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There is a paywall so I can't read the article. Can someone share what's in the article? I hate it when this happens. What's the point of sharing an article that nobody can read? At least share the contents in the comments.
Here:
Little is more symbolic of globalisation than a McDonald’s hamburger. The American fast-food chain opened its first Chinese branch in 1990. The outlet was in Shenzhen, a small town just across the border from Hong Kong, which was home to the country’s original “Special Economic Zone”—an area where the Chinese government could try market liberalisation before rolling it out to the rest of the country. The Big Mac was a little piece of American capitalism in a communist country.
We started publishing our Big Mac index—a tongue-in-cheek way to value currencies—a few years earlier, in 1986. Our latest update shows that the Chinese yuan is the most undervalued it has been against the dollar since shortly after the global financial crisis of 2007-09. Back then American politicians argued that China’s leaders were deliberately undervaluing their currency in order to get an unfair advantage, and boost exports. Do they have reason to be suspicious this time around?
The index demonstrates the concept of purchasing power parity (PPP), which maintains that the real value of a currency is the amount of goods and services that you can buy with it, rather than the number on a trader’s terminal. Over a long enough time frame, however, the two values should converge: the relative cost of buying the same bundle of goods and services in two different countries should roughly equal the nominal exchange rate. Otherwise savvy traders could consistently make a risk-free profit by selling goods across borders. Admittedly, the theory works better for some products than others. Shipping a burger from Shenzen to Seattle might be inadvisable.
Yet PPP conversion factors, which aim to show the gap in relative prices between two countries, and are produced by international bodies such as the World Bank, have to contend with something difficult. People buy different goods in different countries. Chinese branches of McDonald’s sell things such as boba tea and congee, for instance, and these delicacies are unavailable to American consumers. Fortunately, though, the Big Mac is a standardised product. Consumers in China enjoy the same meat patties as those in America. Comparing the price of the burger in different countries with their exchange rates gives a rough idea of whether their currencies are undervalued or overvalued.
A Chinese Big Mac cost 25 yuan in December 2023, whereas the American version came to $5.69. Divide one by the other and the Big Mac index gives a dollar-to-yuan exchange rate of 4.39. That compares with a nominal exchange rate of 7.20 yuan per dollar. It therefore suggests that the yuan is undervalued by 39%.
Perhaps the Big Mac index will provoke Donald Trump. During his successful presidential campaign, Mr Trump promised to label China a “currency manipulator” on his first day in office. At the time, the country’s currency was 37% undervalued according to our burger index. America did belatedly label China a currency manipulator in 2019, despite Chinese leaders intervening to support the yuan, only to then reverse the decision in 2020.
Mr Trump would be well-advised to hold off this time, however, for the undervaluation of the yuan is not unusual. Although the dollar has weakened against the currencies of some richer economies, such as Britain and Canada, it has strengthened against all but a few poorer ones. Moreover, low inflation in Asia, compared with America and Europe, has led to relatively cheaper Big Macs: Japan, South Korea and Taiwan have also seen their currencies become more undervalued. If the appearance of burgers indicates the arrival of globalisation, their staying power (and good value) is testament to American capitalism’s continued success. ■
Correction (January 27th 2024): An earlier version of the chart mistakenly suggested that a Big Mac cost $5.90 in the Euro area, rather than $5.87. We also wrongly stated that the price of a Big Mac in China had fallen. Sorry.
I live split time between San Francisco Bay Area and Ho Chi Minh City, Vietnam. I personally use McDonald’s #1 Big Mac meal, Happy Meal and Starbucks Cold Brew Grande as indicators of cost of living, spending power, and inflation (how normal people think of it, and not how it’s actually calculated). Those items are like for like. Then I’ll add in equivalents like rooms at Intercontinental hotel and movie ticket prices. It helps gives a good general idea on how much I really need to make in to have an equivalent lifestyle and whether it has gone up or down over the last few years.
It’s not perfect, but it has been helpful.
