The Big Mac Index has been around since 1986 so it is currently in it's 36th year. The idea is to use something that can be found in every country around the world as a form of gauge how your currency is performing. The Big Mac price would be taken against whatever price being in the US giving the starting point or base level as 0.
I looked at this chart today and knowing how much less the US Dollar can actually buy you today due to inflation. This is the case with every currency around the world as buying power has definitely dropped across the board with 99% of all currencies. Everything is relative depending on how well your economy and currency is performing. A salary freeze (many) along with a higher cost of living doesn't depict the full story for the bulk of citizens in South Africa.
What we also have to take into account is the various economies of these countries around the world as some are performing better than others. Take South Africa for instance having a super high unemployment and basically in a recession. The Big Mac price maybe one of the cheapest but out of reach for over half the population price wise. If 50% is unemployed and living under the bread line a R33 burger is the last thing on their mind. I can afford one and can tell you now R33 for a Big Mac is not really great value if your family is starving.
I read reports stating that many countries currencies are undervalued like Russia, South Africa, Lebanon and Turkey. One could look at it very differently as knowing South Africa can tell you the Rand is not undervalued and more like the US Dollar is over valued currently. The Rand at $14.66 is not really telling the entire truth considering how bad the economy is right now.
Lets rewind 5 years and see what the index told us in 2016/7 to try and understand some changes. Look at the US first seeing the Big Mac Price $4.93 - $5.65 today so roughly a 18% increase give or take. South Africa was at $1.77 and today is a little over $2.25 or 30% up. Imagine being a South African wanting to go on holiday knowing your best bet is Lebanon and Russia as they are in worse trouble than you?
Inflation heading upwards, unemployment through the roof and a country in tatters regarding it's credit rating. We all know about Turkey's trouble with their currency as the locals were buying Bitcoin to stop the bleeding. How can the index say the Turkish Lira is 58.7% undervalued as that is pure nonsense.
Yes there was an uptrend in December and not surprisingly as Turkey sold over $20 billion in Forex reserves to pin their currency up. The trend may have been halted in it's tracks but it is slowly making it's way back down again. The question is what currency would you be holding if you were a Turkey resident Bitcoin or Lira? To say that this currency is undervalued against the US Dollar is a joke as the Lira looks dead and buried.
What has changed over the last 36 years since this Hamburger Index was introduced is the scale of debt that has been taken on by every country. Not only national debt but serious money printing and the US is not alone in this except they seem to have printed way more.
I do think over the coming years we will either see a rest or a massive collapse of the world economies going into a serious recession. The fallout from closed economies has to have some negatives and I can see it currently in SA. Businesses are struggling and will take years to recover just to get back to 2020 levels prior covid.
