Why Are the Inflation Numbers Fake? - FX Hedge Newsletter

“Big Mac index” - FX Hedge Newsletter

The Big Mac at McDonalds is a surprisingly good inflation indicator because it has so many inputs.

• Yes, it’s food (at least in theory), but it contains a wide array of foods (or food-like lab byproducts) including beef, grains, a couple of vegetables, a variety of plant-based oils, cheese, etc.
• But it also includes labor costs. 
• And fuel costs to cook the patties. 
• And a different fuel to power the trucks that transport the ingredients. 
• It also includes utility costs to keep the McDonalds open. 
• Don’t forget the wrapper and bag your sandwich comes in. And so on.

How does the Big Mac index compare to the most common inflation metric, the consumer price index? The latest annual CPI reading is 3.0% while the same time period for the Big Mac index shows an increase over 8% — more than twice the “official” rate...