The Forty Something To One Exchange Rate Value Myth

[tropicalwaste]

One movie worth watching is Caregiver bit of a womans flick but it shows how life "really is" in the UK for Filipinos. We still get people arriving with a belief the streets are paved of gold which in some cases they are pretty much on the money. E.g. Somalians I used to deal with in Central Birmingham generally dont work, poor education and no interest of changing theyre lifestyle why? Because in the UK they get everything free to a standard they would have to be rich in theyre own country for. Same as today I am out viewing brand new properties which are built within the last few months very ultra modern, fitted kitchens 3 bathrooms 4 bedroom. Etc. and they are for social housing = someone who has bred plenty of kids and unlikely to work legally and unlikely to ever work. Why? Because the system allows them to abuse it while the workers pay for everything. What happens in the Philippines I find is the fact I can choose to have things. I dont pay over $3000 just to have my waste collected and Police (that never turn up) per year. I dont have to have a TV license at around $250. I get service when I ask for it, my fruit is fresh, etc etc. I think when you compare the U.S. your right because ive been there aswell and its cheap especially when there are competing businesses and all you can eat buffets. But its all on lifestyle.This trip back to the UK ive bought :-Scuba gearBadminton rackets and netTennis uniforms and racketsBecause its all cheap to do in the Philippines with no fancy gym membership. I think there is good and bad with all countries and its all got to be compared on lifestyle and ability to maintain that. Personally my sitting round the house bored beer budget more than enough covers my sports activities instead. Ive also got a personel gym being built above the internet cafe aswell btw. All these things I couldnt do in the UK without hassles. You want a gym membership they want your visa for continous billing. Everything is fast becoming an extra in the UK.

[Tom in Texas]

Many Filipinos seem to think that we get 40 or more pesos for our US dollar and therefore we get 40 times what they do and I just wanted to point out that is not true. We pay the same here or there for many items and often have to pay more for the same items while living in the Philippines.***The main point that I wanted to bring to the attention of many of the Filipinos who visit some of the forums, is that Americans or people from other countries like yourself, do not get 48 times (today's exchange rate) as much as they get for their peso just because at this time we get 48 to one for our dollar.It really upsets me when my wife's family continually tells us that we have to be very rich because we get that 40 or more to one for our dollars

Lee, I generally agree with you on this topic.I think what much of your post is aimed at is "parity" rather than "exchange rate.""Parity" refers to the "exchange rate" at which two currencies can buy the same basket of goods. Assume the exchange rate is US $1 = P50; if $1 will buy an apple, and P50 will buy an apple, then "parity" exists as to an apple. However, if $1 buys an apple, and P25 buys an apple, then at a 50:1 exchange rate, you would want to come to the RP, convert your dollars to pesos and buy twice as many apples. With respect to apples, the peso would be undervalued at 50:1, as parity would exist at 25:1. Economists try to get a "basket of goods and services" together and price them in order to determine parity between two currencies. I am clueless on this issue, but have seen reports from alleged experts suggesting that 26:1 would be parity for the peso vs dollar. If this is true, then at any exchange rate over 26:1 we would still get a pretty good benefit in converting US dollars and spending RP pesos. Of course, on any specific item or service, we might or might not come out ahead. Getting a 1.5 to 1 benefit on the "basket" is nice, but as you point out... it certainly is nowhere near getting a 40+ to 1 benefit. I also agree with your "standard of living" opinion. I know that I will be able to live much cheaper in the RP than I do in the US. However, much of that will be due to reduced lifestyle. Much of that reduced lifestyle will simply be that in a 3rd world country there is much less "keeping up with the Jones" to worry about. Most Americans can cut their standard of living by two thirds, and in the RP be living the lifestyle of the top 1%. Wealth is a relative concept. In the land of the blind, the one-eyed man is king. On your other point, I think Filipinos are correct to assume that most Westerners are rich. Again, by comparison, we are. Even a $1,000/mo pension is many times what an average middle class Filipino family lives on... so, by a loose definition of "rich," $1,000/mo income probably qualifies if you live in the RP.Notice -- I reserve the right to change my opinions without warning if I decide the other side of the argument is more fun. Tom in Big D

[Mr Lee]

Many Filipinos seem to think that we get 40 or more pesos for our US dollar and therefore we get 40 times what they do and I just wanted to point out that is not true. We pay the same here or there for many items and often have to pay more for the same items while living in the Philippines.***The main point that I wanted to bring to the attention of many of the Filipinos who visit some of the forums, is that Americans or people from other countries like yourself, do not get 48 times (today's exchange rate) as much as they get for their peso just because at this time we get 48 to one for our dollar.It really upsets me when my wife's family continually tells us that we have to be very rich because we get that 40 or more to one for our dollars

