Perfect currency in imperfect world
Your support helps us to tell the story
As your White House correspondent, I ask the tough questions and seek the answers that matter.
Your support enables me to be in the room, pressing for transparency and accountability. Without your contributions, we wouldn't have the resources to challenge those in power.
Your donation makes it possible for us to keep doing this important work, keeping you informed every step of the way to the November election
Andrew Feinberg
White House Correspondent
AS CURRENCY markets go ballistic, Norman Lamont might chew over Big Mac-onomics for guidance on how far to defend the pound, writes Topaz Amoore.
The McDonald's Big Mac hamburger is the perfect universal currency because exactly the same product is served up worldwide. In an economically perfect world, the price of a Big Mac in Moscow should be the same, converted into sterling, as in London - pounds 1.64. In reality other factors such as rent, wages and raw material costs intervene.
In a further distortion, a Big Mac in Russia costs pounds 26.92 at the rouble's official exchange rate, but only 9p at the market rate.
But purchasing power parity, as economists term the Big Mac comparison, is a good measure of currencies' long-term value.
All member countries of the exchange rate mechanism are fairly close in the Big Mac league, ranging from pounds 1.61 in Germany to pounds 2.26 in Portugal.
Subscribe to Independent Premium to bookmark this article
Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Premium subscription today.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments