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

iPod vs. Big Mac Index

[NoSuchGuy]

The Big Mac Index is more suitable because it is a local index.

Because for a Big Mac you look at the local costs and industries.
(packaging, local labour cost, local agriculture (salad, meat...))

For an iPod you only measure the chinise output (packaging, chinese labout cost, chinise raw materials ...) and the local reseller cost and worldwide shipping cost.

Re:Won't work

[Calinous]

For me, it seems Brasil tends to be self-sufficient. As such, taxing imports is a good way to help local economy.
      However, here are other things to take into account:
-gold is used or usable to evaluate the strength of a currency - but "gold is forever", and the market for gold is open to transactions in both ways.
-oil is considered the blood of the current civilisation. As such, oil is an absolutely needed item, and every buyer works on an open market
-iPods are a trend, at which some people adhere. They are not forever, there is no open market for them, and they certainly are not important for surviving (unlike oil)

      So, taking the price of the iPods to evaluate a currency is wrong on many levels (but might give an insight). It is just considering that US Dollar is more valuable than Euro starting from the premise that gasoline is cheaper over the pond than in the First World

Not good PPP measure

[rlp]

I agree with the posters that the Big Mac index is a much better metric for purchasing price parity. But I don't think an Ipod index is worthless. I suspect it correlates well with the competitiveness of the local retail market as well as government regulation and taxation. If you adjusted the price for PPP (i.e. apply the Big Mac index), the resulting metrics could be a measure of local market efficiency (competitiveness and degree of govt. interference).

Re:Won't work

[Black Perl]

Here's another problem: Apple fixes the prices of the iPods, at least in the US. Dealers can't go below list prices. Mail-order places like MacMall compensate for the inability to lower the price by throwing in free stuff.

I don't know if this is a good or bad thing for their index, but as a measure of true market value it sure is lousy.