What Is The Burgeronomics Of Your Country?
The Big Mac Index results are out this year! And its time for some serious contemplation regarding food buying power and parity among various states of the word. The last half a decade have been particularly poor for the global economy what with the credit crunch to the Euro crisis that plagued even some of the well-off nations of Europe. However, it is time to take a look at the burgeronomics now instead staying focused on the hard core finance markets.
What Is Big Mac Index?
The Index is actually a clever method devised by the Economist to decipher the parity between currencies of the world. The theory focuses on the ultimate price of one burger being the same in every country. Well, the Big Mac hamburger now sits in the basket and calculations begin.
The first step is to figure out the exchange rates which will have the burger selling for the same price in every part of the world. It is found that the hamburger costing $4.33 in US sells for $2.29 in Russia while Brazilians can get it for just a little under $5. It means that the rouble vis-à-vis the US dollar is weak whereas the Brazilian real is doing well for itself.
The Present Position
According to the latest Mac Data, a number of European currencies look strong whereas the Asian markets can get lot of burger for a dollar. The Canadian dollar look cheap too but it is the Australian market that proved to be steadfast with it being 8% overvalued at present. The British story is completely opposite. The pound has sunk so much that it is now only a shadow of itself while the financial markets of Great Britain are witnessing the worst crisis in recent years.
Being placed near the bottom of the Mac Index isn’t always bad news though. Certainly, it is not so for China. A cheap currency is likely to look lucrative for foreign investors looking for exports and this remains the mainstay of the Chinese economy till date. A cheaper yuan which results in a higher demand for exports.
The entire world and its economists are hoping to revive the Euro now. The sick economies of Greece and Spain have contributed much to the mess and only a high calorie boost can now save the Euro Zone if they want to be able to afford even a single burger.
Image Credit- economist