Ask western policymakers how they intend to squeeze growth from their sluggish economies and most pin their hopes on higher exports. That makes exchange rates an especially sensitive topic. A weaker currency improves the competitiveness of a country by making exports cheaper. It also encourages domestic consumers to switch from expensive imports to domestic goods. The Economist’s exchange-rate scorecard, the Big Mac index, shows that currencies continue to be cheap in the developing world but overvalued in Europe.

The index is a lighthearted attempt to gauge how far currencies are from their fair value. It is based on the theory of purchasing-power parity (PPP), which argues that in the long run exchange rates should move to equalise the price of an identical basket of goods between two countries. Our basket consists of a single item, a Big Mac hamburger, produced in nearly 120 countries. The fair-value benchmark is the exchange rate that leaves burgers costing the same in America as elsewhere.

Asia remains the cheapest place to enjoy a burger. China’s recent decision to increase the “flexibility” of the yuan has not made much difference yet. A Big Mac costs $1.95 in China at current exchange rates, against $3.73 in America. Our index suggests that a fair-value rate would be 3.54 yuan to the dollar, compared with the current rate of 6.78. In other words the yuan is undervalued by 48%.

Other Asian currencies such as the Thai baht and the South Korean won are also undervalued. The Brazilian real is one of the few emerging-market currencies that is trading well above its Big Mac benchmark. With interest rates high—the policy rate now stands at 10.75%—Brazil has attracted lots of attention from yield-hungry investors. Burgernomics suggests that the real is overvalued by 31%.

The Big Mac numbers should be taken with a generous pinch of salt. They are not a precise predictor of currency movements. The bulk of a burger’s cost depends on local inputs such as rent and wages, which tend to be lower in poor countries. Consequently PPP comparisons are more reliable between countries with similar levels of income.

So it is particularly interesting to see that on a burger basis the euro is still overvalued when compared with many other rich-world currencies. Sovereign-debt worries and soggy growth rates have helped shift the currency towards its fair value over the past 12 months. A year ago the euro was overvalued by 29% on the burger benchmark; that figure is now down to 16%. (Britain’s currency has gone from being mildly overvalued this time last year to slightly undervalued now.) And the single currency has been moving back up again in recent weeks, on hopes that stress-test results, which were due out on July 23rd, will shore up confidence in Europe’s banking system.

Other currencies are dearer still. Investors looking for a safe place to put their money have sought refuge in the Swiss franc. Despite attempts by the Swiss central bank to stem the appreciation, the Swiss franc is overvalued by 68%. Those on the hunt for a value meal should also steer clear of Scandinavia. In Norway a Big Mac would set you back by 45 kroner or $7.20, nearly twice the cost in America.

More

ShareThis

Bit tired now. Off to London tomorrow; there and back. Weekend has flown therefore I guess I’m enjoying myself #

ShareThis

A couple watching whales from a sailboat got a close-up view when a southern white whale soared out of the water off Cape Town and landed on their boat, snapping the mast.

This species of whale navigates by sound and has poor eyesight meaning it may have simply not heard the sailboat, which had its motor off, The New York Post reported.

Paloma Werner said “Our boat’s engine was off and so the whale just didn’t know we were there, we were just the wrong boat, in the wrong place at the wrong time.”

Ms Werner and her partner, Ralph first saw the whale in the distance and spent an hour watching it. “It appeared about 120m away from our boat and then it went under the water again. Suddenly I heard my partner shout and when I looked around, I saw the huge thing breaching on to the deck. Instinctively, I took cover as the mast came crashing down. I saw my partner, Ralph, dive for cover behind the yacht’s wheel. Then the whale slid down the side of the boat and back into the water. As soon as I realised that we were unhurt, we checked to see how much damage had been done. Luckily, we weren’t taking on water so we started the engine and headed for shore. I saw the whale reappear further away. When we got back to land, I realised how lucky we were to have survived.”

ShareThis

US President Barack Obama may have to reconsider his decision to abandon plans to return to the Moon – it seems our closest galactic neighbour is still throwing up surprises.

Last year, NASA’a Lunar Reconnaissance Orbiter (LRO) dipped into a low orbit around the Moon and almost immediately returned results.

Early in May, it found lost Soviet rover Lunokhod 1, which wandered off course 40 years and stopped sending signals back to Earth. Later that month, it sent back an amazing image of a three-storey high boulder which had rolled across the Moon’s surface before toppling into a crater. Now it may have confirmed a theory that scientists had held about the Moon since the 1960s – its surface may hide a vast network of tunnels. If they exist, such tunnels could offer the kind of shelter that would allow humans to live on the Moon.

“They could be entrances to a geologic wonderland,” lead researcher Mark Robinson of Arizona State University said.

The series of photos were taken by the LRO when it passed over the Marius Hills, a location on the Moon known for its multitude of “rilles” – the long channels on the surface which first led scientists to propose the tunnel theory.

In December last year, Japanese orbiter Kaguya spotted an enormous pit in the middle of one of the Marius Hills rilles. It was about 70m wide and dropped more than 90m to its floor. The LRO recently returned clearer images of the pit which now have scientists believing it may be a “skylight” in a buried lava tube. Not surprisingly, alien watchers have jumped on the discovery, claiming its the perfect lair for extraterrestrial life, but Mr Robinson said if the tunnels existed, they could have a practical use for humans.

“The tunnels offer a perfect radiation shield and a very benign thermal environment,” he said. ”Once you get down to two metres under the surface of the moon, the temperature remains fairly constant, probably around -30 to -40 degrees C.”

Just what we would do once we got there is anyone’s guess, but given that other recent discoveries point to the fact the Moon may hold 100 times more water than we think , habitable areas could be worth noting.

Read more: http://www.news.com.au/technology/moon-find-may-point-to-habitable-tunnels/story-e6frfro0-1225893374953?from=public_rss#ixzz0uCT1f07O

ShareThis