Hold Those Fries

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.