Category: Economics

Why do exchange rates cause Americans to pay more abroad? Why are goods and services not priced at 10% less if the currency is worth more 10% more?

Very, VERY broadly, goods and prices around the world are not pegged to US currency. Neither are currencies around the world.

The cost of goods and services is relatively stable, and may not vary year to year, or even decade to decade. Exchange rates change as fast as the stock market computers can keep up with them.

The hotel room in Berlin that cost you €100 in 2014 will still cost about €100 – but today, the dollar is worth less against the Euro than in 2014. But if you’re working in dollars only, you’ll feel ripped off: $70 in 2014, $90 today.

NB: the dollar is ‘strong’ compared to the Euro. It’s just not as strong as it was – i.e., it’s ‘weaker’ than it used to be. But it’s still ‘strong’ in comparison.

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Why is a £65K salary in the UK seen as a high income, but the equivalent of it in the US ($83K) is not?

I think one factor is that, in the UK, we pay only 11–12% of our income towards healthcare, after which all treatment is free at the point of delivery (excluding a small prescription fee in some cases).

In the US, people pay significantly more for private health insurance – I’ve heard of people paying $1,000 or more per month in health premiums. Then, their health insurance covers only a proportion of some health costs up to a limit, and did not cover pre-existing conditions (diabetes, heart disease, etc.) until the ACA required it. In addition, health insurance companies try to wriggle out of paying for anything if they can, and drop coverage at any time. Some heathcare costs aren’t covered at all by some insurers – things like birth control, maternity costs, etc.

Americans need to have a float to pay for these out-of-pocket costs, and to cover the whims of their health insurers: the result is income inflation.

If you could go back in time and invest in something, what would it be?

I would go back to the 1750s or so, and seduce Robert Edwards. Then I would get him to leave his land to a young Irishman, instead of leasing it to a couple of Dutch brothers. After ensuring the will is properly notarised and recorded, I would return to my own time, in which my family owns Manhattan and is worth $650bn.

It’s relatively easy to dream up ways of making a fortune out of our knowledge of the past – I could invest in tulip bulbs at the right time and become ridiculously wealthy. Yeah, tulips.

However, if I really wanted to take a chance, I’d bankroll Nikola Tesla. He was strapped for cash so often, and who knows what he might have achieved if his benefactors had just given him a blank cheque.

Is 1700€ net a good or bad salary in Ireland for an engineering intern?

with assumption that I get free appartment (no rent). In my country (East Europe) this would be supreme salary, but in Ireland everything is expensive so I wouldn’t know.

It looks to be a very good salary, if you have no rent and no tax to pay.

If you DO have to pay rent, it’s not. Rents in Dublin are quite high, €500-€4,000 a month for one person (varying between single beds in shared houses to serviced studio apartments). I’ve never heard of employers providing free accommodation for interns, so, unless you have relatives with whom you can live, you need to consider paying rent.

You don’t say whether this salary is before or after tax. If you do have to pay tax (i.e., if you live for more than 183 days in Ireland in one tax year), the rate starts at 20%.

You may also have to consider the cost of health insurance. If I were a young person with no health problems only in Ireland for a short time, I would be inclined to give health insurance a miss. You should, however, check what coverage you might have under EU rules, and plan accordingly.

Is there a tax on tampons in the U.K.?

Yes. Tampons and other menstrual products were taxed as luxury items before the UK entered the EEC, at which point the came under EEC VAT rules. The only reason there is VAT on these products is because the UK chose to tax them in the first place. By comparison, there is no VAT on these items in the Irish Republic, because they did not have a tax levied on them when Ireland joined the EEC.

The VAT rate was lowered to 5%, the lowest permissible rate, in 2000, following a campaign. There are plans to remove this tax completely in 2018.

In the Chancellor’s Autumn Statement 2015, a Tampon Tax Fund was announced, which would re-distribute the taxes raised to women’s charities until such time as the EU’s rules allowed VAT zero-rating (equivalent to removing the tax altogether). This has been superseded by Brexit.

The current round of recipients of Tampon Tax Fund grants has attracted outrage when it was revealed that £250,000 – one of the largest amounts distributed – had been awarded to a controversial, unregulated anti-abortion charity, Life. There is currently a petition addressed to Rob Wilson, the Minister for Civil Society, who administers the fund, to reconsider the award to Life. There is also an emailing campaign.

Is there a country in the world where no one goes bedless for the whole year?

Would North Korea and Cuba have no bedless people? If they are communist then all resources are shared so property is shared too with no one owning property but the government assigning everyone a house. What about any capitalist nations though? Maybe the Nordic nations, Austria or Switzerland?

That’s a very simplistic way of viewing Communist and capitalist societies.

Yes, communism is supposed to operate on the principle of ‘from each according to his ability to each according to his need’. Goods and the means of production are held in common, for the common good. However, this does not mean that communist countries do not abuse the principle, or that communist countries do not suffer from scarcity of essential goods, or inadequate production. If, for some reason, there were not enough beds (or inadequate production of beds) in a communist country, some people would not have beds.

Capitalist countries operate on market principles: where there is a need, someone will supply, and the state’s role is to facilitate suppliers – permit them the freedom and resources (within limits) to supply goods to the market. In theory, if beds are needed, somebody, somewhere, will get off their butts and make beds. In reality, most capitalist regimes are not that capitalist: most have some form of social welfare safety net for the less fortunate, and will intervene in the market to provide incentives (tax breaks, etc.) to suppliers for a variety of products. Thus, there should be no shortages of anything in any but the most extreme Ayn Randian capitalist countries. The issue is not one of supply, but one of access to supply – which is where social welfare should kick in. The social welfare safety net in capitalist countries clearly fails some people, just as scarcity and inadequate production (and abuse of communist principles) can fail some people in communist countries.

Where is the cheapest place to live in Ireland?

Not Dublin.

As for the rest, well, cities are generally more expensive, and rural locations are cheaper – unless they’re a tourist destination, in which case the properties to let are more likely to be the expensive holiday rentals.

However, living in the country means more travelling, which, in most regions, due to lack of regular public transport, means you need a car. You need to travel further for your shopping, you need to purchase heating fuel in bulk (no mains gas, etc). All that kind of thing makes your rural idyll more expensive.

The cheapest way is (probably) to inherit a farm with a house, do without electricity, cut your own wood and turf, and have your own well for water. Grow potatoes and cabbage, and keep a pig and some chickens and maybe a cow for the milk. You’d still have to figure out how to pay for clothes (or the wool/fabric to make them), and how to pay for a vehicle – and there’s not too many jobs to choose from. There’s a famous Australian actress who retired in Ireland and lives in much this kind of style, although I’d imagine she has a few dollars tucked away from her acting career for luxuries like diesel and candles.