International Economics

[bladespark]

Okay, somebody correct me if I'm wrong. You have two people living in two different countries. Country A uses the bork as the unit of currency, country B uses the ching. A bork will buy you what a ching will. And for so many hours of work, on average you get paid about as many borks per hour in A as chings per hour in B. They're worth about the same, give or take a little.

Now say the exchange rate shifts. Suddenly a bork is worth two chings!

What does this mean? Well, according to somebody I'm talking to, it means that our native of country A is suddenly suffering, because she's still paying a whole bork for something that her friend in country B can buy for a ching! That's only half a bork! OMG, she's paying twice as much now! WOE!

Me, I kind of think this is bad for the person from country B, because before she could buy international stuff, and pay in chings, and the only real holdback was shipping. Now she can't afford to buy anything at all from country A, because she just can't afford to pay two chings for something that's just a bork. And her friend over in country A could order internationally, and pay half a bork, plus shipping, and still get things cheaper than they cost at home.

Am I crazy here, or is that how it works?

(Yes, I just had a gal from England tell me it was HORRIBLE for her that a pound is worth two dollars. She's paying SO MUCH MORE for stuff than us Americans. I just kind of went ... at her. I mean... a pound buys what a dollar buys. A pound has pretty much always bought what a dollar buys, at least within my memory. The fact that a pound is worth two bucks now doesn't mean that every Brit in the nation is suddenly getting ripped off compared to us Yanks, kay? It means us poor Yanks can no longer afford to buy imported stuff from England, it's too freaking expensive.)

Comments

[thetommydodd.livejournal.com]

I think she's got confused about the point she's trying to make.
If your currency climbs, it's easier to buy stuff overseas, but harder to sell it: If your currency falls, it's easier to sell stuff but harder to buy it. Simple, and obvious.
What's probably getting her goat is that some importers charge such a ludicrous markup for some products that they're letting £1=$1, regardless of the real exchange rates. Things have always, in real terms, been more expensive here. It's not about the exchange rate, but the business culture.

[moltare.livejournal.com]

Try living in London some time :P

[aoanla.livejournal.com]

Indeed, and the issue is complicated by comparison to actual wages being non-trivial (while, considering the exchange rate, a £30,000 salary is equivalent to $60,000ish, this ignores the rate of taxation and, indeed, the interaction of taxation with the amount of stuff you get "for free" like the NHS and things).
So, for example, even if X_£=X_$, things are still going to be generally more expensive in the UK because our equivalent to sales tax is generally bigger.
And, in any case, the valid comparison is to price as a fraction of wages, not price absolute.

[bladespark.livejournal.com]

No.

She is upset because she feels that she is paying MORE than I am for NOT IMPORTED THINGS. That she is getting ripped off because here in the USA I pay $1 to go down to a local store and buy an item, and over there in the UK she is paying £1 for a similar item which she also buys at a local store. And that because her £1 is worth $2, she is paying more than I am, and this is not fair to her.

She's an idiot and is driving me crazy.

[harliquinnraver.livejournal.com]

nope youve got it right. shes only paying 3 pounds for oh....i dunno..a doll. whereas, it would cost us 6 dollars. its almost impossible for me to buy anything from overseas due to this. :/

[harliquinnraver.livejournal.com]

oh jesus. i just found the gal youre talking to.

[beetlecat.livejournal.com]

Whenever the Canadian dollar rises (as it is right now) the newscasters bemoan the poor exporters because now it is harder and more expensive to sell cross-border and so they lose money.
Whenever it falls, the newscasters bemoan the poor importers because now the stuff they import costs more and so they lose money.

[sparkindarkness.livejournal.com]

It depends. Because locally made produce won't change. Anything made in country A that sold for one bork will still sell for one bork - because the whole currency changes.

Just as anything made in Britain is not especially mroe expensive just because the pound is strong. The whole currency changes, which means, compared to the dollar, prices get higher BUT compared to the dollar, wages do as well.

Now if it comes to IMPORTS then we're talking different. Imports from abroad will be cheap in country A, whereas country B will find imports cripplingly expensive. The flip side is Britain's exports look less than shiny because of the high exchange rate

[doran-eirok.livejournal.com]

My impression of things is the same way you're seeing it... exchange rate just affects relative differences between countries, so regardless of what it is between say the US and the UK we're all still paying whatever our own national economy is charging for stuff. When the rate gets lopsided like it is now, buying things from the UK or traveling there gets painful for us from the US, while the Brits get to basically get stuff from here for half price. Nice for them but it makes my wallet cry!

most of this is guesswork so someone go on and fault me

[raimei.livejournal.com]

The pound being up is only ever really good for the UK. The difference is mostly that the pound has _always_ been up, for a very long time. £1 got you $2.50 in 1980, and $2 or more for a period of at least 18 months around it. Britain isn't suddenly getting ripped off, it's been getting ripped off in general on some things, has for a while, and that's because:
* higher import tax if goods are not from within the EU
* lol fuel and alcohol tax
* taking advantage of $1 = £1 as a sales mark intercountry covers the above plus a nice tidy profit, even at $1.50 to the pound, and it's only with nearing the $2 = £1 that this began to be offset in the public mindset

The only thing that sucks about the success of the currency is how much cheaper everywhere else is to import from. Why does it suck? If one imports anything over about £160ish from outside the EU, import law scales up the price to 'similar units offered in the UK', and *then* lops on VAT anyway, and I don't even think it adjusts for shipping.

(Meanwhile, it means goods imported from the EU are fantastically cheap. And food manages to stay the same price pretty much anywhere, save for our rather high VAT. ;) )

[malakim2099.livejournal.com]

See, if my International Econ professor used borks and chings, I'd have remembered it better at this point. But I digress... you do have it pretty much right, there. If her bork suddenly is worth two chings, then she has an advantage in buying imported goods. Now, if the government of Borkovia suddenly decided to put on tariffs for everything from Chingrala, then there might be a complaint.

As far as cost of living goes... check out New York or California sometime. *grins*