Friday, June 24, 2011

Limey Beans

The English are moaning about how expensive things are. They don't know the half of it. A small Bag of Starbuck's Italian Roast Beans at my local (ground at 4-1/2 for my lovely, well-machined stainless Alessi stove-top expresso device) in Switzerland sets one back CHF8.50 (more than USD$10 for American readers). Same bag (though sometimes I go for the even-darker Sumatra or French-Roast) in "high-priced" London is GBP3.70 (more or less USD $6.00. ). For the operationally challenged (who shouldn't have a CMC or ForexPro account nor be trading currencies in any event), this is a 66% premium for the Helvetian-sourced variety of Starbucks finest, deliciously-oily beans.

The Baristas in London, I can tell you, seem only to keen to ground the purchased beans, and it is also unlikely that Starbucks is magnanimously selling their bags at a loss there (though I read this week their >600 outlets are just breaking even). Yes, there are VAT differences, and labour-market differentials, but my bag'o'beans from Geneva was more or less the same price three years ago (as are the Limey Beans). Prices, evidently, are indeed sticky downwards, and profit margins evidently variable at the other end of the spectrum.

Firmly ensconced at the small end of the vanity spectrum, sporting an ancient anorak, failing footwear, tattered trousers, and a seriously-old-and-simple early-generation Swatch, I must confess to having  modest needs when it comes to trimming my locks - not because I resemble James Carville, but primarily - because I just do not care. A quick run through with a Number-3 razor and I'll be out the door five minutes later - perhaps ten minutes with a shampoo and a straight-blade scrape. The median in London (from my non-scientific experience) is GBP17.50 (USD$28) though the truly brave can do better at the risk of emerging a butchered Mohican.  Median men's price to be quickly coiffed in Geneva is CHF50 (USD$60). When in the dollar-zone, I used to pay $10, though admittedly I had to endure the incessant complaints and xenophobic right-wing politics that was part-and-parcel of the service.

There are no shortage of decent Pizzerias in London replete with iconic red-chequered table-cloths, wood-burning ovens and genuinely-accented servers. The median price for a reasonable fresh-cooked bubbling edible disc is somewhere in the GBP7.50 (USD12-) though this can rise to USD15 depending upon the venue and extras.  Our favourite (and we are not alone as it can be annoyingly busy and raucous) Geneva-based pizza fabricator, Luigia, will spin and prep his freshly-made offerings for CHF16.50 (nearly USD$20) with a topping or two taking you to CHF22 (USD26). Two glasses of Nero d'Avola (USD13ea) , a shared generous plate of Calamari (USD35!!!!), and departs significantly poorer than one entered. I would pity the Swiss, except most of the patrons are NOT local Helvetians. For they, I can tell you, are all in France shopping.

One could reasonably argue these examples have been cherry-picked. And they might be right. But they are the most obvious every-day manifestations of The Wrong Price I see in my weekly travels. One could of course, go on: UK airport sandwich $5; Swiss airport sandwich $9; Swiss modern italian chaise USD1,500, indentical in UK USD800. And so on. Switzerland is - in its entirety - the The Wrong Price. And not by a little. Perhaps sterling is cheap. Perhaps the dollar is VERY cheap. Yet Americans seem more than willing to supply both labour and goods as well as services at what seem like - on a relative basis - to be absurdly cheap prices and rates. And for the most part, this does not look set to change dramatically, not on the scale discrepancies. Granted taxes, energy and social costs are much diminished, but this is not so in the UK. It seems to be purely a matter of the Wrong Price, driven by financial flows, with the real economy apparently ignorant of these flows - excepting those who live on borders.

I am not saying the specs seeking a turn, the fearful who are paranoid, sovereign accumulators who are unspoiled for alternative choice-of-stores, nor the unsavoury who are delivering bucket-fulls as a patrimony for posterity into hopefully-safe-and-untouchable coffers are wrong to be doing WHAT they are doing. It is however worth scrutinizing whether WHAT they are doing, is being done at a decidedly WRONG price....

4 comments:

Anonymous said...

Switzerland is stupidly expensive. Good pizza is easily 23 CHF (or roughly USD 27) in Zurich, for take away!

But partly that reflects an amazing change in terms of trade - the pound was 2.56CHF 10 years ago, now it's skipping around 1.4.

Traded goods (electronics for example) are pretty reasonable here, but anything that needs substantial amounts of space (furniture stores) or warm bodies just hasn't dropped in price at all.

The real question is how long the CHF will stay so strong - is this a permanent change, or will it drop as (when? if?) the rest of the developed world starts growing again?

Charles Darke said...

As a Brit who moved to Switzerland a few years ago from London, even the London prices didn't insulate me from the price shock on arriving here!

With the exchange rate going from 2.4 to 1.35 in a matter of years, the price difference is very noticeable! I only wish I took all my GBPs with me when I moved...

Namazu said...

I suspect many Europeans are buying Swiss Francs and doing their Christmas shopping on 5th Avenue to hedge the trade.

Anonymous said...

No doubt that the CHF is overvalued (70% vs USD on PPP basis according to the Big Mac Index). But consider the Swiss Franc as the Euro without the PIIGS. Most of the Swiss industry is based around Zurich and that is doing fine in spite of the currency. Once the PIIGS leave the Euro, it will become the new DM/F Franc fort and leave GBP in the dust. Assuming of course the Huns don't sign up for fiscal transfer...