Talk about fast news cycles.

It’s the Economist’s Big Mac Index for 2010 … again!

In a sign of these unusually uncertain times The Economist has speeded up their news cycle, and in the process seems to be taking themselves and their index more seriously. Used to be we’d get annual updates to the index, this one has taken only six months.

I’m guessing that somewhere in the depths of the newsroom is an aspiring summer intern taking a run at the IMF and the ECB. And why not.

Just to review, The Economist has been publishing their (not so tongue-in-cheek) Big Mac Index since 1986. It’s a reality check on world-wide currency exchange rates, based on the concept of Purchasing-Power Parity. Purchasing-Power Parity (PPP) says that exchange rates are correct when the price of similar goods are the same in each country. The Big Mac survey compares the price of a Big Mac all over the world. The Big Mac is, after all, a basket of standard ingredients put together in a consistent process.

Coming Soon, A Ringtone Quoting Exchange Rates

And while I have a hard time getting excited about this morning’s price of a Big Mac in Krakow, the fact that Lisbeth Salandar would have to fork over SKr 48.4 in Stockholm if she wanted to treat Mikael Blomqvist might raise my blood pressure a few millibars.

When the world gets even more unusually uncertain we can probably expect the BMI to go live stream, with possibly a Twitter Feed and an iPhone app.

Hold the ketchup.

The Chinese seem not inclined to clown around with the value of the renminbi.

Meanwhile the administration is trying to apply pressure on them to revalue their currency, “which President Obama says is kept at an artificially low level to give China an unfair advantage in selling its exports”.

From the NY Times,

A senior Chinese official said on Thursday that China would not bow to pressure from the United States to revalue its currency … Economists say that the Chinese currency, the renminbi, is undervalued by 25 to 40 percent compared to the dollar and other currencies.

And do you suppose it’s necessary to have a PhD in economics to figure out what the proper exchange rate should be?

Not if you’ve been  following our blog.

Here is the Rosetta Stone of currency parity, and it comes with fries and a Coke,

You've Got Your PhD, Just Add Ketchup

Maybe it’s not too late for a Happy Meal.

Time flies.

It’s the Economist Big Mac Index for 2010.

That’s pronounced “Twenty-Ten” F2u Rio Linda.

Just to review, The Economist has been publishing their (not so tongue-in-cheek) Big Mac Index since 1986. It’s a reality check on world-wide currency exchange rates, based on the concept of Purchasing-Power Parity.

Purchasing-Power Parity (PPP) says that exchange rates are correct when the price of similar goods are the same in each country. The Big Mac survey compares the price of a Big Mac all over the world. The Big Mac is, after all, a basket of standard ingredients put together in a consistent process.

Ronald The Economist

Anyway, this week’s 2010 survey says that should the Big Mac price in a country translated into dollars be above $3.58, its cost in America, the currency is overvalued; if it is below that benchmark, it is undervalued.

But our Burger-In-Chief seems to be causing a few upsets.

Last year the best deal in town was Hong Kong. This year they don’t even make the chart; wassup? Did the mainland hackers get into the Economist gMail account?

And perhaps more disturbing, Wikipedia has compiled a comparison chart of Big Mac stats worldwide, which seems to indicate it’s not quite the Gold Standard of Standard.

Are Not All Big Macs Equal? We're Shocked ... Shocked!

And I’d say that Wikipedia has certainly Earned Their Chops on this one.

It’s a good thing that we have correspondents on the ground around the world.

As you know we have been tracking the Big Mac Index (BMI) for quite some time because we believe it will become the lynch-pin (sic) for the new Global Reserve Currency.

• Click this link for a list of posts.

Data for the index has been compiled by The Economist since 1986,

Just to review, The Economist has been publishing their (not so tongue-in-cheek) Big Mac Index since 1986. It’s a reality check on world-wide currency exchange rates, based on the concept of Purchasing-Power Parity.

But yesterday their data has been called into question by our Argentine investigator!

According to the latest BMI the price of a Big Mac in Argentina is 11.50 Pesos. We are quoting in local currency so that there isn’t any confusion about exchange rates. Here is the latest Economist data from July, 2009, showing the  price of a Big Mac in Argentina.

Data Called Into Question

Today we received documented evidence (see photo) from Matthew, in Buenos Aires. It looks like the 11.50 peso Big Mac is now going for 8 pesos, no make that 7 pesos!

Breakdown In The Global Currency Reserves?

When I questioned the data as perhaps ‘Bait and Switch”, I got this response from Matthew:

Well they have huge billboards all over BsAs, which has 1/3 of the country’s population, advertising their price is marked down from 8 to 7 pesos. And your humble correspondent did purchase one for 7 pesos yesterday whilst trapped on Florida Street waitig for his wife…

What to think?

We are awaiting a response from the International Monetary Fund.

And since Mattew went to Argentina on your behalf,  a final shameless plug for his website, TreasuredFinds.com, your home for Sterling Jewelry and Gifts.

On Monday we speculated that McDonald’s Big Mac would come to replace our Dollar as the world’s premier reserve currency.

