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."

Comments

Stupid idea

[sfogel]

The Big Mac index is so good because the price of the Big Mac involves a little bit of everything: tradable products (meat, bread, etc), labor, services, rental, etc. It is cheap, and usually not subject to any special taxes. The iPod is an imported luxury good, and thus its price is subject to arbitrary decisions by dealers and governments. No good.

An iPod index makes no economic sense

[patiwat]

The reasoning behind the Big Mac index is that for the most part, McDonalds tries to produce the burgers using the cheapest available inputs. Thus, the Big Mac index is representative of the cost of a bundle of food-related inputs. Much of the time, this means locally produced inputs. A country with low cost beef and wheat will have relatively cheaper Big Macs, whereas countries with expensive beef and wheat (or high input tariffs) will have relatively more expensive Big Macs. In the long run, a country with cheap inputs will tend to export to countries with expensive inputs, thus weakening the currency of the importing nation and strengthening the currency of the exporting nation.

The idea of an iPod index makes no economic sense. The reason that an iPod is expensive in Brazil, India, and Thailand isn't because labor, LCDs, and Flash Memory are expensive in those countries. An iPod costs the same to produce no matter where it is sold. The only main difference is in import duties and sales taxes. Import duties and sales taxes have nothing to do with the long-term direction of a country's currency. This index is a waste of time.

Re:Won't work

[vhogemann]

As such, taxing imports is a good way to help local economy.

I'm sorry to disagree with you.

How overtaxing things that will never be produced at Brazil, and that have NO local competition help the economy? Last time I checked, every single DAP out there comes from somewhere at Asia.

The government is just making it harder for brazilians to have access to technology...

And yes, I'm from Brazil. And it suck to be forced to pay double the price for every piece of IT equipment, sometimes MORE.