Link to Profile Semperoper, Dresden Sieg (auf dem Siegesäule), Berlin Brandenburg Tor, Berlin Skyline, Frankfurt am Main

Monday, November 27, 2006

I'll Be Home for Christmas

No definite plans, but the Dollar has dropped against the Euro, now roughly $1.31 per Euro and on its way to third-world status ... Ok, that may be a bit of an exageration, but it's already cheaper to buy most things in the US (Can you say WalMart Effect?) and getting cheaper still, especially with the looming 3% increase of the VAT to 19%.

By the way, for all you wage slaves in Germany, the average employer expects to raise wages only 2.5% this year ... the consultants are telling them that inflation is only 1.5 to 2.3%, but of course they are ignoring the increase of the VAT, which will in one stroke wipe out a lot of the good that was slowly coming from the tax cuts of the recent past. Hmmm.


Anonymous Maribeth said...

Hey if you come stateside, let me know. Would love to hve a blogger meet up.

12:23 AM, November 28, 2006  
Blogger Claire said...

I want to go!! I could do some major shopping.

The VAT increase is mostly bad for small business owners, like me. Unfortunately, my school is not registered with some dark German beaurcracy and therefore we have to charge VAT. Some of my customers are already grumbling about the extra .20 cents that they will have to pay.

9:46 AM, November 28, 2006  
Blogger Scott said...

Not to be picky, but it's a 3 percentage point increase in the VAT, from 16% to 19% -- a 19% increase! That's huge no matter how you measure it.

1:18 PM, November 28, 2006  
Anonymous Hamish said...

No wonder my flight home was so expensive, all the Europeans are headed to New Jersey to shop. The smart ones, at least.

And Scott: I hear that all the time.

7:38 PM, November 28, 2006  
Blogger Haddock said...

We're off to Florida in 4 weeks for a hoilday. We will of course be shopping heavily too! :)

10:52 PM, November 28, 2006  
Blogger EuroTrippen said...

Imagine how the british feel... the pound is practically 2 to 1 to the dollar. That makes it practically cost effective to hop an intercontinental flight & do your christmas shopping.

7:48 PM, November 30, 2006  
Blogger PapaScott said...

I heard on the radio (and it jives with my economics training) that consumers will probably only see 1 point of the 3 point VAT increase. The supply chain will swallow 1 point, and the second will be absorbed by retailers.

And most places have probably raised prices already. My wife's employer factored in the new VAT when raised prices in summer so they could keep prices stable now.

5:10 AM, December 04, 2006  
Blogger Mike B said...

My economics training says that all 3% will ultimately flow through to the end consumer in one form or another ... I don't buy for a second that any of it will stick in the supply chain or with retailers. Both of them are under pressure to keep margins up or even improve on them.

Prices have indeed increased in advance, probably due to a little opportunistic rent-seeking by suppliers who know consumers are rushing to get major purchases in before the increse.

A lot of economists are sticking with the story that German inflation will only be 0.5% higher to 2.4% due to this, which is why employers on average are raising wages only 2.5%, but the IMF and I are on the same side at 2.6%, which means the "real raise" for most germans will be -0.1%.

9:36 PM, December 10, 2006  

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