Big Mac Index

I decided to try to get around the problem of the exchange rate, and how much cash I would have lying around, by using the Big Mac Index, which was developed by The Economist magazine. Basically, they say, never mind what the real exchange rate is, compare the cost of a Big Mac in the currencies, and that tells you the real exchange rate - i.e. what you can buy.

Trouble is, the last update to the Big Mac index was in January, and the dollar has dropped since then. Although they said that the £ was overvalued by about 5%. (Does that mean that I'll have 5% more money than before, or 5% less. Well, I'll have the same amount as before, but will it feel like 5% more or less? I can never work that out).

However, it does tell me what a Big Mac costs in the US in January: $3.15, and that probably hasn't changed. But (being a person of high moral standing) I have no idea what a Big Mac costs in the UK. What I do know is that in January, it cost the equivalent of $3.32 in pounds. And

So, off to the Universal Currency Converter, which tells me that on the 15th of January, a dollar was worth 56.2p. So a Big Mac must cost about 3.32 * 56.2 = £1.86.

At the perceived exchange rate 1 pound is therefore worth 3.15/1.86 = $1.69, and 1 dollar is worth 1.86/3.15 = 59p. So, when I ask Google what $1000 is worth in dollars today it tells me it's £530. But what it will feel like (which is more important) is £590.

Hurrah! I've just talked myself into a pay rise! (Or raise, I should say now).