The Big Mac Index (the economic BMI) is your quick thumb-suck measure of just how healthy (or unhealthy) a currency is looking. Basically, it makes the assumption that Big Macs should cost roughly the same everywhere – and where there are differences, that’s indicative of a currency’s relative strength or weakness.

The problem, of course, as with any rule of thumb, is that it ignores things like:

1. Different demands for Big Macs
2. Different supplies of ingredients
3. Different costs of living caused by trade walls and immigration barriers
4. Etc

Essentially, there are structural reasons why things cost less in developing countries and more in developed ones. I wrote about it in an older post: Why Bus Drivers In Sweden Earn More Than Bus Drivers In India.

But then the Economist (who prepares the index) went ahead and adjusted for different costs of labour. So there are now there are two varieties of index.

Here’s an Infographic Introduction

Which just about covers it.

Here are the updated Raw and Adjusted Indices for July 2016

The Raw Index:

The Adjusted Index:

And South Africa?

The South Africa specific raw numbers:

The South Africa specific adjusted ones:

Rolling Alpha posts opinions on finance, economics, and sometimes things that are only loosely related. Follow me on Twitter @RollingAlpha, or like the Rolling Alpha page on Facebook at www.facebook.com/rollingalpha.