AboutWarren D. Miller, CFA, ASA, CMA, CPA Expertise My in-depth knowledge of economics is confined to three sub-disciplines: Austrian economics, industrial organization, and evolutionary economics. Other questions dealing with macroeconomics, the traditional neoclassical paradigm, labor economics, environmental economics, agricultural economics, health economics, and so on should go to those who have the appropriate expertise.
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Organizations CFA Institute, Strategic Management Society, American Society of Appraisers, Institute of Management Accountants, Academy of Management, Culver Legion
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Education/Credentials MBA - Oklahoma State (1991)
BBA - U. of Oklahoma (1975)
Chartered Financial Analyst designation (2006)
Accredited Senior Appraiser (2006)
Certified Management Accountant (1992)
Certified Public Accountant (1992)
A New York Post article took great exception to the fact that some restaurants in the Hamptons (NY) are willing to take Euros, rather than dollars, becuse they feel visitors will buy more.
After reading the piece I realized that I had no idea what harm was being done that would get the Post so outraged.
Symbolically I suppose it's unfortunate that the restaurants would take Euros, but I'm not sure what concrete harm is being done. Why does it matter whether a diner pays 100 Euros for a meal or 150 dollars? As long as the money is figured at the exchange rate on the day of the dinner, what difference does it make?
My wife says that perhaps it's the fact that when the payment is in Euros the restaurant must pay a fee to change the Euros into dollars. This is true, but, since the Euro-to-dollars exchange will be made at an American company, I don't see how this hurts America. (And the restaurants obviously think it's worth taking the Euros even if they have later to pay an exhange fee.)
In any case, my question: Wha is the harm (other than symbolic) done to the U.S. by the Hampton's practice?
Many thanks,
Steve
nighttrain@nyc.rr.com
Answer Dear Steve--
Thank you for your interesting question, and thank you for using AllExperts.com. Let me see if I can shed some light on this for you.
First, I should point out that LOTS of restaurants, taxis, etc., in Europe and Asia accept U.S. dollars (USD). Or at least, they did the last time I was there. Of course, that was before the USD hit the skids. They did it to make it easier for tourists to do business.
I suspect that's why the restaurant owners in the Hamptons are doing it: to make it easier and more convenient for their guests from the Continent. For one thing, New York City's tourism arm, NYC & Company, estimates that about 7.6 million people from outside the North American continent came to NYC in 2007. That's up 11.8% from 6.8 million in 2006. Another 8.5 million visitors to NYC came from Canada and New Mexico. Domestic tourism to NYC is increasing much more slowly.
One of my closest friends is a senior executive for a U.K. company. He commutes there from Virginia. He tells me that his secretary and her husband have begun taking at least three long-weekend trips to NYC each year to take advantage of the favorable (for them) exchange rate between the USD and the British pound (GBP). She says that the savings from their shopping on each trip more than pays the expenses for airplane, lodging, meals, and ground transportation.
As for those restaurants in the Hamptons, there might be another reason that they accept euros: It might be an investment for the owners. In essence, they are trading a wasting asset (food) for an appreciating one (euros), at least in the last couple of years. So they might be betting that the dollar will continue to decline.
There's one other possibility that comes to mind: Perhaps the owners will be traveling to the Continent sometime soon. Rather than soak up the FX (foreign exchange) conversion fee, they bring the native currency (euros) with them. And, if the USD continues to decline against the euro, they'll look pretty prescient, won't they?
I agree with you: any U.S. business accepting a foreign currency is doing our country no harm. In fact, I would argue quite the opposite: by making it easier for our overseas guests to spend their native currency, U.S. businesses are preserving jobs, and perhaps even creating a few new ones. Any business that makes it easier for customers to spend their money in whatever form will likely find that its revenues are expanding.
I hope this is helpful and answers your question. Please do me a favor and complete the 'rate the expert' email you'll receive on the heels of this reply. Your feedback helps me do a better job of helping folks like you.
