I post a bit about how the falling US dollar indirectly makes it more expensive for US studios and facilities to send VFX work to other countries.
You do know that 1 GBP goes a lot further than 1 USD, right? Approximately one and a half times as far in fact…
Soldier, I know you’ve never left Cali but I’m not going to start explaining exchange rates for you.
Well it seems someone needs to do some explaining.
The Wrap wrote an article called Currency Woes: Why the Weak Dollar Is Helping — and Hurting — Hollywood :
But for producers of movies like “The Hobbit” in New Zealand, the weak dollar pushes the cost of production higher.
Warner Bros., like other studios, traditionally locks in the exchange rate when it greenlights a movie for overseas production.
But as “The Hobbit” faced endless delays stemming in part from co-backer MGM’s bankruptcy, the dollar weakened, which has driven up the cost of the mammoth shoot.
Also this from a VFX facility management blog on how a higher Canadian Dollar is hurting Canada:
Should we be concern by a higher dollar?
The answer is : YES.
Everybody knows corporation are always looking for the best deals. They come to Canada, go to Australia and they’ll go to India or China to save more money. Corporations have been moving factories from one country to an other just to save a few bucks and to generate better income to their shareholders. The entertainment industry is not an exception, at the end they want to make money. The reality Canada is facing is that to keep runaway and any other productions in Canada they will have to offer better tax incentives, the US currency is plunging and will probably continue for the next few years.
The reason why the US dollar has been falling is because of quantitative easing. The federal reserve is expanding the monetary base which leads many to conclude the US is “printing money”.
The hope is that by making it more expensive to go overseas, more inward investment will occur. Critics of this policy argue that this will lead to inflation and higher interest rates.
After two rounds of quantative easing, we have seen interest rates fall and no real increase in inflation. According to some economists, inflation tends to lag and the hope is that the economy will be growing by the time a measurable amount of inflation arrives. In fact, some inflation would actually be good for the US economy.
Whatever the reasons behind this method, it’s an incredibly effective tool. The alternative is much worse: Countries that have adopted the Euro such as Spain, Portugal, Greece, Italy, and Ireland are unable to engage in such a practice because they cannot control the Euro currency. Many of those countries are at risk of default, interest rates are soaring, and now France and Germany are left to bail them out.
Lastly, it looks like things are going to get even tougher for US studios looking to send work outside the US: Predictions are Fed Chief Ben Bernanke will announce a third round of quantative easing this Friday.