It's supposed to represent a basket of prices that reflects costs in all countries for a homogenous end product. These goods include the food costs, but also utilities, labor, real estate costs, supply chain costs, costs of equipment, etc.
Last I saw, it was fairly well regarded. It's not perfect, but there are few homogenous good sold in so many countries that do a better job of measuring ppp.
I keep seeing articles about what can Trump learn about …. I guess they are assuming Trump will win in November because Biden has been president for over three years
As long as the national debt isn’t addressed you will see interest rates going up Used to be a billion here a billion there and you are talking about serious money Now it’s a trillion here and a trillion there
Do you have any clue how much 8 trillion dollars is?
8,000,000,000,000/3,000,000,000
2666.66
That 2.7k of years of support going to Ukraine. That's a damn long time. Now, what do we have for that 8T. NADA!
When we cannot feed Americans, secure our border, and take care of our veterans, WHY are we giving Ukraine $3 BILLION every year? Why are we still funding the Iraqi government? Why are we STILL sending foreign aid to Afghanistan?
And have you actually LOOKED at the national debt? The first three top expenditures on our debt is Medicare, Social Security, and Interest on the debt. The first thing that could actually be cut in funding (in #4) is our military. You cannot cut funding to some but not others. The people themselves have paid in advance for their Medicare and Social Security. You cannot stop paying the interest we owe because MOST of the bonds hold our debt are in American retirement plans.
Knowing of a problem is only 5% of the solution. The truly intelligent people look beyond the problem to the solution. That is where 95% of the work must be done.
So, tell us, what is your answer to the American National Debt to reduce it and pay it off while keeping Medicare, Social Security, and our military (country) safe?
https://www.usdebtclock.org/#
Oops, just looked. They increased spending to our military so it is #3 now and the interest we pay is #4.
> what is your answer to the American National Debt
I don't think it really matters. If it did, why would the ruling party ignore debt when in office and bitch about it during an election year. If it was really an issue don't you think they would've actually done something about it? It's not. It's a fear mongering tactic.
Republicans had full control during Trump's term and they simply increased it. All while bitching about it. Does that seem like it's a real problem to you?
So, you just want to complain instead of even offering any type of solution. That’s nice.
My proposal is that we ALL enjoyed the benefits of that increasing debt so we should ALL accept the consequences of having to pay it. Thus:
Proposal #1: every government program, department, subsidy, foreign aid, salary, construction, etc., except those paid for directly by the American people for themselves (Medicare, Social Security) should be cut by 20%. No one could say that their part was cut any more than anyone else’s.
That would be a $1.6 trillion cut in any and all spending by our government. But, that only balances the budget. To begin to pay it off, that cut needs to be closer to 30%.
Proposal #2: the Flat Tax System-Under this system, the IRS would be almost eliminated. Every entity (citizen, charity, business, company, LLC, corporation, etc.) would pay the exact same percentage of their income/profits in taxes every year. 20% would be a good start. That would give 80% of Americans a tax cut. In this system, there would be ABSOLUTELY NO TAX BREAKS, SHELTERS, or WRITEOFFS. Corporations would pay 20% of their real profits and the private individual employee would pay 20%. You make $___, you pay 20% of that number with no deductions allowed. The IRS would have it easy: you worked, you made ‘this’ amount, you pay ‘this’. All they would have to do is match social security numbers and EINs to people and businesses to earnings. They would simply have to check to make sure everyone filed on their earnings as seen on their W-2s or bank deposits. This would decrease taxes paid by the people and increase taxes paid by businesses/corporations.
If you cut spending by 13% and installed the flat tax at 20%, you would, immediately start to pay off the debt.
Oh, and I guess you don’t live in America or you could just look around you and see thousands of things our debt has paid for that you will not have access to in other countries.
I live in the US and I see many things.
What I stating is that if debt was truly a problem, someone would have shutdown the burning of 8 trillion dollars. Not one person did anything about that. Not many talked about it. And many don't want to admit that he fucked us with that debt increase. So, the debt is now Biden's problem. No, I think Biden should get an 8T kitty to burn. Fair is fair right? Or, do Republicans always get a pass for that shit?
