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nils
Joined: 06 Dec 2004
Posts: 7309
Location: tahoe
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 Posted: Tue May 01, 2012 7:56 pm Post subject: Big Mac index, and the consequences |
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Assume most of you have read The Economist at least occasionally over the years, and know their index that attempts to get at least nearer to correctly assessing parity purchasing power.
It's had an amusing effect in Argentina.
| Quote: | | To that end, the Argentine state leaned on Argentina's McDonaldses to exercise restraint in their Big Mac pricing. That, in turn, has led the McDonaldses to radically de-emphasize the suddenly non-profitable signature sandwich in favor of the Triple Mac and other offerings. |
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ghostofcarl
Joined: 22 Jul 2010
Posts: 6624
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| Posted: Tue May 01, 2012 8:08 pm Post subject: |
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That's the Kirchners
as an aside I never understood McDonalds in Argnentina. Burgers were the same price as steaks at other restaurants within a few blocks. |
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French For Cant Tele
Joined: 02 Feb 2006
Posts: 5123
Location: Mammoth Lakes (sometimes)
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| Posted: Tue May 01, 2012 8:24 pm Post subject: |
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| ghostofcarl wrote: | That's the Kirchners
as an aside I never understood McDonalds in Argnentina. Burgers were the same price as steaks at other restaurants within a few blocks. |
It's the meth that they add that really increases repeat business.
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James
Joined: 24 Jan 2005
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Location: Castle Rock, CO
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| Posted: Tue May 01, 2012 8:48 pm Post subject: |
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| That is way to funny. |
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ghostofcarl
Joined: 22 Jul 2010
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| Posted: Wed May 02, 2012 1:41 am Post subject: |
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| James wrote: | | That is way to funny. |
FWIW China (hey Cyrus! stalker high five!) is playing similar games with their inflation numbers. Apparently cab fares are included which is why cabs in Beijing haven't been allowed to raise fares.
The US just changes the constituents of the index   |
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nils
Joined: 06 Dec 2004
Posts: 7309
Location: tahoe
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| Posted: Wed May 02, 2012 5:08 am Post subject: |
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have been circling thru germany/austria/italy this past week...even w/ the weakish US dollar the costs have not been bad at all for food / lodging.
'over-valued' CHF is killing CH export business, from what my family tells me. let's shed a tear for vacheron constantin...
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James
Joined: 24 Jan 2005
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Location: Castle Rock, CO
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| Posted: Wed May 02, 2012 12:48 pm Post subject: |
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| ghostofcarl wrote: | | James wrote: | | That is way to funny. |
FWIW China (hey Cyrus! stalker high five!) is playing similar games with their inflation numbers. Apparently cab fares are included which is why cabs in Beijing haven't been allowed to raise fares.
The US just changes the constituents of the index |
Yep and while I was aware of our history of tweaking the constituents of certain indexes it can be easy to forget when we get on our high horse and make fun of Argentina, China and many others.
I think what is most funny is the whole point of the Big Mac index is because certain countries don't have good or accurate economic information. The thought that the Big Mac index carries enough importance to fudge even those numbers is comical.
I find the deflationary and inflationary forces we are seeing over the last few years and how they very by country and industry very interesting. As far as your FWIW comment this info could be worth a lot if one could figure it out. |
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skookumchuck
Joined: 15 Dec 2004
Posts: 9487
Location: Blue Canadian Rockies
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| Posted: Wed May 02, 2012 12:58 pm Post subject: |
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| Well there has been a movement to use "core inflation" ie. eliminate things like energy and food which are quite volatile, to get a better idea of underlying trends. Whether this is good idea or not, I am not really sure. |
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James
Joined: 24 Jan 2005
Posts: 6985
Location: Castle Rock, CO
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| Posted: Wed May 02, 2012 1:09 pm Post subject: |
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I am not sure that is a movement or anything new.
I will not argue that from and economists point of view using core inflation for some things makes sense.
It does sound pretty stupid for most politicians to use it when talking to the general public.
I also think some people creatively pick and choose which index serves their purpose. |
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skookumchuck
Joined: 15 Dec 2004
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| Posted: Wed May 02, 2012 1:15 pm Post subject: |
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Well its not really new, its been used by the federal reserve since 2000.
Is it the measure that the Fed should be using or should they stick to the CPI which is used by most other central banks? |
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NoOneInParticular
Joined: 09 Feb 2005
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Location: VT
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| Posted: Wed May 02, 2012 1:34 pm Post subject: |
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| skookumchuck wrote: | | Well there has been a movement to use "core inflation" ie. eliminate things like energy and food which are quite volatile, to get a better idea of underlying trends. Whether this is good idea or not, I am not really sure. |
i've never understood the excluding food and gas. yes it is volitile and i understand it for long term trending, but in reality food and gas are major expenses and shouln't be excluded when measuring inflation. |
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skookumchuck
Joined: 15 Dec 2004
Posts: 9487
Location: Blue Canadian Rockies
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| Posted: Wed May 02, 2012 1:46 pm Post subject: |
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| NoOneInParticular wrote: | | skookumchuck wrote: | | Well there has been a movement to use "core inflation" ie. eliminate things like energy and food which are quite volatile, to get a better idea of underlying trends. Whether this is good idea or not, I am not really sure. |
i've never understood the excluding food and gas. yes it is volitile and i understand it for long term trending, but in reality food and gas are major expenses and shouln't be excluded when measuring inflation. |
I think the idea is that core inflation is something that can be affected by macroeconomic policy -while government policy has little effect on he price of food or gasoline. So if you just measure core inflation you can gauge the success of current policy and what macroeconomic measures should be implemented in the future. |
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James
Joined: 24 Jan 2005
Posts: 6985
Location: Castle Rock, CO
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| Posted: Wed May 02, 2012 2:18 pm Post subject: |
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| skookumchuck wrote: | Well its not really new, its been used by the federal reserve since 2000.
Is it the measure that the Fed should be using or should they stick to the CPI which is used by most other central banks? |
Tough question to answer yes or no but I would say the Fed should use Core inflation.
I don't think our problem is the Feds "mandate" to target inflation or employment. It is the other creative bullshit like portfolio balance channel theory that hey are pursuing that I have a problem with.. |
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Sugarloafer
Joined: 06 Dec 2004
Posts: 9840
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| Posted: Wed May 02, 2012 2:27 pm Post subject: |
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| James wrote: | | skookumchuck wrote: | Well its not really new, its been used by the federal reserve since 2000.
Is it the measure that the Fed should be using or should they stick to the CPI which is used by most other central banks? |
Tough question to answer yes or no but I would say the Fed should use Core inflation.
I don't think our problem is the Feds "mandate" to target inflation or employment. It is the other creative bullshit like portfolio balance channel theory that hey are pursuing that I have a problem with.. |
Absolutely. The only problem with the core inflation calculation is when politicians try to use it fit their campaign message.
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ghostofcarl
Joined: 22 Jul 2010
Posts: 6624
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| Posted: Wed May 02, 2012 2:39 pm Post subject: |
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| James wrote: | | skookumchuck wrote: | Well its not really new, its been used by the federal reserve since 2000.
Is it the measure that the Fed should be using or should they stick to the CPI which is used by most other central banks? |
Tough question to answer yes or no but I would say the Fed should use Core inflation.
I don't think our problem is the Feds "mandate" to target inflation or employment. It is the other creative bullshit like portfolio balance channel theory that hey are pursuing that I have a problem with.. |
Their mandate is to target inflation and employment. Not or.... though that is the way Helicopter Ben has viewed it under his tenure. |
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