Europe Is Expensive This Summer

This is my chart of the purchasing power parity (PPP) of the euro versus the dollar. The green line is the PPP value of the euro, as I calculate it. It assumes a base year when prices in the U.S. and Europe were roughly comparable, and then adjusts that value according to inflation differentials between the U.S. and Europe. Since the line has an upward sloping trend, we know that Europe has for a long time had less inflation that we have had in the U.S.

Whenever the actual value of the euro is above the green line, the euro is "strong" relative to the dollar and U.S. tourists will find that things in Europe generally cost more than they do in the U.S. By my calculation, things cost roughly 20% more on average in Europe right now. If you go to Europe on vacation this summer, tell me if I'm right or not.

Comments

[Steven Hansen:]

i am sure you already know that even when the euro is on par with the dollar, it is still expensive.

Jul 01 05:41 AM

[Pstoneki:]

Good thing the Euro isn't the only European currency. I have a 10 day vacation in the UK planned for July, another in Iceland planned for August. Both vacations are due to the decrease in the value of their currencies compared to the USD. We could not have afforded Iceland without their currency collapse. For instance, the hotel room we have in Reykjavik is $83/night. 2 years ago it was $475/night. Same hotel, same type of room, same time of year. Now is the time to go.

Jul 01 03:58 PM