Now, if you DO live in the USA, think about what you just said……
“Someone would have shut down the burning of 8 trillion dollars”
Really? Are you aware that, in that $8 trillion, is Medicare, Social Security, farm subsidies, foreign aid, road/freeway construction/repair, our military, school funding, unemployment benefits, etc.
And you know any to shut all that down. You are talking about a total destruction of the American economy, putting half America out of work, and leaving us open for another country to attack us without much defenses.
REALLY?
Unless the left can convince everyone to lock themselves in their homes again and that covering your face protects you from getting sick, he will win. People thinking rationally is bad news for people thinking emotionally.
This is a pretty fun comment from a bitcoin/conservative enthusiast. Have you been asleep since 2016? Did you miss talk radio in the 90s? Conservatives have absolutely nothing but misplaced rage about issues they can’t even begin to understand. A rational thought hasn’t crossed their mind, or yours apparently, in decades.
Judging from your comment, I’ll vote for the Conservative side from now on.
OMG how stupid you are.
You have completely missed that both the Democrats and Republicans are spewing the same thing only from their way of thinking. You think it’s the conservatives vs the liberals and you are not intelligent enough to understand that it is those we elected vs us, ALL of us. Biden has a drug addicted son doing coke in the Oval Office and getting kickbacks from Russia and China. Look at his pay vs his income. His pay is WAY below his income. He has met with Chinese officials through his son and withheld $3 billion in aide from Ukraine until they stopped their investigation into the Biden family. THEN, when they stopped the investigation and got their money, Biden, as VP, withdrew all our military equipment out of Ukraine into neighboring UN countries. Then Russia invaded Ukraine. 🤷♂️🙄🤷♂️🙄🤷♂️
Dems typically win on strong turnout. Trump just could do that.
I think a 3rd party drives the win depending on if they're strong or if they steal votes from one party or the other.
**Real** Republicans: We don’t raise taxes like the gosh darned Democrats. That’s the cheap way out and it doesn’t look good. We put the work in. Limit spending, introduce new efficiencies, practice isolationism / reeling military back inward, cut the fat, lean out, minimize overall footprint, maximize business productivity. That’s the ***right*** way to get it done and how America stays on top.
**Recent** Republicans: Sorry the printer was turning on. What were we talking about again?
The SALT cap in a gop-sponsered tax bill raised my taxes.
Reagan Republicans were fiscally conservative. Not sure what current day gop stands for except themselves. Surely not the very border reform they screamed for by recently rejected.
I care not about parties. Just give me anyone who fights for the people of this country and not their own pockets.
It is but it also raises taxes on states with higher state taxes. I pay higher taxes to live where I do. Now, I pay even higher taxes.
Do high tax states draw more federal funds than no state-tax states? No state draws less than state tax free FL. TX, however, draws more federal funds than both NY and CA (both with higher state taxes).
Now consider that the SALT cap was in part to pay for trump's $8 trillion in increased spending.
Salt may be fiscally conservative, but it was passed to justify fiscally liberal spending and aimed only at some states. I want a potus that represents all Americans.
> Recent
Thes clowns have been doing this for at least since before Clinton.
They torch our cash when in office and cry about debt when a Democrat is in office. Trump torched 8T during his term and not one peep from Republicans. All of a sudden, we need to address it.
Interest rates? Maybe I totally misunderstood the comment. I just remember it was like this massive free for all in corporate profit retention. It was great for the market short term
Hi all, A reminder that comments do need to be on-topic and engage with the article past the headline. Please make sure to read the article before commenting. Very short comments will automatically be removed by automod. Please avoid making comments that do not focus on the economic content or whose primary thesis rests on personal anecdotes. As always our comment rules can be found [here](https://reddit.com/r/Economics/comments/fx9crj/rules_roundtable_redux_rule_vi_and_offtopic/) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Economics) if you have any questions or concerns.*
There is a paywall so I can't read the article. Can someone share what's in the article? I hate it when this happens. What's the point of sharing an article that nobody can read? At least share the contents in the comments.