Lee, I generally agree with you on this topic.I think what much of your post is aimed at is "parity" rather than "exchange rate.""Parity" refers to the "exchange rate" at which two currencies can buy the same basket of goods. Assume the exchange rate is US $1 = P50; if $1 will buy an apple, and P50 will buy an apple, then "parity" exists as to an apple. However, if $1 buys an apple, and P25 buys an apple, then at a 50:1 exchange rate, you would want to come to the RP, convert your dollars to pesos and buy twice as many apples. With respect to apples, the peso would be undervalued at 50:1, as parity would exist at 25:1. Economists try to get a "basket of goods and services" together and price them in order to determine parity between two currencies. I am clueless on this issue, but have seen reports from alleged experts suggesting that 26:1 would be parity for the peso vs dollar. If this is true, then at any exchange rate over 26:1 we would still get a pretty good benefit in converting US dollars and spending RP pesos. Of course, on any specific item or service, we might or might not come out ahead. Getting a 1.5 to 1 benefit on the "basket" is nice, but as you point out... it certainly is nowhere near getting a 40+ to 1 benefit. I also agree with your "standard of living" opinion. I know that I will be able to live much cheaper in the RP than I do in the US. However, much of that will be due to reduced lifestyle. Much of that reduced lifestyle will simply be that in a 3rd world country there is much less "keeping up with the Jones" to worry about. Most Americans can cut their standard of living by two thirds, and in the RP be living the lifestyle of the top 1%. Wealth is a relative concept. In the land of the blind, the one-eyed man is king. On your other point, I think Filipinos are correct to assume that most Westerners are rich. Again, by comparison, we are. Even a $1,000/mo pension is many times what an average middle class Filipino family lives on... so, by a loose definition of "rich," $1,000/mo income probably qualifies if you live in the RP.Notice -- I reserve the right to change my opinions without warning if I decide the other side of the argument is more fun. Tom in Big D

Tom my friend, I cannot argue with you on most things but I think you are in for a rude awakening once you move to Cebu. Some things are in fact less expensive and some things such as electric are more expensive, so rents and labor items will be much less expensive if you get your wife to do the bargaining but once they see you white face then all bets are off. I feel that people can in fact have a fairly large house for a reasonable price but not as cheap as homes are now selling for in the US. I also believe that people can have servants but that can often end up a nightmare if you end up with the wrong ones, and then there is owning a car, yes less expensive for insurance but it will be much better to take taxis or to have your wife drive and you hide in the back seat because often when a round eye gets into an accident, then hold onto your bank account but of course that is not all the time but most of the times I have heard about. So the more a person stands out, the more things will cost them and the saving might be on lower property taxes but for that you get almost no services. Try calling a cop if someone is trying to break into your home, or try calling an ambulance if you or someone needs one and then comes the fire services which arrive only after the fire is well on its way and then they often cannot put out the fire. Life in the Philippines can be wonderful if you go into it with your eyes wide open and learn how to fend for yourself, but cheap it is not and it is getting more and more expensive every year we come back, and not to mention the daily power outages. So the parity between the cost of gas here and the cost of gas in the states is exactly that when converted, no difference or even more expensive in the Philippines and many things seem to be just that but what is more important is that our relative stop thinking that just because we have dollars that we get 40 times as much as they do with their pesos. Those of you who have never lived in the Philippines will see that it is not that much less expensive to live if you try to keep up the same lifestyle as you would back home.And last Tom, while $1000 a month would make a person rich compared to Filipino wages, we can never live our lifestyle on that amount and we would have to cut our lifestyle considerably, so I am all about apples and apples and not apples and oranges.

[TheMason]

Lee, I generally agree with you on this topic.I think what much of your post is aimed at is "parity" rather than "exchange rate.""Parity" refers to the "exchange rate" at which two currencies can buy the same basket of goods. Assume the exchange rate is US $1 = P50; if $1 will buy an apple, and P50 will buy an apple, then "parity" exists as to an apple. However, if $1 buys an apple, and P25 buys an apple, then at a 50:1 exchange rate, you would want to come to the RP, convert your dollars to pesos and buy twice as many apples. With respect to apples, the peso would be undervalued at 50:1, as parity would exist at 25:1. Economists try to get a "basket of goods and services" together and price them in order to determine parity between two currencies. I am clueless on this issue, but have seen reports from alleged experts suggesting that 26:1 would be parity for the peso vs dollar. If this is true, then at any exchange rate over 26:1 we would still get a pretty good benefit in converting US dollars and spending RP pesos. Of course, on any specific item or service, we might or might not come out ahead.

