In 1950 a beer cost about the same (about 25 cents in U.S. dollars at the time) in Pounds Sterling, French Francs, German Marks, Japanese Yen and many other local currencies that hinged on those bigger countries. But for Americans traveling abroad at that time, the local cost converted back into US Dollars was about 10 cents. Wow! The good old days!
Since then a lot has changed in the world of currencies. The U.S. dollar is no longer the only reserve currency of significance. There is the Euro for most of Europe, the Yen for Japan and the Renminbi of China and the effect of different and fluctuating exchange rates on balances of trade, flows of capital and movements of tourists, etc. is sometimes downright as amazing as a 25 cent beer for 10 cents.
Today the question from the point of view of an American tourist is no longer how strong or weak the dollar is but also how strong or weak the local currency is where that tourist is buying his beer. For example in Switzerland, which still uses the Swiss Franc, they say the Franc is too strong, not that the dollar is weak. But whichever way it is, beer can tell an average person what is really going on. Today in Switzerland a beer is 4 Francs, which the local people find perfectly reasonable. But when an American pays 4 Swiss Francs that beer costs him 6 U.S. dollars, which is pretty outrageous by American standards.
So what should that simple real fact mean to an average Swiss and American?
For the Swiss person it should mean that he should plan a trip to finally see New York, or to convert his retirement savings into American investments, or to order his children’s school clothing from Amazon.
For the American it should mean that he should take his next trip to the Grand Canyon, make sure his long-term investments are in American companies and have hand-me-downs make do for his growing children. And, if the American is adventurous, he may want take a suitcase full of popular toys, mini cameras, etc., when he goes to Europe and become a sometime peddler to help pay for his trip.
But, should the American who may be financially clever sell Swiss Francs short since he is already long dollars in his savings account? The short simple answer is NO.
Just because the U.S. dollar may be cheap and the Swiss Franc expensive no longer means it will quickly and easily readjust to what is called purchasing power parity. The world of exchange rates has gotten much too complicated to make that bet except for the most sophisticated financiers. The dollar may have to become a lot cheaper before it gets stronger and the Swiss Franc may get even stronger because of problems in Greece and with the Euro.
Still, it may help average Americans plan their short-term daily lives if they can see a schedule in their local news giving the price of a beer in many different places priced in dollars at that moment. The currently published exchange rate schedules may be useful to some, but a beer standard would be helpful to everyone.