Burgernomics

"Burgernomics" provides a sexier way of measuring price changes in a commodity that we are all familair with, while being a bit more enticing than a loaf of bread. Otherwise known as the Big Mac index, an idea the Economist originated, or it may have been dreamt up by the MacDonalds marketing team.

Essentially, what it does is show the purchasing power of any particular fiat currency against a standard and consistent good such as the Big Mac. The assumption is there were Big Macs in the 1980's and there are Big Macs, everywhere now. The difference is in the price and this reveals something about the money.

I had a converstaion with a customer recently, he said he remembered our verts being twenty pounds. In fact, he was buying a new pair to possibly replace his previous pair, which he was still wearing, after acquiring them on a trip to Zimbabwe in 1995, or there abouts.

30 years later its time for a second round

Our trousers, that I have always called verts, are also a standard, consistent good, like the Big Mac and almost as famous, if one considers the relative marketing spend from one to the other. Contemplating what my client had said, I googled the price of a Big Mac in the UK in 1995 and it seems to have been about two pounds. Thirty years later a Big Mac is said to be five pounds , by The Economist, in a recent article referencing the Big Mac Index.

So that is two and half times more than what a Big Mac used to be, but what it really means is the Pound is two and half time less than it used to be. In Zimbabwe, we have had more than our fair share of infaltion so much so, in fact, that the Zimbabwean dollar, like the Dodo, is extinct.

What we have in its place is the United States dollar, but nothing smaller than a one dollar note. No dimes, in other words. This leads to interesting pricing arrangements. You can have six bananas for a dollar, or four apples but you cant have two apples because you cant have change, unless you want it in bananas. Equally, in a supermarket you can buy a loaf of bread for one dollar and ten cents and then take 6 pens and some chewing gum to make up the change for your two dollars.

Of course, the problem here is you went out to get some bread and now you have more pens than you ever had before, but you still lose them. What you have is confusion and that is what we have all around us. Look at the gold price its now four thousand dollars an ounce and there was a time when it was fifty dollars, for a very long time. It just was fifty dollars.

We feel the same, we make our trousers and apply the same margins we always have and that is that. The price keeps going up because there is something funny with the money. Interestingly enough, if you happen to be borrowing lots of money like our governments do this " funny with the money " works in your favour. The worst case scenario is borrowing and printing a currency into oblivion, which is what happened in Zimbabwe.

What do you do if you dont have another fiat currency that you can adopt, because they all have the same problem ? This is when I sometimes ask myself is Zimbabwe actually more ahead of the game, by being so far behind, effectively being lapped by everyone else? If this happened to be a track race, we are so far behind that we are now in front of the pack, so to speak.

My conclusion to all this is we need a currency that is not managed by a government and I can only think of one. Its Bitcoin and we will be selling our trousers in BTC, very soon, We will, of course, continue to sell in Pounds. My guess is the BTC price will be going in the opposite direction, which will make a welcome change.

The Big Mac