The 'back of the envelope' parity example that is most commonly used is the Big Mac Index. Compare the cost of a Big Mac value meal at McDonald's in various countries to get a feel for what your money will buy. In Manila, a Big Mac combo meal is selling for 125 pesos, or $2.71 (46:1 exc. rate).I think you're estimate of 26:1 exchange rate giving parity is dead on.

I also agree with your "standard of living" opinion. I know that I will be able to live much cheaper in the RP than I do in the US. However, much of that will be due to reduced lifestyle. Much of that reduced lifestyle will simply be that in a 3rd world country there is much less "keeping up with the Jones" to worry about. Most Americans can cut their standard of living by two thirds, and in the RP be living the lifestyle of the top 1%. Wealth is a relative concept. In the land of the blind, the one-eyed man is king.

I always knew that my lifestyle was a bit wasteful in the US, but I never realized just how wasteful until I moved to the Philippines. It shocked me what I was able to give up and not miss at all when I moved to the Philippines. My lifestyle was downsized, but I hardly noticed at all. My wife and I are moving back to the US later this year. It will be interesting to see if my scaled back lifestyle survives once I'm back in the US.

[Mr Lee]

I always knew that my lifestyle was a bit wasteful in the US, but I never realized just how wasteful until I moved to the Philippines. It shocked me what I was able to give up and not miss at all when I moved to the Philippines. My lifestyle was downsized, but I hardly noticed at all. My wife and I are moving back to the US later this year. It will be interesting to see if my scaled back lifestyle survives once I'm back in the US.

Just do us a favor and check back with us once you settled in and let us know how things progress. I suspect you are going to be surprised and find it hard to live on a low Philippine type budget, but time will tell.As for me, I am spoiled and I want to live each day to the fullest because one never knows when today might be our last, so I am going to enjoy it while I can and help my wife to enjoy our life too.

[No name]

The forty something to one exchange rate value myth that is being perpetuated by many Filipinos. :thumbsup: Please stop perpetuating that myth. :hystery: Sorry, I needed to get that off my chest :Mad:123 and I did say sorry!

haha dude if you get upset over that you have it too easy. :hystery: Passes Mr Lee some xanax.....Mr Lee, the cost of food is a tiny fraction of what you pay in the USA. Well, if you get out Ayala Mall that is. :) I don't spend much time in places like that. According to Jessie, I probably should based on what I hear of the hotties prowling it at night. LOL I once feed 10 people, all the fish we could eat for about 8.00USD. It was an awesome little roadside place. No, you wont find a bunch of expats there, you'll find Filipino and it was just awesome!!!! A fresh shipment came in while I was there. The old man got out of his boat and gave the cook the fish he caught from the sea behind the eatery. Things you get from the west tend to be a little more expensive here. Anything home grown will be cheaper. A Westerner can save a ton of money here, housing comes to mind. If you have money to invest, labor is very cheap. Hey you can even get an "IPOD" for 20 bucks in the Philippines. haha well it works just as well, perhaps for not as long. And I got myself some fine designer sunglasses on the side of a mountain for about a buck fifty. Too bad the decals came off and they became non designer glasses. :)Did you get my email with the link to find god? :)

[love2winalot]

Hiya: A Picture is worth a thousand words. It is easy to say, "My electric bill back home is this, and my rent was this, and my cable was this", and so on. Most people just think you are stretching the truth a little, or a lot. But, actually show then a Elctric Bill, a gas Bill, your cable bill, your rent/mortage receipts, insurance bills, and so on, and now they, "SEE", where all us rich people's money was going each month. Our In-Laws were in shock when I did this. Seeing is believing.

[softail]

Hiya: A Picture is worth a thousand words. It is easy to say, "My electric bill back home is this, and my rent was this, and my cable was this", and so on. Most people just think you are stretching the truth a little, or a lot. But, actually show then a Elctric Bill, a gas Bill, your cable bill, your rent/mortage receipts, insurance bills, and so on, and now they, "SEE", where all us rich people's money was going each month. Our In-Laws were in shock when I did this. Seeing is believing.

I did the same thing with my in-laws. Told them what the budget is in the states, they could hardly believe what they were hearing. Doug and Sally