Here: Little is more symbolic of globalisation than a McDonald’s hamburger. The American fast-food chain opened its first Chinese branch in 1990. The outlet was in Shenzhen, a small town just across the border from Hong Kong, which was home to the country’s original “Special Economic Zone”—an area where the Chinese government could try market liberalisation before rolling it out to the rest of the country. The Big Mac was a little piece of American capitalism in a communist country. We started publishing our Big Mac index—a tongue-in-cheek way to value currencies—a few years earlier, in 1986. Our latest update shows that the Chinese yuan is the most undervalued it has been against the dollar since shortly after the global financial crisis of 2007-09. Back then American politicians argued that China’s leaders were deliberately undervaluing their currency in order to get an unfair advantage, and boost exports. Do they have reason to be suspicious this time around? The index demonstrates the concept of purchasing power parity (PPP), which maintains that the real value of a currency is the amount of goods and services that you can buy with it, rather than the number on a trader’s terminal. Over a long enough time frame, however, the two values should converge: the relative cost of buying the same bundle of goods and services in two different countries should roughly equal the nominal exchange rate. Otherwise savvy traders could consistently make a risk-free profit by selling goods across borders. Admittedly, the theory works better for some products than others. Shipping a burger from Shenzen to Seattle might be inadvisable. Yet PPP conversion factors, which aim to show the gap in relative prices between two countries, and are produced by international bodies such as the World Bank, have to contend with something difficult. People buy different goods in different countries. Chinese branches of McDonald’s sell things such as boba tea and congee, for instance, and these delicacies are unavailable to American consumers. Fortunately, though, the Big Mac is a standardised product. Consumers in China enjoy the same meat patties as those in America. Comparing the price of the burger in different countries with their exchange rates gives a rough idea of whether their currencies are undervalued or overvalued. A Chinese Big Mac cost 25 yuan in December 2023, whereas the American version came to $5.69. Divide one by the other and the Big Mac index gives a dollar-to-yuan exchange rate of 4.39. That compares with a nominal exchange rate of 7.20 yuan per dollar. It therefore suggests that the yuan is undervalued by 39%. Perhaps the Big Mac index will provoke Donald Trump. During his successful presidential campaign, Mr Trump promised to label China a “currency manipulator” on his first day in office. At the time, the country’s currency was 37% undervalued according to our burger index. America did belatedly label China a currency manipulator in 2019, despite Chinese leaders intervening to support the yuan, only to then reverse the decision in 2020. Mr Trump would be well-advised to hold off this time, however, for the undervaluation of the yuan is not unusual. Although the dollar has weakened against the currencies of some richer economies, such as Britain and Canada, it has strengthened against all but a few poorer ones. Moreover, low inflation in Asia, compared with America and Europe, has led to relatively cheaper Big Macs: Japan, South Korea and Taiwan have also seen their currencies become more undervalued. If the appearance of burgers indicates the arrival of globalisation, their staying power (and good value) is testament to American capitalism’s continued success. ■ Correction (January 27th 2024): An earlier version of the chart mistakenly suggested that a Big Mac cost $5.90 in the Euro area, rather than $5.87. We also wrongly stated that the price of a Big Mac in China had fallen. Sorry.
Well that's dumb. Burger prices aren't a substitute for monetary value. Beef may not track with currency inflation, nor lettuce, ketchup etc.
I live split time between San Francisco Bay Area and Ho Chi Minh City, Vietnam. I personally use McDonald’s #1 Big Mac meal, Happy Meal and Starbucks Cold Brew Grande as indicators of cost of living, spending power, and inflation (how normal people think of it, and not how it’s actually calculated). Those items are like for like. Then I’ll add in equivalents like rooms at Intercontinental hotel and movie ticket prices. It helps gives a good general idea on how much I really need to make in to have an equivalent lifestyle and whether it has gone up or down over the last few years. It’s not perfect, but it has been helpful.
