pacomartin
pacomartin
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October 12th, 2014 at 6:39:12 AM permalink
According to the IMF Switzerland has the most mismatched currency to purchasing power in the world. Theoretically if you exchange $1000 to Swiss francs, you will have the equivalent purchasing power of $655. In other words in June 2014 for $1000 you will get 900 Swiss francs, but with those 900 francs you would have the same purchasing power as $655 in the USA.

Guess what the other five most expensive countries in the world are from IMF data given the following clues.
* Three of the other five are in Europe
* None of these six countries uses the Euro. So you can exclude Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.

It really isn't that difficult.

$655 Switzerland

$664 Norway
$716 Denmark
$777 Sweden

$742 Australia
$789 New Zealand

Obviously the dollar amounts change constantly. For instance the Swiss Franc now trades at roughly 960 francs to $1000. But the basic relationship with the country remains about the same.
Wizard
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October 12th, 2014 at 1:01:36 PM permalink
I'm surprised to see Australia on the list. I've been there and wouldn't call it cheap, but thought it was not that bad. Germany and France strike me as more, based on just my observations as a tourist.

Iceland, I thought, was terribly expensive.
"For with much wisdom comes much sorrow." -- Ecclesiastes 1:18 (NIV)
pacomartin
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October 12th, 2014 at 2:20:00 PM permalink
It's that way now for most of Europe, but Switzerland and Nordic countries are particularly bad. When I visited Sweden, at one point I asked, "How do you people live?". Everything costs an arm and a leg.
Dicenor33
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October 12th, 2014 at 2:24:38 PM permalink
Norway has real wealth, others are semi socialist states with limited industries. Wion't go there, too expensive .
pacomartin
pacomartin
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October 12th, 2014 at 2:38:35 PM permalink
Quote: Wizard

I'm surprised to see Australia on the list. I've been there and wouldn't call it cheap, but thought it was not that bad. Germany and France strike me as more, based on just my observations as a tourist.

Iceland, I thought, was terribly expensive.



Well the IMF is not thinking of tourism. They are thinking of general cost of living. Someone told me what they pay for electricity in Sydney, and it was higher than Hawaii, and much higher than Manhattan.


The country with the closest ratio between actual and PPP exchange rate in the IMF database was Japan. The PPP rate was 102.438 JPY/USD while the current exchange rate was 102.048 JPY/USD. That seems shocking to me since in my experience food is very expensive in Japan. I know that hotel rooms have come down considerably.

The State Department reimbursement rate for
Tokyo City is $200 for hotel room per day and $196 per day for food and incidentals
Mexico City is $244 for hotel room per day and $118 per day for food and incidentals
Madrid is $260 for hotel room per day and $145 per day for food and incidentals

On average hotel room reimbursement is 80% more than food reimbursement. The economy of Tokyo after the great crash seems to have gone out of whack compared to other countries.

Iceland had a massive economic crash when they had to close all the banks. Iceland was closer to a cash free society than Switzerland, but when all the banks went bankrupt, the use of cash doubled or tripled.
pacomartin
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October 12th, 2014 at 3:47:15 PM permalink
Let's try a different trivia question. These are the Euro-zone countries
At the time it cost $135 to get 100.
Your 100 gets you $200 in purchasing power in Latvia, so you come ahead in the exchange.
Your 100 gets you $107 in purchasing power in Luxembourg, so you lose in the exchange.

The ranking of the other countries is shown.

Latvia $200
Estonia
Malta
Slovenia
Portugal
Cyprus
Bulgaria
Greece
Spain
Italy
Germany
Ireland
Netherlands
France
Austria
Belgium
Finland
Luxembourg $107



The trivia question is which country is closest in purchasing power to the real exchange rate of $135 = 100 ?

We all read about the disastrous economic conditions in the PIGS (Portugal, Italy, Greece and Spain. So is the fair exchange rate up near Luxembourg or down near Latvia?



Latvia $200
Estonia $182
Malta $177
Slovenia $164
Portugal $164
Cyprus $158
Bulgaria $157
Greece $156
Spain $148
True Exchange $135
Italy $131
Germany $128
Ireland $124
Netherlands $123
France $121
Austria $120
Belgium $120
Finland $109
Luxembourg $107


The true exchange rate is leaning towards the countries in trouble.



In economics, an optimum currency area (OCA) is a geographical region in which it would maximize economic efficiency to have the entire region share a single currency. Many people argue that the Eurozone is not a good OCA, because the purchasing parity varies so much across the continent.
FleaStiff
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October 12th, 2014 at 5:23:09 PM permalink
All these exchange rate comparisons are distorted.

