A Big Mac Global Currency Attack

In France, it’s Le Big Mac. In Mexico, maybe it’s called El Big Mac? In any case, the ubiquity of McDonald’s has made its signature burger a well-known fast food staple the world over. And one the Economist magazine has chosen to explain the current state of global currency relationships and the idea of purchasing power parity — “the notion that a dollar should buy the same amount in all countries.”

But as the latest Big Mac Index shows, not all things are equal. In the US, the double burger costs $3.57. In China, it is 12.5 yuan, which, when converted, is equivalent to $1.83. That means you can buy two in China for the price of one stateside. Maybe we should all be going to China's drive-thru's then, right?

Well, take that idea and apply it to toys, toothpaste and machine parts, and you get a sense of how this index tells a larger tale of the economic relationship between China and the United States — and all currencies. Because the yuan is undervalued against the dollar, it makes China’s cheap exports an attractive buy.

It goes the other way, too. While China can unload plenty of exports thanks to the yuan's value, think about how products sold in Swiss Francs fare on the world market. One burger there will cost you the equivalent of $6. Can it really be the same Big Mac? Two all Wagyu beef patties, special sauce, organic lettuce, artisan cheese, pickles, onions on a sesame seed bun, perhaps?

(via NPR)

Photo courtesy of GlenMcBethLaw, via Flickr.