The Global Burger: A Leading Economic Indicator The Economist's Big Mac Index compares the price of a Big Mac in dozens of countries, using the hamburger to draw conclusions about the strength of each country's currency. In a recession in which no one relishes a strong currency, China's Big Mac remains unsustainably cheap, and at $6, Switzerland's is wildly overpriced.

The Global Burger: A Leading Economic Indicator

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GUY RAZ, host:

Chef Ruhlman doesn't eat too many Big Macs, but the number crunchers at the Economist magazine depend on the all-beef patty with special sauce, lettuce and cheese. The magazine's Big Mac Index is now out, and it shows how much the burger costs, in dollar terms, in dozens of different countries.

Mr. GREG IP (U.S. Economics Editor, The Economist): Essentially, the Big Mac Index is a very simple way of finding out whether a country's currency is overvalued or undervalued against the dollar.

RAZ: That's Greg Ip. He is the Economist's U.S. economics editor.

Our producer, Zoe Chace, has been looking into the Big Mac Index.

Hi, Zoe.


RAZ: Zoe, it costs about $3.50 to get a Big Mac here in the U.S. What would that buy me in China, in Beijing?

CHACE: Well, one Big Mac here is about two in China, and that actually tells us…

RAZ: I get two Big Macs in China.

CHACE: Yes. One Big Mac here, two in China for the same price, and that tells us a lot, actually, about the relationship between China and the U.S. because China keeps the yuan artificially low.

RAZ: Their currency.

CHACE: That allows them to export cheap goods to the U.S. But the recession has shown that it's dangerous to have your economy so heavily dependent on exports. And so when you look at the Big Mac Index, you see the Chinese haven't really changed their economic strategy at all.

RAZ: They're still keeping the yuan artificially low.

CHACE: So that more people will buy their goods around the world.

RAZ: And more of us can buy more Big Macs there.

CHACE: Sure.

RAZ: Okay, so you have more Big Mac for your buck in China. What about anywhere else in the world? Is it a bargain here in the U.S. compared with any other countries?

CHACE: Yeah, it actually is. The index shows the Big Mac generally costs more all over Europe. It means the euro is overvalued against the dollar by about 30 percent, and that's a big problem for countries like Germany, which, like China, rely heavily on exports.

RAZ: Okay, so where does the Big Mac cost most?

CHACE: Switzerland.

RAZ: What are they doing? Putting, like, foie gras on it?

(Soundbite of laughter)

CHACE: A Big Mac is like $6.00 in Switzerland.

RAZ: $6.00?

CHACE: I know. They're not happy about it.

Here's Greg Ip again.

Mr. IP: Their economy has actually been beaten up quite a lot. Their banks have got some problems, and their central bank has already lowered interest rates to zero in an effort to boost the economy.

What they would like to happen now is for their currency to also go down against other currencies. This would help their exports and take some of the pressure off the rest of the economy to keep people at work. But as you can see from our Big Mac Index, it hasn't been working very well. In fact, according to our Big Mac Index, the Swiss franc is overvalued by 68 percent.

RAZ: That's Greg Ip of The Economist magazine, recommending you cross the border into France or Italy to buy your Big Macs. And here in the studio is our Zoe Chace.

Zoe, thanks.

CHACE: You're welcome.

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