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wulfgar

The Big Max index and inflation

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Over the past 10 years USD in circulation has increased by an average of 6.27% pa. Note I always include the population in the calculation, so since the US population grows by about 1% pa, I'll use that as the deflator.

28/10/2004...........707,151 $M FRN in circulation to 30/10/2014...........1,297,194 $M

http://www.federalreserve.gov/releases/h41/

6.27% - 1% = 5.27% average monetary inflation for the last decade.

Now let's choose a test for this, how the famous Big Mac index.

http://www.economist.com/blogs/graphicdetail/2014/07/daily-chart-20
 

 

 

That puts US inflation at 5.26% Y/y.

Big Mac Index

Date............ US Price ......... Y/Y % change
7/14.................4.80..................5.26%
7/13.................4.56..................5.31%
7/12.................4.33..................6.39%
7/11 ............... 4.07 .................9.11%
7/10................ 3.73................. 4.48%
7/09.................3.57..................0.00%
7/08.................3.57..................4.69%
7/07.................3.41.................10.00%
5/06.................3.10 .................1.43%* annualized from 6/05
6/05 ................3.06 .................5.59%* annualized from 5/04
5/04 ................2.90

According to the US consumer price index 2004 Sept....189.9, 2014 Sept.....238.031, they have had an average of 2.3% inflation for the period. Of course the official figures are manufactured concoctions.

 

An interesting comfirmation of my theory that the domestic value of the currency is determined by the quantity of cash in circulation per person.
 

Edited by wulfgar

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I was under the impression Big Macs were cheap in the USA. I thought fast food was cheap in the USA.

Is that more expensive than Australia?

In fact I'm pretty sure, 4.80 US dollars is more expensive than most euro countries?

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I was under the impression Big Macs were cheap in the USA. I thought fast food was cheap in the USA.

Is that more expensive than Australia?

In fact I'm pretty sure, 4.80 US dollars is more expensive than most euro countries?

That was my impression (and experience from ~ 10yrs ago). From memory the 'list' price is dearer but it's cheaper because of coupons and deals. ie there are coupons and deals all over the place and virtually no one pays the sticker price. A bit like our Dominos - I'm constantly bombarded with coupons that would get me a basic pizza for $5 but if I didn't have one I'd pay double that. 

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I was under the impression Big Macs were cheap in the USA. I thought fast food was cheap in the USA.

Is that more expensive than Australia?

In fact I'm pretty sure, 4.80 US dollars is more expensive than most euro countries?

  When comparing common wages the Australian worker earns more big macs per hour than his American counterpart.

 

  The nation wide US minimum wage is $7.25 hr (although some states have higher minimums). That buys 1.5 big macs. This will rise in the near future, but rises in the American basic rates aren't annual events like they are here. Even though the FED constantly devalues the domestic USD.

 

 In Aus the minimum wage is $16.87 hr so with the local big mac at $5.80 , the local worker earns 2.9 big macs phr and is way better off than his American counterpart.

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