Thursday, June 14, 2012

From Burgernomics to Dinarnomics - The Role of Dinars in the Threat of Liberal Economy

Initially it was Pam Woodwall from The Economist who introduced The Big Mac Index in September 1986. Since then these leading publications have routinely published The Big Mac Index, a humorous way to measure Purchasing Power Parity (PPP) in different countries.

Literally the way to measure this economic 'indicator' can really be digested in our stomach - because what is measured is in the form of food prices hamburger Big Mac from McDonald's restaurant chains around the world.

The theory is simple, the exchange rate of a currency is commensurate with a group of goods within a country. But this time a group of items was replaced with one item which is said to be sold worldwide - that is, yes hamburger Big Mac just now.

In its publication last week for example, we can learn from the following interesting numbers:

In America alone Big Mac did not increase from last year, which remained at the price of US $ 3.57; but in Singapore there was a 7% increase from Sin $ 3.95 (2008) to Sin $ 4.22 (2009). In Indonesia this increase reached 12% from Rp. 18,700 (2008) to Rp. 20,900 (2009). Pay attention to these price increases, it seems they are making adjustments to prices that are more or less the same as the inflation rate in the country concerned.

Big Mac Prices

When it's calculated with US $ then it turns out Big Mac which is sold in Rupiah (Indonesia) is the cheapest. Big Mac in Indonesia Rp 20,900 is sold for only US $ 2.05; compared to Singapore Sin $ 4.22 which is equivalent to US $ 2.88, and in its home country of US $ 3.57.

According to the initiator of the theory which then gave birth to what was called Burgernomics or the economy that is based on the price of this hamburger, if a country's currency produces the price of a hamburger (in US $) lower than the price of a hamburger in its home country, then that currency is relatively undervalued against US $. This means that there is a possibility that the currency will strengthen.

Based on the prices of Big Macs in each of our neighboring countries, for example, the Indonesian Rupiah (2.05) has a better chance of being compared to Singapore (US $ 2.88); but worse than Malaysia (US $ 1.88); Thailand (US $ 1.89); Hong Kong (US $ 1.72), and even China (US $ 1.83).

Because indeed it was never intended as a serious indicator, The Big Mac Index This has many weaknesses, including not paying attention to local components such as labor costs, rent fees, etc., which can be very different from one country to another.

Nevertheless there are good benefits as an international learning process: as a benchmark for assessing the strength of currencies - other money is not used ripe. Fiat currency has a character of inherent or default value from the currency itself; so it cannot be used as a fair scale.

On the contrary, real objects can be used as fair scales in bermuamalah because their values ​​are intrinsically carried away by these objects. It's just that I certainly don't choose hamburgers as the fair scale; I still chose the Gold Dinar as a benchmark because of its stable purchasing power and its availability reaching all the inhabitants of the earth throughout the ages.

So even though it is better than fiat money, it is not hamburger that is the standard scale but gold or Dinar. Wa Allahu Allah.

By: Muhaimin Iqbal

Undergroundtauhid/The Truth Seeker Media

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