Why We Need a Time Machine

Ex-patriot living has made me start paying attention to something that never really concerned me before: exchange rates. I will not pretend to be a financial analysis and give any sort of reasons for the drop in value of the US dollar or the rise in the value of the Brasilian Real. But, I will present a couple charts and some examples of what it means for a couple Americans in Brasil (who are earning Reais (thank goodness!), but also have some Dollars they considered spending here too.)

First off, a little historical data. This graph shows the monthly average of the Real vs. the Dollar from January 2002 until today.

© 2008 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada.Permission is granted to reproduce the above image provided that the source and copyright are acknowledged.Time period shown in diagram: 1/Jan/2002 - 6/Mar/2008

I would like to start by saying that late 2002 would have been a great time to visit Brasil if you were American and had some dollars burning a hole in your pocket! Assuming inflation doesn't exist and everything was the exact same price then as it is today, let's evaluate a couple things when one dollar was worth 3.75 Reais.

Our favorite filet mignon meal for 2 people at Bar Ideal: US$10.67

1 night at a hotel a couple blocks off the beach at Ipanema: US$53.33

Basic 2008 Fiat Palio (common car in Belo Horizonte): US$7,408

Even the oh, so expensive Peter Pan Peanut Butter: US$5.87

Now, let's explore what the Dollar has done each week since we moved here on October 6, 2007.

© 2008 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada.Permission is granted to reproduce the above image provided that the source and copyright are acknowledged.Time period shown in diagram: 6/Oct/2007 - 6/Mar/2008

The month of February was not a good one if you were contemplating moving any US Dollars to Brasil! Now, let's compare the costs of the same things as above at both the initial 1.80 in October and the current 1.67.

Filet mignon meal for 2 people at Bar Ideal: $22.22/$23.95
Hotel a couple blocks off the beach at Ipanema: $111.11/$119.76
Very Basic 2008 Fiat Palio: $15,433.33/$16,634.47 (are we seeing the difference now?)
Peter Pan Peanut Butter: $12.22/$13.17

Now, scroll back up and compare those numbers...

and now you know why we are busy trying to build a time machine in our garage!

And since I want to end things on a positive note, so we can all enjoy our weekend and what not, let's reverse the graph and see how well the Real is doing when compared to the Dollar.

© 2008 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada.Permission is granted to reproduce the above image provided that the source and copyright are acknowledged.Time period shown in diagram: 1/Jan/2002 - 6/Mar/2008

See, now doesn't that make you feel better?