[Foundation-l] Relocation announcement

[Gwern Branwen]

On 2007.09.22 20:57:31 +0100, Thomas Dalton <thomas.dalton at gmail.com> scribbled 25 lines:
> > > I've just looked up the numbers. So far this year, 26% of donations
> > > have been in something other than USD. In 2006, Salaries and Wages and
> > > Operation, which are the only two things that would change currency
> > > (and not all of them, at that), constituted 20% of total expenditure.
> > > This is not a particularly accurate way of working out how a change of
> > > currency would affect things, but I think it's close enough - the
> > > change in currency would not be a serious issue.
> > Exchange rates alone have their effect over a much longer period of
> > time.  The Euro and US$ were last at par in 2002; now the Euro buys
> > US$1.36.  At the peak in June 2001 the Euro bought US$0.85.  So what
> > would represent 26% of revenues now would have represented 20.3% when
> > the U.S. dollar was at its peak.  That 6% difference may not seem like
> > much, but that's because other country fundraising is still relatively
> > small.  This is a simplified calculation because I have only considered
> > Euros, but similar things would happen with other currencies.
>
> You can't just look at the exchange rate, you have to look at how the
> exchange compares with purchasing power. If the value of a dollar
> drops by 10%, but the price of everything denominated in dollars
> increases by 10%, then it makes absolutely no difference to anyone
> that isn't a currency speculator. Exchange rates and purchasing power
> move separately (the former usually much faster than the latter), but
> they do tend to converge over time.

I don't think that's true. There are a lot of reasons inflation is considered bad even if the economy adjusted ideally (that is, all sectors' prices increased the appropriate amount). For starters, there's the cost just of increasing prices, and there's any inefficiences suffered while prices are increased.

More importantly, it's deeply unfair to holders of capital and especially fixed-return assets and everyone on fixed-incomes (like bonds or Social Security, or I think annuities are generally fixed).

--
gwern
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