Big Mac Index and the British Economy

August 28, 2012

Is the British Pound a “shadow of it’s former self?”  Possibly, if you take the Big Mac Index as an indication.  In reality, that actually depend on the goals of the central banks.  Sure, the Pound went from 18% overvalued to 4% undervalued in a matter of 5 years, but is an undervalued currency necessarily a bad thing?  China has been systematically devaluing their currency, the Yuan, for years in order to increase exports (see the comparison between the Big Mac Index 2007 and the Big Mac Index 2012).

 

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gold price December 6, 2012 at 4:38 pm

The flip side comes with the Indian Rupee, which had been hitting record lows last year. Here, we’re talking about a 60% undervaluation. Ukraine, Hong Kong and Malaysia come close at over 40% undervaluation. If you wondering China’s Yuan is the 5th most undervalued currency using this statistic, also more than 40% undervalued vis-a-vis the US dollar.

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