[maximilian_boehm]

Hi,
I’ve got a question about the economy of Denmark. Hopefully my question doesn’t demand an indepth knowledge of the Danish economy, but can be explained in general principles. Denmark is one of the most socialistic countries in the western world. It’s got an insanely high taxation scheme and lots of government regulation. Needless to say, a lot of a Dane’s income is swallowed up by the state. All of this makes food, housing, cars, etc. extremely expensive. Example: In Berlin you can get a nice appartment for 2 people for 500 to 1000 $, depending on size. In Copenhagen, you won’t even begin thinking about an apartment for two, if you can’t afford to pay at least 1000$ for the smallest size (electricity and warm water excluded!).
So far, everything makes sense to me. Lots of intervention leads to high prices. However, something that I do not understand is the following. At the end of the month, the Dane (in absolute terms) has more money left than the German. He won’t live better in Denmark than the German (probably worse, because the wealth isn’t that great), but when he decides to visit any other country and exchanges his currency for the local currency, for example Euro, then he’ll feel like a king among peasants.
I understand that his income has to be higher than elsewhere, in order for him to be able to live off of it and still be able to pay 60% taxes, 25% VAT, etc. but why is his currency still so strong compared to the rest of the world? It’s a bit complicated to explain, I hope you get what I mean.

[gutzmank]

Danes and Germans all use Euros, the currency of the European Union.

[maximilian_boehm]

Hi Kevin. It’s not true. Danes use the Danish Kroner. The introduction of the Euro was prevented in a referendum in 2000. That’s why I have to exchange money when I travel between the two countries 😉

[gutzmank]

Oh, right. I’m sorry that I forgot about that–which is odd, since I celebrated the Danes’ decision at the time.

We have similar phenomena in the USA. My state of Connecticut, for example, is very expensive in virtually every sense. We generally have higher nominal incomes here than in Texas or Idaho (where I spent much of my life before I came here), but we if anything live less well. As in regard to you visiting Germany, if I visit Idaho or Texas, I find that the money I take there from Connecticut will buy much more than in Connecticut. My favorite example is that the same 30-ounce Coca-Cola in the same plastic cup costs me $2.75 (including sales tax) at McDonald’s in Danbury, CT, $1.06 at McDonald’s in Boise, Idaho, and $1.00 at a McDonald’s in Lawton, Oklahoma.

There’s more wealth in the greater New York City area (where I live) than in most of the rest of the USA, which accounts for the generally higher prices, but oddly this doesn’t translate into higher standards of living for most people–unless you count living near New York City as a benefit (which I don’t). I suppose this same truth obtains for Danes vis-a-vis Germans, Dutch, et al.

[maximilian_boehm]

Hi Kevin,
thanks for your response. Your situation sounds pretty much the same. Is the overall taxburden in CT higher than in TX and ID? I find it very interesting and extremely counterintuitive. There’s gotta be an Austrian explanation for that, right?

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