A few years ago I compared the price of the same Dell computer and found that a Canadian consumer would need to pay 20-30% more than someone in the UK or the USA.
Goodness, how things have changed. A similar comparison today of a Dell Vostro 220 Mini Tower with the same components delivered within the country tells us that this item in Canada costs 10% more than in the UK and 16% less than in the USA! As noted in the original post, the identical computer should cost the same effective amount in different countries according to the theory of purchasing power parity. The divergence since 2007 has narrowed since 2007 but it is nowhere near purchasing power parity. From being a lot more expensive than in the USA, the Canadian-bought computer is now significantly cheaper. Here are the costs and exchange rates (using mid-market quotes from Google Finance) for this no-monitor system.
- Canada: $598
- UK: £349 at CAD to GBP 1.5475 = approx. CAD $540
- USA: $685 at CAD to USD 1.0357 = approx. CAD $709
On a shorter time scale of the past year, since the abatement of the flight-to-safety panic of the 2008 crisis, the Canadian dollar has been on a tear against virtually all world currencies, as this chart from RatesFX shows. The blue areas show CAD appreciation and the size of the boxes for each currency on the chart indicate the importance of the currency. Note how the chart is mostly blue. In Olympic terms, the CAD is currently the Gold medal currency ... well maybe silver, since the South Korean won chart is 100% blue (yes, it is tough to own the currency podium ... or does the USD count for more than the won like hockey or curling count for more than short track speed skating? [I've often thought they should count one medal for each player on a team where it is impossible to win more than one medal - like hockey and curling - to compensate for the sports where an athlete can win a half dozen medals]).
That's good for Canadians wanting to travel on the cheap, or Canadian expats who bring Canadian funds into the USA, Mexico, Europe etc to live on. It isn't quite so good from an investment point of view since foreign stock returns have been reduced by the CAD appreciation. Still, as this Google chart showing CAD vs USD and EUR, as well as returns from foreign stock ETFs for the USA (Vanguard's VTI) and the rest of the world excl-USA (Vanguard's VEU) demonstrates, the stock market rebound has far outstripped the CAD currency jump, so a Canadian is still well ahead of the game on a net total basis.
Stumble It!
No comments:
Post a Comment