GBP vs Dollar
 

The dollar buys only .53 GBP. You need almost 2 dollars to get 1 GBP. Why is this exchange rate so miserable? Any hope of it getting better?

I doubt it. Our economy sucks. The exchange rate has always been bad though. When we went, it took $1.75 to get to a British Pound and that was in 1999 when our economy was booming!

The thing that really hurt was that the inflation rate is the exact same as the exchange rate. For example, a meal at a TGI Friday's type restaurant might cost you $22. In London it's still 22, just in GBP. YIKES! It would help if the meal was more like 15 GBP, then the difference in the exchange rate wouldn't be so hurtful. It's like that with EVERYTHING too.

~gnr~

Apart from fundamental economical factors (current account deficit etc), one of the main reasons for a strong pound vs US$ is interest-rate differential: As The Fed raised to 1.75%, Bank of England upped it to 4.75%. The gap isn't set to narrow in near term, so an imminent decline in pound looks unlikely.

Quite complaining! It takes about 2.5 Canadian $ to get one £.....

Keep things in perspective - the first time I went to the UK the pound was about $2.40. And for many years prior to WWII the pound was worth about $5.

Since travel is not an economic driver in this country - there's really very little we can do about it.

The USD vs GBP is not great right now, but no need to distort things. It's more like .55 which is $1.83, not almost $2. Anyway, if it's any consolation, there hve been lots of other years when it was similar, and it was worse around 1980.

The fact that a currency doesn't trade one-to-one versus another is not meaningful in itself. I know a lot of people don't understand that, but that is not the measure of a good vs. bad exchange rate.

[For example, a meal at a TGI Friday's type restaurant might cost you $22. In London it's still 22, just in GB]

[It's like that with EVERYTHING too.]


That just isn't true. MAYBE at TGI Friday's (wouldn't know) but certainly not everywhere. I my experience, IN LONDON, things cost fewer pounds than the American counterpart would in dollars. And that is London, where things are more expensive than in the rest of the country.

I am not trying to start an argument- I just don't want people who have never been to Great Britian to get the wrong idea.

Pandaschu,
I beg to differ with you BIG time.
I just returned from 2 weeks in London and I don't remember ANYTHING that was less expensive than in America.
Train travel, food, clothing...this is the 1st trip in memory that we didn't purchase anything as "souvenirs" of our trip.

I am sorry for the misunderstanding, that is not what I meant. I meant that it often costs fewer pounds to purchase something than a similar product would in dollars. I agree that things are still more expensive in London, but just not as expensive as if something that is 5 dollars in U.S. cost 5 pounds in U.K.

For instance:
A pint of beer in U.K. costs between 2 and 3 pounds at the pub. In the U.S., a pint of beer at a pub averages around $4.

A chicken salad sandwich in the U.K. from a takeaway shop: between 2 and 3 pounds. In U.S., at least 4 dollars.

A 12 oz. Latte from Pret a Manger: 1 pound 40. In America- 2 or 3 dollars.

Finally, and most specifcally, The Big Blue bath ballisic from LUSH in U.K., 2 pounds 15 p. In America, it costs $3.95.

Of course there are tons of exceptions, I just felt like gnrbernstien was giving the wrong idea.

>The fact that a currency doesn't trade one-to-one versus another is not meaningful in itself. I know a lot of people don't understand that, but that is not the measure of a good vs. bad exchange rate.

Christina - I assume you were referring to my statement. It was just an observation and had nothing to do with the exchange rate other than it means that London is exactly whatever-the-exchange-rate-is-at-the-time more expensive than the US. Of course, it depends on where you are in the US, but a museum in NY would cost $15. In London the Natural Museum was 15 GBP. Therefore, it was exactly x% more expensive. That's all I was saying.

~gnr~

When I was in London in 2002..boy that long ago already, I need another "fix" badly...anyway the pound was 1.40 and I was lovin' it. It was 1.65 in '99 when I was there. Another reason for the weak dollar I heard..and I'm far from being an economist and understanding it all...but the weak dollar attracts foreign investment and of course foreign travelers. We have so much money going out of the country right now that they are hoping that some will come in from other countries. Makes SOME sense to me

If you use the Big Mac index from the Economist, which is a light-hearted way to look at real purchasing power, then a Big Mac in London is the equivalent of about $3.37. That's relative to the $2.90 it costs in the US. Using that index, your real "price" increase is about 16%.