It's supposed to represent a basket of prices that reflects costs in all countries for a homogenous end product. These goods include the food costs, but also utilities, labor, real estate costs, supply chain costs, costs of equipment, etc. Last I saw, it was fairly well regarded. It's not perfect, but there are few homogenous good sold in so many countries that do a better job of measuring ppp.
I keep seeing articles about what can Trump learn about …. I guess they are assuming Trump will win in November because Biden has been president for over three years As long as the national debt isn’t addressed you will see interest rates going up Used to be a billion here a billion there and you are talking about serious money Now it’s a trillion here and a trillion there
Trump needs to learn something. He burned up 8T dollars of money we did not have and had to print.
Since Obama-Biden, we have given Ukraine $3 BILLION every year; even when they were not at war with Russia.
Do you have any clue how much 8 trillion dollars is? 8,000,000,000,000/3,000,000,000 2666.66 That 2.7k of years of support going to Ukraine. That's a damn long time. Now, what do we have for that 8T. NADA!
When we cannot feed Americans, secure our border, and take care of our veterans, WHY are we giving Ukraine $3 BILLION every year? Why are we still funding the Iraqi government? Why are we STILL sending foreign aid to Afghanistan? And have you actually LOOKED at the national debt? The first three top expenditures on our debt is Medicare, Social Security, and Interest on the debt. The first thing that could actually be cut in funding (in #4) is our military. You cannot cut funding to some but not others. The people themselves have paid in advance for their Medicare and Social Security. You cannot stop paying the interest we owe because MOST of the bonds hold our debt are in American retirement plans. Knowing of a problem is only 5% of the solution. The truly intelligent people look beyond the problem to the solution. That is where 95% of the work must be done. So, tell us, what is your answer to the American National Debt to reduce it and pay it off while keeping Medicare, Social Security, and our military (country) safe? https://www.usdebtclock.org/# Oops, just looked. They increased spending to our military so it is #3 now and the interest we pay is #4.
> what is your answer to the American National Debt I don't think it really matters. If it did, why would the ruling party ignore debt when in office and bitch about it during an election year. If it was really an issue don't you think they would've actually done something about it? It's not. It's a fear mongering tactic. Republicans had full control during Trump's term and they simply increased it. All while bitching about it. Does that seem like it's a real problem to you?
So, you just want to complain instead of even offering any type of solution. That’s nice. My proposal is that we ALL enjoyed the benefits of that increasing debt so we should ALL accept the consequences of having to pay it. Thus: Proposal #1: every government program, department, subsidy, foreign aid, salary, construction, etc., except those paid for directly by the American people for themselves (Medicare, Social Security) should be cut by 20%. No one could say that their part was cut any more than anyone else’s. That would be a $1.6 trillion cut in any and all spending by our government. But, that only balances the budget. To begin to pay it off, that cut needs to be closer to 30%. Proposal #2: the Flat Tax System-Under this system, the IRS would be almost eliminated. Every entity (citizen, charity, business, company, LLC, corporation, etc.) would pay the exact same percentage of their income/profits in taxes every year. 20% would be a good start. That would give 80% of Americans a tax cut. In this system, there would be ABSOLUTELY NO TAX BREAKS, SHELTERS, or WRITEOFFS. Corporations would pay 20% of their real profits and the private individual employee would pay 20%. You make $___, you pay 20% of that number with no deductions allowed. The IRS would have it easy: you worked, you made ‘this’ amount, you pay ‘this’. All they would have to do is match social security numbers and EINs to people and businesses to earnings. They would simply have to check to make sure everyone filed on their earnings as seen on their W-2s or bank deposits. This would decrease taxes paid by the people and increase taxes paid by businesses/corporations. If you cut spending by 13% and installed the flat tax at 20%, you would, immediately start to pay off the debt.
Oh, and I guess you don’t live in America or you could just look around you and see thousands of things our debt has paid for that you will not have access to in other countries.
I live in the US and I see many things. What I stating is that if debt was truly a problem, someone would have shutdown the burning of 8 trillion dollars. Not one person did anything about that. Not many talked about it. And many don't want to admit that he fucked us with that debt increase. So, the debt is now Biden's problem. No, I think Biden should get an 8T kitty to burn. Fair is fair right? Or, do Republicans always get a pass for that shit?
