<Today I read, appreciated and absorbed the full flavor and whole gusto of the Big Mac Index, its history, intricacies, and portends:>
economist.com
Jay, in the early 1980s, my brother, a 747 pilot, was discussing with me currencies, politics and all that stuff I've always been interested in. He reckoned that hamburger price was a good guide [GG] to currency positions. A couple of years later, The Economist brought out their Big Mac index. I've wondered if they filched the idea though it's a fairly obvious one.
Anyway, the underlying issue is one of voltage, or potential energy, or hydrostatic head or whatever analogy you prefer. Money flows downhill, from those with it to those without.
Normally, the greatest difference would cause the most rapid flow, causing an equalisation of the Big Mac indices. However, as we see from India, China, Singapore, New Zealand, USSR and any number of other examples, the political memes, trade barriers, bureaucracies and other inhibitors can increase and even stop completely the flow downhill. Albania, North Korea and Mao's Great Leap Backwards were examples of a great need for money, with very cheap hamburgers, but no means for the money to flow downhill to them.
The point is, Big Macs should be used exiguously to protect health [both biological and financial].
It continues to fascinate me how strong the barriers to balance are - holding back a wall of money. Language is a big one. As a lingua franca develops, flows will improve.
Mqurice |
