this is like a podcast in that the lecturer is talking but he is doing little to write or change slide for us to follow
And all of this is done to see if one's country is either more expensive or less expensive then the Foreigner. (Relative to the goods in the basket) And more importantly, the PPP rate is highly subjective to compare the standard of living in different countries because it highly depends on what you put in the basket. If you would compare Big Macs in Norway to USA, norway would be way more expensive. Now you put a Nose Job in the basket, and sudenly, America is not that attractive.
Purchasing Power Parity was almost ignored after its invention until a few savvy right-wing politicians realised that it made economies with great wealth inequalities appear much richer than economies with fairer distributions of wealth. In reality, cheaper hamburgers=lower pay, unsafe and longer working hours for hamburger flippers. A Maid Index would be a more honest way to explain Purchasing Power Parity. Obviously, cheaper Maids means more money left over for everyone to buy more servants!
I would like to know if there is Any name for those listings where Instead of comparing Exachange Rates, what you are listing is the Amount of Hours you have to Work - in that country - to buy a certain basket of goods there. For instance, Buying a Bic Mac in Portugal may require - in average - for one to work half an hour; and 19 minutes in norway. What are those listings called?
So much for the Efficient Market hypothesis then! Apparently, well according to this video, you can beat the market professionals by buying and selling currency at its PPP value! The currency exchangers are not pricing the future value of the currency they're trading in. Naive nonsense! It's got nothing to do with currencies being priced wrong by the market. No, the greater the wealth inequality in a country the higher its PPP to nominal GDP ratio. The Big Mac index, what next? The Maid index?
Sorry but, now that I perfectly undestand what the PPP exchange rates are, you presentation is kind of poor. You don't make it at all clear that by calculation a PPP rate, you are just obtaining a theoretical Exchange Rate that should traduce the value of my money in some different currency. And that it' s ONLY, single PURPOSE, is to be campared to the ACTUAL true excahnge rate. By the dividing the PPP rate by the true exchange rate,
@RTX94