Euro woes...
 

I've been fortunate enough to travel in Europe 4 times the past 30 months. The Euro exchange was: .91, .89, .96, 1.16 going back to May 2001.

While the major travel costs (airfare, hotels) are not a currency issue for me (I use points/auctions), the other costs have really skyrocketed.

With the Euro now making new all-time highs, and looking to gain strength, what, if anything, are people doing in response? Cancelling? Shortening trips? Downscaling? Or just saying "You only live once"?

Coachboy

I simply blame Bush.

I take comfort in that and go anyway.

As long as the rest of the world perceives that we cannot keep our fiscal house in order (we spend more than we take in or we cannot sell more than we buy), the dollar will remain weak in comparison with other currencies, including the Euro. As an old and (very) retired banker, my experience tells me that the major thing that keeps the dollar from sliding farther and faster is the perception that we are a strong nation, with a functioning democratic internal economy, and a safe haven for investment compared with other markets. Lose any of those three legs, and we will descend farther. No matter what the Administration says.

I fear that the exchange rates will continue to get worse and that it may become generally harder to travel. So I am getting my trips to Europe in while I can.

Keith

Stop complaining,

I remember when the GBP was $1.95, the French Franc 4 to the dollar and the German Mark 2 to the dollar. This would be a Euro eguivalent of about $1.45.

Keith:

The forex markets really aren't in the business of passing judgement on the US economy. They're making much more pragmatic calculations.

Base interest rates in the US are half what they are in the Eurozone. The Fed is mandated to manage interest rates for stable, low-inflation growth (so they prefer to keep rates low). The ECB is mandated to keep inflation down (so they prefer to keep rates higher).

So the likelihood is that interest rates will stay higher in the Eurozone than in the US. Which inevitably pushes the Euro up against the dollar.

Until either administratiln changes its policy. But in the short term, the US prefers job creation (which means a low dollar) to encouraging trips to Europe.

I agree with ira; since the mid-1990s we've seen more favorable exchange rates and we've seen worse. In terms of overall value, travel in Europe still has a lot going for it by comparison to many alternatives.

Well all you "old timers" I remember when the Pound was worth more than $3.00 and you could get four DM's for the dollar, you could actually go to Europe "on $5 a day" and have a good time, etc., etc., etc. Bottom line: times change and we must change with them...people who can afford to go will go regardless of the exchange rate.
I do find the comment from CoachBoy that because he uses points and auctions that "major travel costs" are not an issue interesting...have you ever figured out how much each one of those FF points you use up actually cost to get in the first place..and as to auctions, well, I doubt you're getting a hotel room for $5.00 a night..so like it or not, you ARE paying more for what you're getting..whether you want to believe it or not.

I'm not doing anything. I don't agree with your whole perspective that what was once an abnormally high exchange rate in favor the the USD is the way it should always be. The euro may be at a high point because it hasn't been around that long. The exchange rate of USD versus euro is definitely not at the worst point it has ever been. It was worse from 1948-1968 (all 21 years), and 1973-1980 (all 8 years) and in 1995, also.

So, it's now about 30 pct more expensive that a few years ago, but it was a lot cheaper then that in prior years -- it all evens out. It doesn't affect my plans at all because I'm not a big spender, anyway--so if I spend $20 more a day on food now in Europe, it doesn't really matter that much. Most people waste money on all kinds of junk that I don't and it doesn't seem to bother them--like expensive cars, SUVs, TVs, you name it.

JonJon-

Costs for FF are 0. Buying EE and I bonds online. Or by flying. Or normal purchases.

As for hotel costs, I'm usually paying 50% under rack rates for virtually any hotel. So if a hotel is listed at 350e a night, I'm usually paying $170-200 max, including taxes.

Is it $5.00...no, but I never claimed it was.

Coachboy

Here, I have to agree with Ira. If you live long enough and are a travel veteran you will see plenty of highs and lows. No place is more expensive than Tokyo so I just compare everything to that and feel like I'm getting a deal. For those on a budget, the current rate of exchange can matter. I still say, you only live once and nobody knows what tomorrow will bring.

A couple of years ago Europe was a big bargain. But also a couple of years ago I could usually get a room at the Marriott Marquis in New York for $129 on special. Now it is rare to find a room there for double that price.

In other words, everything in the US seems a whole lot more expensive now too, so just because Europe is no longer the bargain in was, doesn't mean it still isn't a bargain. I spend a lot more when I travel in the US to California or to New York than I do in Europe, so I don't plan to stop going there.

As has been discussed countless times before...it all boils down to your priorities. Mine..is travel..in times such as these you need to remain flexible there are ALWAYS deals to be had...

An economist would call all the above rationalizations "elasticity of demand" -- that is, within unknown limits, buyers will continue to purchase goods or services, no matter the rise in cost in real terms. At some point, however, they will say "enough" and discontinue buying or renting or whatever. As for prices today in Europe, I only know that they have exceeded rational limits as far as I am concerned.

Koshka, I can only assume you've never taken an economics class. Had you, you'd understand how ridiculous your criticism sounds.

BTW, have you refinanced your mortgage at historically low rates? If so, you should be aware that it is the low US interest rates that have driven down the dollar versus the Euro, in large part.

I go along with Christina on this one.

Frankly, low U.S. interest rates have little do with the Euro but thanks, Ryan, for Economics 101-and-a-half-divided-by-three-quarters. The business of buying and selling currency is very complicated and involves the economies of many other nations. At least, this is what my financial analysts are saying to me. There's no easy answer to the "why" question. It is what it is so deal.

CoachBoy, perhaps you would care to enlighten us how you are able to buy EE and I bonds online with your CC and get FF miles. Hasn't the program been changed and ties to your bank account?