‘Big Mac Index’ Shows US Dollar Strongest in 30 Years

Re-Blogged From Newsmax

The U.S. currency is at its strongest level in 30 years, according to the Economist newspaper’s January 2019 “Big Mac Index.”

The newspaper’s “lighthearted guide to exchange rates” measures the purchasing power of currencies against each other. The gauge also compares the prices of McDonald’s flagship hamburger, the Big Mac, in different countries with the actual exchange rate between the currencies to determine whether a currency is over- or undervalued.

For example, “a Big Mac costs 3.19 pounds in Britain and $5.58 in the United States. The implied exchange rate is 0.57 [pound per dollar]. The difference between this and the actual exchange rate, 0.78, which suggests the British pound is 27% undervalued,” the Economist said.

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Thc CPI vs The Big Mac Index

cropped-bob-shapiro.jpg   By Bob Shapiro

In 1986, The Economist magazine created the “Big Mac” index. The theory is that this is a standardized product, available around the world, which likely would continue to be sold for many years.

In the US in September 1986, the Big Mac sold for $1.60; it was selling for $4.62 in January 2014, 27+ years later (328 months later).

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