Then on Tuesday The Wall Street Journal ledes their Money & Investing Section with:

Decades from now, the crisis of 2008 mightn’t be remembered as the last days of Bear Stearns and Lehman Brothers, but as the moment the dollar lost its undisputed No. 1 ranking among world currencies.

Meanwhile the President of France is pressing this very aggressively. I wonder why?

What was true in 1945 can no longer be true today,” Mr. Sarkozy said last week. “The dollar cannot claim to be the only currency in the world.

Is Sarko Jonesing For Control Of Micky D's?

There is as yet no official confirmation that Big Mac is the leading candidate for Dollar V2.0, but if we Follow The Money we will sniff something other than French Fries cooking in the bistro.

According to Drew Hasselback in Canada’s Financial Post:

Rising food prices and declining consumer confidence are leading the French to abandon bistros for McDonald’s. About 3,000 independent restaurants filed for bankruptcy in the first half of 2008, according to Insee, which is France’s national statistics office. The number of filings was a record 27% higher than in the same period of 2007.

France is meanwhile emerging as McDonald’s biggest source of revenue outside of the United States. Sales at the company’s 1,115 outlets in France will rise this year to a record 3.35 billion euros, McDonald’s has said.

Can we next be looking at a French Nationalization of Micky D’s to turn around their economy and seize control of the new Global Reserve Currency?

Perhaps.

And the term being floated for a new Reserve Currency, to replace “The Greenback”?

“The Sarko”

While Sarko’s chin isn’t a total show-stopper, I must say he does use it to great effect, as you can see in this poster.

Remember, YHIHF, OYYD.

Problems with the WSJ link because you just haven’t had the time to purchase a subscription? Here’s our hack-around. And if you thought we misspelled lead as lede here’s your link.

Please hold the Frites.

We are predicting that The Big Mac will soon be taking on a expanded role in Global Finance as an alternative candidate to the US Dollar as the world’s reserve currency.

Not a week goes by now without another Global financial indicator being tied to the Big Mac.

You will recall that this all began with the Economist’s Big Mac Index, which is a proxy for PPP (F2U Rio Linda, PPP is the acronym for Purchasing Power Parity).

The lastest tabulation is now is from UBS which converts the number of hours worked around the world into Big Mac Units, as reported by The Economist.

That a major global financial institution like UBS would spend their time and resources collecting this kind of data confirms they are either completely out of touch, or know something we mere mortals are missing.

Who In Their Right Mind Collects This Data?

On the other hand, I’m happy to verify that USB maintains their integrity these days thru their recent settlement with the IRS regarding hidden Swiss bank accounts.

UBS AG and the Swiss and U.S. governments have finalized a settlement in a tax-evasion investigation that will allow UBS clients to appeal to a Swiss tribunal before their account information is handed to U.S. tax collectors, according to a person familiar with the situation.

In any case the Chinese are on the case, witness their recent call for an alternative to the US Dollar in Central Bank currency reserves.

BEIJING — China’s central bank reiterated its call for the creation of a new international currency that could replace currencies such as the dollar in countries’ official reserves.

In its annual report on financial stability … the People’s Bank of China said the country will push reform of the international currency system to make it more diversified and reasonable. While it didn’t specifically target the U.S. currency, it said it aims to reduce over-reliance on the current reserve currencies, of which the dollar is the biggest.

Although Beijing didn’t spell out what candidates they would support as an alternative reserve currenty, our guess is that the UK staple of Fish and Chips will not suffice given Sterling’s recent (greasy) slide against the Dollar and Euro.

Should we proceed down the Big Mac road there is food for thought:

• Go Long McDonald’s Stock – MCD
• Like gold there are a finite amount of Big Macs.
• Unlike “Blood Diamonds”, there is  no such thing as “Blood Big Macs”.
• They can be ‘mined’ in underdeveloped countries, like ‘micro-loans’.
• And while you can’t take your money with you when you die, you can eat any surplus.

Flash to all you day traders: instead of betting on hedges in Commodities, the world is changing, it’s time to consider Condiment futures.

Just One Word

I have just one word: Ketchup.

Walter Cronkite passed away today, so we are down one icon. But thankfully the Economist’s Big Mac Index soldiers on.

In a previous post we expressed concern that Big Mac might be supplanted by Big White, but our fears were unfounded.

Herewith the latest Index, no ketchup required.

Just to review, The Economist has been publishing their (not so tongue-in-cheek) Big Mac Index since 1986. It’s a reality check on world-wide currency exchange rates, based on the concept of Purchasing-Power Parity.

Purchasing-Power Parity (PPP) says that exchange rates are correct when the price of similar goods are the same in each country. The Big Mac survey compares the price of a Big Mac all over the world. The Big Mac is, after all, a basket of standard ingredients put together in a consistent process.

Anyway, this week’s 2009 survey says that should the Big Mac price in a country translated into dollars be above $3.57, its cost in America, the currency is overvalued; if it is below that benchmark, it is undervalued.

And for the quants among you, here are the stats:

Whereas last year you were headed off to South Africa for your Bargain Burger, this time your destination appears to be Hong Kong. On the other hand, should you need a quick withdrawal of funds from your Swiss Bank, don’t stick around for dinner.