Hacker News Reader

Comment by ohhhwell | Hacker News Reader

Unrelated tangent: It always baffle me how people view exchange rate as something that can "eat away your salary" and when you see people making statements like "it's so expensive in the UK, a pound is like 130% of a dollar". Makes me wonder if people who are only used to currencies that are roughly on the same scale view currencies in a different way than people who are used to 10x / 100x differences in currencies.

Don't mean to pick at your comment, but it's something I've seen around lately and makes me wonder.

View on HN

I think you misunderstand the comment about exchange rate. In Canada, the price difference of goods with the U.S. is beyond just the exchange rate. Thus, you can convert a salary between USD and CAD, but that doesn't account for higher prices of goods in Canada (beyond exchange rate differences). This is why many Canadians shop in the U.S. (if feasible), or travel to the U.S. to make big purchases (such as cars). When CAD gets stronger, w.r.t. USD, prices in Canada don't respond proportionately. Likewise, when CAD gets weaker, prices in Canada tend to respond quite rapidly. It seems asymmetric, and is another factor when comparing US/Canada cost of living. I'd love for an economist to explain this. It's never really made sense to me, but anecdotally, it's well known phenomenon in Canada.

IANAE but it sounds like when imports get cheaper, importers pocket as much of the the difference for as long as they can get away with it. When imports get more expensive, they pass on as much as they can to consumers as quickly as they can get away with it. Not terribly surprising for profit-driven behavior.

That sounds about right. Also, there's some cost to readjusting prices, so that probably introduces some price change hysteresis.

The sales tax in canada is brutal

Not really. The highest sales tax is 15% (NB, NL, NS, PEI).

I'll grant that's higher than in some US states, but come over to Europe where VAT is usually 19-25%. Although at least in Europe prices are advertised including VAT, so no mental math is required to calculate how much it will end up costing.

That's higher than in all US states. The highest US state sales tax is 7.25%. The highest municipal+state sales tax is 12.8%.

That's a huge outlier, though. The average is 5%, and many states exempt huge swaths of goods (such as groceries) and some have no sales tax at all.

> and many states exempt huge swaths of goods (such as groceries) and some have no sales tax at all.

Groceries are exempt from GST/PST or HST in Canada as well.

That certainly changes the cost-of-living, but it's not really relevant to the point about exchange rates and price differences, since most people compare prices pre-sales tax. Sticker prices, in the US and Canada (and Europe?), don't typically include sales tax.

To supplement the person you are replying to post, in Canada, the same goods and services are more expensive AND your money is worth 30% less than the US Dollar. So if you were able to move to the US and get a job that paid THE EXACT SAME SALARY, you would STILL be better off because good and services you consume would be cheaper AND you pay less overall tax.

As someone from India, I'm surprised people do this.

With 1 USD = 65 INR, we're used to converting with cost of living and Purchasing power in mind.

The confusion might come from the fact that the UK can be quite expensive. So prices look nominally the same in GBP as in USD---it's just that the US is often a lot cheaper.

Thus for the casual observer it look like the difference is in the exchange rate---not in the prices.

I always use the example of Japan. $1 = 109 Yen, so do people think Japan costs 1/100th of what the US does?

Japan is a good example because people have an idea that it is a rich, expensive country.

I don’t think anyone but the daftest people think that Japan costs 1/100th of what the US does.

Living in Japan with a Japanese lifestyle is not that expensive. I have many Japanese friends living in Tokyo for under $1.5-2k a month. They’re not living in luxury, but they quite enjoy their lives, travel every once in a while, etc. You won’t be doing that in SF (and Tokyo is a much more pleasant city than SF in more ways than one).

On the other hand, living an american lifestyle in Japan (big car, big house, eating lots of red meat, buying imported American goods, etc) is going to cost you a lot of money though.

The point that grandparent and ohhhwell are making is, nobody says "I came to Japan and now my salary is 100x my previous salary in nominal terms (ie, before you factor in the exchange rate that eats 99% of your salary)". But for some reason people do say things like that when the currencies involved are USD/CAD/GBP/EUR. I guess it's just not as obviously "wrong".

Just normalize everything to a single currency; we can still talk about differences in cost of living. Sure, exchange rate fluctuations can be related to the cost of living, but it's not everything.

Reply on news.ycombinator.com