Regardless of the exchange rate, London is an expensive city and always has been.

The exchange rate is irrelevant to me. In 9 trips to Europe the $ has been all over the place, yet I have had 9 great trips. Of course, it would be nicer if the rate was a little more in our favor, but I will never let it stop me from going to Europe. I have reduced my accomodations cost by 45% in London, so actually it is cheaper now than it was 2 years ago.

One thing that has changed in London since gnrbernstein was there in 1999 is that thanks to a change in the tax laws, most museums are now free.

The Natural History Museum in London (which gbr cited) isn't £15 anymore, admission is free. Whereas admission to the American Museum of Natural History in NYC is $12 per adult, with extra fees for special exhibits, planetarium, etc. Admission to the Met is also $12; not sure where the $15 in gnr's post came from.

For Aussies, we only get 40 english pence for one Australian Dollar. (Last time I visited Britain only got 33 pence, so things are looking up)
But the exchange rate doesn't stop me from visiting, you just get wiser, and look for cheaper accommodation, and other ways of making your money go further. We always book our rental car in Australia (much cheaper than in UK), also stay in B&B's in London, and not expensive Hotels, and when touring, we use the little UK "green" book from Nationwide B&B Service, and only stay in the B&B's where they advertise approx.40 pounds per couple per night.
The Heritage Pass helps in other way, in saving money on entry passes, and no doubt others on this Forum, would have their ways of saving a buck or two.
Even down to the point of visiting in September/October (just outside of the high season...B&B prices do in fact drop), renting a diesel driven motor car, etc.
So when you complain about US dollar conversion rate, spare a thought for the "little" Aussie bleeding dollar.

Taggie and tropo make the same mistake: it doesn't really matter how many units of *your* currency it takes to buy one unit of another currency. What matters if how expensive a certain country is as compared to what your living standard at home is.
The Japanese need 203 (yes, two hundred and three) units of their currency to buy one GBP, still for someone from Tokyo London is probably relatively cheap.

The REAL measure of value is:
How many hours of work does it take it buy it?
If it takes ten minutes of your time as a stock broker to buy a week in London, versus ten months of one's time as an Iraqi camel shepherd, and then the cost goes up 3%, suddenly the shepherd must work ten days longer. You, on the other hand, must somehow work another 18 seconds.
Life's a hoot, and then you die.

Sjoerd I understand what you are saying regarding the buying power of a currency. But I do not think that trop and I were making a mistake, since in our respective countries prices for goods are quite reasonable. London by comparison is very, very expensive, and the fact that we have to use more of our respective dollars to buy pounds sterling make it even more so.

a few thoughts...

gnrbernstein says:
YIKES! It would help if the meal was more like 15 GBP

helpful for whom? the wording of this statement implies that prices in the UK should be set according to what things "should" cost an american traveller.

Tropo is right...aussies are some of the best and most frequent travellers in the world..and their spending power abroad is among the weakest as compared to people from almost all other first world countries (and has been for a long time, probably always). So good for them for going anyway. Also, in general, the average aussie is much less prosperous, financially than the average american. And the average Aussie does travel internationally whereas the average american does not.

Remember that VAT (sales tax) is included in the price when you buy something (i know you probably all know this but i have a feeling that the prices that stick in your head are including tax in the UK as compared to not including tax in the US. Restaurant and hotel tax in the US can be very high.

No matter how you cut it, UK is an expensive place. Many visitors don't notice this but the UK does have a much lower material standard of living than the US so it's not like the average local is living it up while you are suffering.

Anonymous is correct in that just about all the world class museums in London are completely free. Museum entry is usually a big expense for tourists so this helps bring down the total cost. A couple can easily get $100 worth of museum entry for nothing.

You can also see very good theatre at the barbican and national very cheaply. We pay for this subsidy with our taxes. West End can also be much cheaper than broadway.

<b>Anon</b> - I was thinking of the Guggenhiem. Knowing that the museum is free is reason enough to go back. We went and stood in the lobby and discussed the architecture, then left. We couldn't afford the 15 GBP as students. Plus, we were spoiled since all the museums in Washington, DC are free.

<b>Tomboy</b> - Love that comparison.

