Peso’s undervalued, based on Big Mac

ANAHEIM, California – I haven’t been inside a McDonald’s in the three weeks that I had been here. That’s because there are a lot of absolutely better alternatives. Any fast food area in any shopping mall offers a variety of choices from Chinese to Greek, and you have to be terribly boring to insist on getting a Big Mac. Even if you are craving for a good ol’ burger, a chain called In and Out seems more of an "in" place to be seen at than a McDonald’s.

Still, McDonald’s is an international institution, a symbol of what is once outrageously successful in fickle America. It has fallen on hard times but you have to admire the all out effort it is exerting to get back on top. With Americans growing more health conscious, McDonald’s has come up with low fat, low carbohydrate offerings to appeal to followers of the Atkins and South Beach diets.

One other reason why McDonald’s is important is that it is in business practically everywhere in the world with one product that is pretty much the same wherever it is sold. This is why The Economist has lightheartedly developed what it calls the Big Mac index, as a way of comparing various currencies and determining which currencies are over or undervalued.

What does the Big Mac index tell us? It gives us an idea of how fast the world economy is growing. The answer to such a huge question depends "on how you convert the value of output in different countries into a common currency." The Big Mac PPP is the exchange rate that would leave a burger in any country costing the same as in America.

As The Economist explains, "converting national GDPs into dollars at market exchange rates is misleading. Prices tend to be lower in poor economies, so a dollar of spending in China, say, is worth a lot more than a dollar in America.

"A better method is to use purchasing-power parities (PPP), which take account of price differences. The theory of purchasing-power parity says that in the long run exchange rates should move towards rates that would equalize the prices of an identical basket of goods and services in any two countries."

According to the calculations of The Economist based on the price of a Big Mac, the Philippine peso is the world’s most undervalued currency. The average price of a Big Mac in four American cities is $2.90 (including tax). The cheapest shown in the table is in the Philippines ($1.23), the most expensive in Switzerland ($4.90).

Looking at this positively, this means we have a lot of upside, if we know what we are doing. We have all this potential for getting more value for the peso. On the negative side, we are probably this undervalued because we have lost the confidence of the world’s investors.

This probably means there should be little reason for the peso to deteriorate to 60 or beyond unless our politicians are absolutely determined to see it there. Sad to say, that seems to be what they are trying so hard to do. They are selling our country short by creating the conditions that present the country as an unstable banana republic. No wonder we are no longer in the radar screen of job creating investors, including those from home.

We should learn something from the Big Mac... if nothing else.

Obesity

Speaking of McDonald’s, Peter Jennings in a special report on the ABC Nightly News said it takes six hours of physical activity to burn off calories from a McDonald’s sandwich. I don’t think pressing the TV remote controller counts as sufficient physical activity for the purpose. That’s why America has an obesity problem. The American eagle may be replaced by the California Sea Lion as the national symbol.

This columnist who should lose about 20 pounds has never felt better in terms of his physical fitness than in this land of really fat people. In this land of plenty, I feel underweight. But if I stay here a bit longer, I may just end up blending with the environment. Eating out here has created an ethical dilemma of sorts for me. The servings are larger than I am used to back home and I can’t in conscience stand up without eating up every last greasy American fry (formerly French) on my plate.

I guess that partly explains why so many people here are fatter than they should be. On the ABC evening news, Peter Jennings also gave some statistics: 58 per cent of Americans want to lose weight and 30 percent are considered medically obese and must lose weight. Obesity is also costing the American health system $100 billion a year, according to the Surgeon General.

Things are so bad that, according to that ABC news feature, today’s children will likely end up as the first generation of Americans who would grow up to be less healthy than their parents. I guess, America’s fast food industry will have to take a lot of the blame for this national catastrophe.

But what should be done? The health fads of late, emphasizing more healthy food, lower carbohydrates and lower fat, should help if more people became more conscious of the need to eat healthy. Fat chance this will happen. As ABC pointed out, the cards are stacked in favor of high fat, high carbohydrate fare of fast food chains. After all, even the American government subsidizes a farming sector that grows all the food considered bad for America’s health.

Enter the smart entrepreneurs. There are thriving businesses that cater to the needs of big people. Bigger wheel chairs. Bigger furniture. Even bigger caskets. The social stigma of being overweight is no longer as bad as it used to be. It is politically incorrect to call a fat person fat. There is less social pressure to lose weight.

The time may come when the Surgeon General will make fast food restaurants post a warning on their offerings, like eating Big Mac with fries and all the soda you can drink may be dangerous to your health. Then again there is hope. Krispy Kreem, that popular doughnut chain, didn’t make as much money in the last quarter and experienced some beating at the stock market because the low carbohydrate craze has affected sales.

In America, anything that affects the waistline impacts on the bottom line. Maybe, when the health costs attributable to obesity soars significantly, economics will kick in to change America’s long running love affair with fat and carbs. Until then, this land of plenty would be the land of the plenty fat. That should keep the drug industry and the exercise gyms busy for a long time.

Oh My Gosh!

I have been on the road and was unable to re-edit my column last Wednesday like I usually do. There were a number of errors, grievous enough, for which I beg the readers’ forgiveness.

In the sentence which in part read "...to fill up 40,000 positions that is required for now. ..." should have read "....that are required for now...."

The sentence which read "We would be stupid to lose the momentum for sheer partisan politics" should have read "... to lose momentum because of partisan politics."

Enjoy

Now, here’s Dr. Ernie E.

As dessert was served to the visiting pastor, the hos-tess apologized for not having any cheese to go with the apple pie.

Hearing this, her little son slipped down from his chair and left the room, then returned with a small piece of cheese which he shyly placed on the pastor’s plate.

"Why, thank you, son," said the guest as he popped the cheese in his mouth, "You must have found the last piece! Where did you find it?"

Flushing with pride, the little boy said, "Oh, it was in the mousetrap."

(Boo Chanco’s e-mail address is [email protected])