Consider Sydney electricity... yes its high. Fire season down there destroys the power lines year after year so its not entirely a political distortion. In Australia you may get "glassed" in a Kings Cross pub but in general you will be safe as a tourist and need only worry about driving speed and sobriety. Crime can be bad there if you get near what used to be called Aboriginals or Maoris. New Zealand is pretty much the same thing. prosperity with some problems about Maori and land claims etc. Water can be a problem there though. Each country has enhanced penalties for crimes in rural areas or upon the elderly but in general quality of life is excellent. Good health, outdoor lifestyle, strong zoning.

So you get what you pay for.

Iceland used to import everything and pay dearly for it but the citizens forced the banks to give up their entire capital and close rather than seize depositor's funds and the citizens took over the country. During the banking crisis a cop tussled with a young woman protester and after the government fell she approached a bank and was again confronted by the same cop, this time she told him: Stand aside, I am the new President. Iceland was and to some degree still is a blend of capitalism and clans. The trouble is that the "Russian" mafia made tremendous inroads, imported alot of prostitutes and eroded the quality of daily life to some degree, but it is still a highly educated country albetit now concentrating on revitalizing its fishing industry and its housing crisis wherein mortgage rates doubled over night.

Norway? Yeah, high prices. People tend to keep to themselves, they have oil and a guaranteed income. People study what they want to study, since there is no real salary incentive to work one job over another. Health is good since children do not go to school at young ages and mix germs all over the place. A woman gets her salary for seven years and has no particular incentive to return to work early. Boats, vacation homes, etc. abound even with high taxation and high prices. People tend to socialize with small groups of friends and are always polite to tourists. So is the exchange rate so surprising? Yes, they had one mass shooting, very poorly handled, some great courage, many idiotic responses, but in general its a pleasant peacefully country despite all their recent immigration.

France tends to have high prices too but those are always the "official" prices because tourists do not how to shop. In France, everyone "makes arrangements" in the supply chain. A trucker carries certain wines to a wine store, but also brings a few wines in bulk such as 50 litres. The wine store re-bottels perhaps 25 liters for a restaurant and 25 liters for its favored customers. You get the same product but at a very steep discount but have to pay an accommodation fee and not miss next month's "arrangement", since that would leave the merchant with some excess inventory. Its easy to tap into the real price economy but takes a bit of time. There is even a bar in Paris that caters to black American ex-patriates and a black American tourist can score some real bargains there by trading in "accommodations".

Holland now requires lessons in language and social values but is still a great place to live particularly on houseboats or in very narrow homes along the waterfront. "Coffee shops" (pot shops) are closing and the term is being eradicated though pot is still freely available.

The British no longer go to Spain and Portugal for condos and vacations but its mainly because of crime and police ignored extortion now and changed medical coverage rules. Gypsy gangs control certain areas and a Spaniard might get help but a colony of expatriate English are on their own as far as "road taxes" and street crime.

Until you know what a country will be like for your particular living or traveling style, its hard to compare currency rates.
ThatDonGuy
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October 12th, 2014 at 5:47:46 PM permalink
Quote: Wizard

I'm surprised to see Australia on the list. I've been there and wouldn't call it cheap, but thought it was not that bad.


It depends on when you went. When I was there in 1992 and 2002, conversions in terms of worth were almost always in the dollar's favor; A$1 bought slightly more there than what US$1 bought in the USA, and the exchange rate was something like A$4 = US$3.

In 2011, it was almost the other way around; the currencies were pretty much on par with each other, but Australian prices were higher. I think it had something to do with China buying Australian metals.
rdw4potus
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October 12th, 2014 at 6:00:48 PM permalink
Quote: ThatDonGuy


I think it had something to do with China buying Australian metals.



and natural gas. Which is also a big part of why Australian power prices are so high.
"So as the clock ticked and the day passed, opportunity met preparation, and luck happened." - Maurice Clarett
pacomartin
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October 13th, 2014 at 9:14:37 PM permalink
Quote: ThatDonGuy

In 2011, it was almost the other way around; the currencies were pretty much on par with each other, but Australian prices were higher. I think it had something to do with China buying Australian metals.



It seems like some of the major currencies of the old British Empire have been reversed. I believe the US dollar was one of the strongest of the group, but now it seems to be the weakest. If you trade a $1000 US currency into any one of them you lose purchasing power. You still lost power in the UK a decade ago.

This table is PURCHASING POWER, not exchange rates.
Currency 2014 2004
Australia $742 $999
New Zealand $789 $1039
United Kingdom $855 $811
Canada $880 $1097
United States $1000 $1000
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