<b>Ryan</b> - The cheapest place for fast food - Thailand. Even in the airports it's relatively inexpensive (at least compared to American airports)

~gnr~\:D/

Thomas, if you want to drive yourself crazy trying to anticipate future exchange rates, look here:
http://www.forexnews.com/

I agree with others above -- the relative expense of a particular trip has much more to do with the buying power of the local currency at the destination than it does with the exchange rate du jour.

Here is a current survey reflecting high cost-of-living cities. This type of index almost always trickles down to also include the casual traveler/visitor.

http://www.expatica.com/source/site_...story_id=10607

I think that judging by buying power of the currency can be deceiving - you really need to judge by the buying power of tourist items - hotels, restaurants, mueseums etc - not the whole economy.

If you judge by the prices UK residents pay for basic consumer goods the picture would be way worse vs the US - their food, electronics and even household staples are astonishingly expensive - and last time I was there I saw a bargain sale of the year ad for a new Accord for 20,000 pounds - can you believe it - like $35,000 for a basic family sedan. Which brings us to the real question - is everything really expensive there - or shockingly cheap here?

Here's an (admitedly kind of odd)example of what an item costs where:
I like a certain brand of candle, from France. They're expensive as far as most candles go.
In the States, they run $40 - $45 US.
In London, I saw the candle on my last trip in the neighbourhood of &pound;30.
In Canada, I got the candle for $50 Cdn, but have seen them at $55 and $60 Cdn.
In Paris they were around 25 euros.

We find everything exensive in the UK but we still go because we love it-especially London. A Starbucks was 2GBP, in Canada it is just under $2-just under half. Oddly enough we find beer in a pub to be about the same. We like Selfridges. Last year I priced a shirt that I always buy in Canada for a suggested retail of $75 CAD. Exact same shirt-brand, thread count, the whole bit was 75GBP at Selfridges. This is our experience. Also find the so called duty free at Heathrow to be more expensive than full retail at home-particularily Harrods. But...this is the price and we are willing to pay. We just balance this off against what we save on trips to Greece or Turkey.

allanc I totally agree about London... I just think of pounds as dollars while I am in the UK and worry about the bills when I get home :). I'll be headed there next week, and after that to Greece. However, our hotels in Greece, particularly Santorini, are no great bargain either!

London businesses simply follow classical economical rules. They raise prices until demand lessens. Auctions are a limited example of this phenomenon. Much of the London population probably prefers that there should be fewer tourists! Being expensive also adds a cachet to its image. &quot;I've been to London!.&quot; &quot;I've been to Bangor!.&quot; Which statement will impress your friends? Is the exchange rate 'miserable' for an Englishman travelling to the US? Maybe the longer experience of English businesses allows them means to charge higher prices and extract more profit from tourist sales.

At the end of the day, for a traveler, the exchange rate really doesn't affect you very much.

Living in the UK is more expensive than living in the US. Cars are about 20%-30% more expensive. Gasoline/petrol is about 300% more expensive. I won't compare housing because that varies in both places by where you live. Restaurants, clothes and food shopping all are more expensive in the UK.

On top of this, my husband's salary is about 30% lower than in the US and mine is about 50% lower, in the same jobs.

We look at things in units and percentages, and we spend a much larger percentage of our salaries on living expenses in the UK than in the US.

On the plus side, we load up on cheap stuff when we're back in the States, made even cheaper with the strong pound, which pays for our flights.

a few points:

keep in mind that the &quot;big mac&quot; type ratings of cost of living (COL) are usually use NY as a base city, giving it a rating of 100 and ratings are relative to this. This means that the rating changes based on the currency changes RELATIVE TO USD. This measure is totally irrelevant to the majority of the people in the world, who do not earn USD. For example, if the exchange rate changed dramatically, and london became the cheapest city in the world according to this scale, it is still costs the same for the local person (and visitors to UK using EUR, etc).

Similar to the argument above, NYtraveler's view of the honda is a bit simplistic. First, the honda would cost about $35,000 for YOU. For the Brit, it costs &pound;20k. A few years ago that &pound;20 car would cost YOU $25 -28k. Still costs the Brit &pound;20k. Sounds like an obvious point but the flaw is that you are guaging the real cost of the car according to your own currency which is completely irrelevant.

