Friday, July 14, 2006

X-PayPal: The democratization of cross-border commerce

X-PayPal: The democratization of cross-border commerce
For example, say you want to buy something for 100 Pounds Sterling. If the exchange rate is 1.81 USD = 1.00 GBP, you'd pay about $181 for the item. Later, you are shipped the item and find it's defective, so you complain. The seller, being a right old chap, agrees to refund your money. He takes the 100 GBP he got, exchanges it for dollars, and sends it back. Due to rate fluctuations and the margin, the exchange rate is now 0.60 GBP = 1.00 USD, or 1.00 GBP = 1.66 USD - which means you'd only get $166 of the refund back. So international trade carries some risk, even under the best conditions.

I've been in a similar situation where a lady in Australia made a contribution in US dollars for what she thought was Australian dollars. When her credit card converted it, it wound up being much more than she thought it would be. In trying to rectify the contribution, I found the above to be true in that either she would not get the full refund she wanted or her contribution would be smaller than she intended.

I bet casas de combio and Western Union make a mint on currency flow from the US to Mexico.

1 comment:

mark the bruce said...

You can how currency speculators (Soros, et al) can drive Central Banks crazy. The inflationary pressures of currency flight, illiquidity in capital markets, loss of investment opportunity, and unreliability of snapshot data (deposits, savings, debt, etc.) are all devilish variables to nail down in economic forecasting tools. Also kinda hard to tag gains in currency markets with income taxes as well. Just another way for the rich to make more money with their money, without actually producing anything of value. Aaaaahh ... the games we can play when we don't have to work for a living ...

Maybe your Australian donor should hold her contribution until the end of the summer, when the spread between AUD and USD flattens a bit ... (if RBA doesn't cave to fears of inflation).