AUD $, page-12

  1. 1,257 Posts.
    The Economist magazine says you buy a big mac in each country. In theory they should cost the same because if they don't then smarties like Kaitie, Cerhob, Sliders, Sandune and Fforrest will go and buy a container load of them where they are cheap, ship them to the dear country and sell at a profit.

    So "correct" exchange rate for USD/AUD is = (big mac price in Altamont) / (big mac price in Point Piper).

    Still it is just a theory. (Purchasing Power Parity theory by name). I think really there is no such thing as correct FX rate. It is just supply and deand like everything else.
 
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