drive a beater. In my definitions, US middle class would include company directors earning $200K and beyond. US upper class would be tycoons, Hollywood stars, etc. My definitions only, I guess - correct me if I’m wrong.

Missed the edit window to say: Usram, in British terms, have you met our mid-middle classes? They’d be something like a GP or a senior economist, annual income £100,000 or the like, I suppose, with a nice four-bed place with no mortgage, big Beamer, kids in state school but take private tuition. Then there are the upper middle classes. The ones who have a house in the country and a pied-a-terre in London, send their kids to private school with trust funds waiting for them on graduation, have a holiday cottage in Tuscany, and drive Range Rovers. I’m talking Tara Palmer-Tompkinson and her family. I assure you, they earn a fuck of a lot more than I do!