Also, there are many more complications. First, a honda accord is not a &quot;typical family sedan&quot; in the UK. Others may disagree but unlike in the US, a family starting out with decent, professional jobs (e.g. teacher and entry level accountant) does not go out and buy a car like this, it's too expensive. Typically, a car like this is a company car earned as a benefit for those in professional jobs with significant experience. I could go on and on about this but the point is that you are looking at this from a US perspective.

is everything expensive in the UK for locals, yes. you don't see as much frivolous shopping as you do in the US.

gsteed, i don't even know how to respond to this as it is frankly rediculous and shows a great lack of understanding. Believe it or not prices in the UK are not set according to what can be extracted from USD using visitors (perhaps minor exceptions to this exist but to imply that this is the basis of the economy is foolish). The UK has an economy in its own right and to assume everything revolves around the dollar is arrogant (and of course all economies are related so there is influence in all directions). the average vendor in the UK makes much less profit than a similar one in the US. Although you see everything as expensive from your perspective don't assume that this means pockets are being lined. The thought that the high prices are engineered to add to the &quot;cachet&quot; are equally rediculous. Nor do i think people are impressed based on the COL for your travel destinations.

Finally, KS452, i don't totally agree, a &euro;100 pair of shoes in Munich would cost $85 a couple years ago (probably a bargain - better bought in Munich), today it costs $125 and you can probably now do better to buy them in the US. The website you quote supports the opposite of your point as it works as i describe in my first paragraph---

quote&gt;&gt;&gt;
European cities have shot up the table due to the weakness of the US dollar and the relative strength of European currencies like the euro: the continent has 20 out of the top 25 slots.

As others here, i have lived in UK and US each for several years and this is the basis for my view.

Sorry I was misunderstood. The question asked why the present exchange rate is low. Simple, the dollar is being devalued. It will continue to be devalued until major changes occur in US ecomomic and political policies and actions. English prices are high because England's marketing system is wasteful. The English rely on a many tiered distribution system, markups are added at each location.

I can't recall the last time the U.S. devalued the $$$. Wrong terminology.

Actually, a weak dollar makes our goods and services overseas more affordable, is good for our economy, and will increase tourism in the U.S. Europeans are flocking to the U.S. mainly because of the exchange rate.

I guess I'm just going to have to live with the fact that my trip to Italy will cost me just a little bit more. I'll adjust and survive and have a GREAT time!!! Bring on the brunellos and the super tuscans!!! ((a)) ((b))

GSteed:

Claptrap.

Give me a single <b> significant </b> example of multilayered distribution in the UK.

Britain's expensive because:
1. America runs its economy so as to create a devalued dollar
2. Britain, for arcane reasons, has high interest rates, which don't just inflate the &pound;, but drive all sorts of other costs up.
3. Land is expensive, and is part of every cost - rarely the case, for example with French hotels and restaurants.
4. In many cases, order runs are shorter in the UK than in the US
5. British businesses, partly because of high interest rates and partly because of their history of global trading, expect higher returns on capital than US businesses
6. Yes, high prices are a complicated way of saying that Brits, on average, aren't as well off as Americans, on average.

Britain appears expensive because:
1. Many of you are comparing central London with suburban Peoria
2. Many of you are pretending America's deceitful habit of hiding tax on retail sales doesn't exist, and forget that service in usually included in bills here. If you want to add 20% to the price, you're being unnecessarily generous
3. British hoteliers have an incomprehensible habit of being shifty about VAT when advertising to foreigners, and some restaurateurs are downright duplicitous about pretending service isn't on the bill when they present credit card slips
4. Many of you are looking at prices for brands, where we'd buy (generally superior) own labels, and are looking at them in central London convenience stores.

But I really struggle to think of a single industry where distribution layers are more complex here. In every example I'm familiar with, the opposite is the case.

flanner's correct.

i don't mean to pick on anyone, it's just kind of funny...per steed, high prices in london are caused by:

1. supply and demand (ok, hard to argue here but hardly worth mentioning).
2. effort to keep tourists away because locals don't want them.
3. london wishes to enhance its image &quot;cachet&quot; by keeping prices high and making it a prestige destination for tourists.
4. businesses have &quot;longer experience&quot;(presumably because Britain is older than the US??), and therefore are better at gouging tourists.

now this is all a misunderstanding and it's really because of inefficiencies in the multi-tiered distribution channels.