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The iPod International Currency Index
Snad writes "The BBC is reporting that an Australian bank has adopted the price of Apple's iPod as a means of tracking international currency values. Similar to The Economist's Big Mac index, this 'iPod index' tracks the price of a 2-GB iPod Nano around the globe and uses purchasing power parity to determine relative currency value. A sample quote: '"The index suggests that the US dollar has potential to appreciate against a range of major currencies, with the Australian dollar about 15% overvalued against the greenback," said Craig James, Commonwealth Securities' head economist.' The cheapest place to buy an iPod is Canada — $144 (but Hong Kong and Japan are almost as cheap); the most expensive is Brazil — $327."
This is not very useful: the market value and intended targets of the iPod change from country to country.
You can safely assume the shiny gadget is a consumer good in the US, most of Europe, Japan, and other similarly rich countries. But in much of the developing world, it is a luxury item that local distributor(s) can afford to overprice (compared to its value in other markets) because they are only going after the 0,1 percent of wealthy people that can afford the item regardless if it costs 250 or 450USD. For this to make any sense, of course, you need to keep in mind that in many developing countries, there is no such thing as a large middle-class.
The Economist's Big Mac index is flawed for another, similar reason: going to Mc Donald's is considered cheap and unfashionable in Paris, France, while it the most hype thing to do in Cairo, Egypt, or Guangzhou, China. So despite the fact that you are talking about the exact same BigMac & fries, you are not considering the same product, because its perceived value changes considerably from place to place. I think I remember reading an Economist article that aknowledged this.
Hello! I'm a disaster waiting to happen!
Most expensive nano, most expensive PS3 (the 60GB version was R$8000 at launch - thats 3270 fscking dollars!!!!) And this in retail stores, not eBay or similar. Probably most expensive Macbooks as well. You know, we are all filthy rich here, so we don't mind paying such outrageous prices. Sigh.
Where is that guy who'd die defending what I had to say when I need him?
You really can't calculate a meaninful exchange rate based on the price of a single product, unless the economies of the two nations are inherently similar. Yes, MKs in Africa figure exchange rates based on the price of Coca-Cola, but that's between countries with more-or-less the same economy, and it's inherently an informal calculation anyhow. You can't meaninfully compare the currencies of the US and Australia that way, much less the US and Brasil.
The problem is that different kinds of goods and services are more or less expensive in different economies. You can get VERY different ideas about the exchange rate, depending on which product you look at. In one country, technology is cheap but labor is expensive. In another, technology is unaffordable but labor is cheap. In another, both technology and labor are expensive but food is cheap. If you compare currencies based on one product, you can get yourself quite seriously confused.
Exchange rates are also driven by trade balances, and just because one US dollar can be exchanged for eight billion Ubledubgongian Frankls does not mean that a product worth one dollar in the US will cost F8 billion in Ubledubgong. It may only cost 250 Frankls. Going the other direction, just because exchanging one US dollar only gets you 50p in England does not necessarily mean that 50p has the same purchasing power as $1 would have in the US. People who don't understand economics tend to assume it works that way, but it doesn't.
Cut that out, or I will ship you to Norilsk in a box.
Did you know that ipods only support 2 video formats (both of them MAC formats)
Last time I checked, the formats were MPEG4 and MPEG4-AVC/H.264 - hardly "MAC-only" formats!
We are an Apple reseller in Peru. Since we don't have local Apple offices we buy the iPods in the US and then import them. The discount is pretty much 8% for all countries that need to import them this way, then we pay shipping to Peru, 12% ad-valorem tax, add a 10% margin, and we have 19% sales tax.
Brasil has way higher ad-valorem, but has local Apple offices.
The US has only a 5%-8% sales tax.
Mexico has 0% ad-valorem since the consider the iPod a hard drive, and 15% sales tax.
So there are a lot of thing to consider... I agree, the Big Mac index should be more accurate.
If nothing else it shows the disparity in purchasing power for (high end) consumer electronics or luxury products. Don't tell me the iPod is not a luxury product in your country.
IANAE, but I doubt most people here are either. As far as I read the article it isn't a serious index. OK the BBC article doesn't make this clear, which says something about the BBC. The CommSec article is clearer and perhaps some people here would've done good reading it before going of on a rant about how ridiculous it is.
In economics oftentimes you just have to try and track things to see what effect they have. You get weird correlations sometimes, and sometimes they are meaningful. Sunspot cycles seem to be correlated to economic cycles, and a friend of mine found a (weak) correlation between the weather in New York and the NYSE index. Does this prove anything? I don't have an answer. However economics is as much about weirdness as it is about math.
And in the UK it's actually £0.79, not £0.99.