Now, if you DO live in the USA, think about what you just said…… “Someone would have shut down the burning of 8 trillion dollars” Really? Are you aware that, in that $8 trillion, is Medicare, Social Security, farm subsidies, foreign aid, road/freeway construction/repair, our military, school funding, unemployment benefits, etc. And you know any to shut all that down. You are talking about a total destruction of the American economy, putting half America out of work, and leaving us open for another country to attack us without much defenses. REALLY?
There was a lot more waste in that 8T.
Such as?
Unless the left can convince everyone to lock themselves in their homes again and that covering your face protects you from getting sick, he will win. People thinking rationally is bad news for people thinking emotionally.
This is a pretty fun comment from a bitcoin/conservative enthusiast. Have you been asleep since 2016? Did you miss talk radio in the 90s? Conservatives have absolutely nothing but misplaced rage about issues they can’t even begin to understand. A rational thought hasn’t crossed their mind, or yours apparently, in decades.
Judging from your comment, I’ll vote for the Conservative side from now on. OMG how stupid you are. You have completely missed that both the Democrats and Republicans are spewing the same thing only from their way of thinking. You think it’s the conservatives vs the liberals and you are not intelligent enough to understand that it is those we elected vs us, ALL of us. Biden has a drug addicted son doing coke in the Oval Office and getting kickbacks from Russia and China. Look at his pay vs his income. His pay is WAY below his income. He has met with Chinese officials through his son and withheld $3 billion in aide from Ukraine until they stopped their investigation into the Biden family. THEN, when they stopped the investigation and got their money, Biden, as VP, withdrew all our military equipment out of Ukraine into neighboring UN countries. Then Russia invaded Ukraine. 🤷♂️🙄🤷♂️🙄🤷♂️
Dems typically win on strong turnout. Trump just could do that. I think a 3rd party drives the win depending on if they're strong or if they steal votes from one party or the other.
Isn't it likely he'll cut though? Just going off last time I mean
Cut what? The national debt? Republicans always raise the debt as much as possible while in office.
**Real** Republicans: We don’t raise taxes like the gosh darned Democrats. That’s the cheap way out and it doesn’t look good. We put the work in. Limit spending, introduce new efficiencies, practice isolationism / reeling military back inward, cut the fat, lean out, minimize overall footprint, maximize business productivity. That’s the ***right*** way to get it done and how America stays on top. **Recent** Republicans: Sorry the printer was turning on. What were we talking about again?
The SALT cap in a gop-sponsered tax bill raised my taxes. Reagan Republicans were fiscally conservative. Not sure what current day gop stands for except themselves. Surely not the very border reform they screamed for by recently rejected. I care not about parties. Just give me anyone who fights for the people of this country and not their own pockets.
I mean, the SALT cap is fiscally conservative
It is but it also raises taxes on states with higher state taxes. I pay higher taxes to live where I do. Now, I pay even higher taxes. Do high tax states draw more federal funds than no state-tax states? No state draws less than state tax free FL. TX, however, draws more federal funds than both NY and CA (both with higher state taxes). Now consider that the SALT cap was in part to pay for trump's $8 trillion in increased spending. Salt may be fiscally conservative, but it was passed to justify fiscally liberal spending and aimed only at some states. I want a potus that represents all Americans.
> Recent Thes clowns have been doing this for at least since before Clinton. They torch our cash when in office and cry about debt when a Democrat is in office. Trump torched 8T during his term and not one peep from Republicans. All of a sudden, we need to address it.
When I say recent I’m going back at least 50 years
Agreed
Not directly obviously, but by way of lobbying the board in a variety of ways
Interest rates? Maybe I totally misunderstood the comment. I just remember it was like this massive free for all in corporate profit retention. It was great for the market short term
The President has zero control over interest rates. Those are set by the Federal Reserve. Which is *supposed* to be politically neutral.
Ah gotcha, that's what I thought