A Tea Addict's Journal

That sinking feeling

March 19, 2008 · 8 Comments

Those of you who pay attention to things like the market and the economy have probably been treated to a roller coaster ride in the past few weeks of good and bad news, mostly bad. Those of you who don’t have probably still heard a lot about the credit crisis, mortgage problem, and that bit about a coming recession. Those of us who drink tea in the US, unfortunately, will also be victims of this mess, and not just because you worked for Bear Stearns and are about to lose your job.

The thing is, the US dollar has been sinking like a rock. This is most acute in the case of the USD/Yen exchange rate, which has the USD falling by about 15% in the last three months. If the USD keeps at current level for any amount of time, I’d imagine that those of you who love sencha, hojicha, matcha, bancha, or God forbid, genmaicha might start noticing that all your teas, especially the spring 2008 crop or beyond, are going to be a bit more expensive. You might not see the full effect immediately, since somebody in the supply chain might absorb some of the exchange rate cost in order to keep their customers, but at some point or another, this is going to show.

The Taiwan dollar is a lot weaker than the Yen, but even that has risen against the USD by close to 10% since when I left Taiwan. There’s this batch of aged oolong that I want to buy more of from here by wiring money to the Taiwanese tea shop, but now I have to factor in an extra cushion because, well, prices went up. Or I just have to bargain hard to try to get it down, but I don’t feel too lucky.

Then there’s the Chinese yuan, which is not a free floating currency. However, in its controlled floatation, the yuan has steadily risen against the dollar throughout the last year and half (basically since the current regime of limited floatation started). It went from about 7.75 yuan/USD to the current 7.07 yuan/USD, which, again, means that everything will cost you 10% more compared to a year ago. I still remember when the Hong Kong dollar was higher than the Chinese yuan. That was when I first got to Beijing. Since the HKD is pegged to the USD, now HKD is worth about 10% less than the Chinese yuan. Sigh, how times change. The bad thing about this one is that there’s almost an expectation of the yuan rising — there are fundamental economic reasons for this. So, it is easy for those selling Chinese tea to work this cost into their price in advance. Woe to us.

While I don’t claim to be a financial wizard, it doesn’t seem as though there’s going to be any substantive change in the works for a higher dollar. So it seems we’re stuck with more expensive tea in our future, if things stay the way they are. At least those of you in the Euro zone or in the UK need not worry about all this mess. Lucky you.

Categories: Old Xanga posts

8 responses so far ↓

  • HobbesOxon // March 19, 2008 at 6:05 am | Reply

    Yes, this one’s no fun at all. It would probably be an oversimplification (and none-too-helpful) to point the finger at the Bush administration, as do all the newspapers over here in England. Given that the RMB is pegged artificially low for export purposes, and the amount of weight being applied to the PRC to peg their currency to a less restrictive “basket” of currencies, most believe that you are quite right to say that it’s not going to get any cheaper to buy from China.

    I saw many articles (and even breakfast-time news) while recently in the USA concerning the cost of gold breaking the $1000 barrier – but this, like the cost of oil, is surely more to do with the declining dollar than other factors.

    Not a great outlook for tea.



  • MarshalN // March 19, 2008 at 9:28 am | Reply

    Hey, the Sterling is doing quite well, so what are you worried about?

  • Anonymous // March 19, 2008 at 10:00 am | Reply

    Actually, when I started buying pu-erh online, 1 USD was 27 SKK, today it’s 1 USD for 20.50 SKK – 25% off just in one year.

  • mulcahyfeldman // March 19, 2008 at 12:11 pm | Reply

    Whatsa matta with genmaicha? I know it’s not the real thing but it’s like a light meal in the middle of a big workday when you can’t break for lunch.

  • MarshalN // March 19, 2008 at 1:39 pm | Reply

    Nothing, other than that they’re basically an invitation for tea makers to use the worst tea since much of the flavour will be covered by the genmai.

  • osososososos // March 19, 2008 at 5:05 pm | Reply

    I read recently (on BBC News, methinks), that the dollar is unlikely to continue tanking, and will likely begin to rebound at the end of the year. The reasoning was that the Chinese and European markets are overvalued–that if bad economic news was to appear anywhere in the world, it would likely be from Europe or Asia, whereas the US economy has already hit or is approaching “bottom”.

    But, speculation is speculation, and recovery of the value of the dollar being tied to the decline of other economies rather than the improvement of our own isn’t such great news: we’re still left with a not-so-great economy.

    I also wonder if all these rate cuts in the end will hurt the US economy by delaying the process of raising efficiency and competitiveness by infusing “heavy” companies with borrowed cash instead of making them trim their fat.

    blah blah blah

  • MarshalN // March 19, 2008 at 10:58 pm | Reply

    Well, any speculation on where the dollar is going in the next year is going to be pretty moot, but for the near term, I don’t think we have any reason to expect it to go up much.

  • mulcahyfeldman // March 22, 2008 at 1:41 am | Reply

    @MarshalN – 

    Luckily we still have a few decent newspapers…

Leave a Comment