The Big Mac Index Conspiracy Theory You Never Knew About
Math is a strange and complicated language — so, anyone who claims to genuinely understand the complexities of its weird combinations of numbers, symbols, and letters is either a crazy scientist with bristly white hair or a liar.
Whoever was responsible for inventing the financial markets on which the whole world depends was therefore an extremely brave person (and probably rather foolish). As if the mind boggling madness of algebra wasn't confusing enough, someone decided that we needed math to control our everyday lives. They may have drowned witches in the Middle Ages, but at least they had a simple system for selling potatoes. Fortunately, clever boffins have developed ways to help everyone try to understand financial figures.
One of those is the Big Mac Index, which was created by The Economist in 1986 and uses the price of its McDonald's namesake in different countries to judge the performance of currencies. Codenamed Burgernomics, the index suggests if existing currency exchange rates are over- or under-valued based on the price of a Big Mac burger in the countries being compared. Although designed to be a simple and fun way of explaining currency economics, some countries apparently take the index very seriously, leading to claims that Argentina had rigged the system (via The Irish Times).
The Big Mac Index revealed that Argentina had been underestimating its inflation rate
As explained by Inc, exchange rates compare the value of one country's currency with another. They are judged to be one of the most important ways of assessing the strength of a country's economy, alongside interest rates and inflation.
The Big Mac Index uncovered an inflation scandal in Argentina involving the price Big Macs were selling for in the country. While the Argentinian government's official figures showed average annual inflation increases of 10%, the index reported Big Macs were going up by 19% — a considerable difference that was not reflected in any other country (via The New York Times). If a country has a high inflation rate compared to others, its currency depreciates (via OFX).
According to The World, officials in Argentina artificially influenced inflation rates to make products appear cheaper than they actually should have been, so that workers did not need to be paid as much. However, Argentina's government argued that the interference was necessary to allow the country's industries to compete with those of the U.S.