Exchange rates | The Big Mac Index

Currencies are very dear in Europe but very cheap in Asia

THE Big Mac Index is The Economist’s light-hearted guide to exchange rates. The index is based on the theory of purchasing-power parity, which says that exchange rates should move to make the price of a basket of goods the same in each country. Our basket contains just one item, a Big Mac hamburger. The exchange rate that leaves a Big Mac costing the same everywhere is our fair-value yardstick. Many of the currencies in the Fed’s major-currency index, including the euro, the British pound, Swiss franc and Canadian dollar, are overvalued and trading higher than last year’s burger benchmark. Only the Japanese yen could be considered a snip. The dollar still buys a lot of burger in the rest of Asia too. China’s currency is among the most undervalued, but a little bit less so than a year ago. The full index is available on our website by 7pm London time on Thursday July 24th.

Exchange rates | The Big Mac Index | Economist.com.

According to this, the Swedish Kroner, along with other European currencies, are very much overvalued. Damn.

Let them eat bugs

Green.view | Let them eat bugs | Economist.com

A new, abundant and environmentally friendly source of protein is creating some buzz

The world is getting hungrier. After years of falling food prices, eating is suddenly getting expensive. With price-tags now rising some 75%, the World Bank estimates that the soaring cost of food will push 100m people into poverty. What with rising fertiliser prices, increasing concerns about deforestation and unreliable rains brought on by climate change, how will we find new sources of nourishment?

Scientists at the National Autonomous University of Mexico have an answer: entomophagy, or dining on insects. They claim the practice is common in some 113 countries. Better yet, bugs provide more nutrients than beef or fish, gram for gram.

Yum!

Ambush marketing | Playing the game

Ambush marketing | Playing the game | Economist.com

Rival brands, as well as athletes, compete at sporting events

TAKING your hat off at the door may seem like a throwback to a more genteel age. But the practice lives on at modern sporting events. Dutch buyers of Heineken beer were given green hats to wear to the recent Euro 2008 football tournament. Anyone who tried to enter a stadium wearing one, however, as many fans did in 2004, was asked to remove it. The hats were an “ambush marketing” campaign, in which companies try to promote their brands at sporting events without paying sponsorship fees. Heineken’s rival, Carlsberg, was an official sponsor of Euro 2008, paying $21m for the privilege. A few TV close-ups of fans wearing Heineken hats would have cost very little by comparison. This was just one of 18 examples of ambush marketing at Euro 2008 identified by researchers at Coventry University Business School.

Ambush marketers have replaced hooligans as the villains of sporting events, because they undermine official sponsors, which are the main source of revenue in some sports. The stakes are highest at the Olympics. This year 12 firms, including Coca-Cola, Samsung and Visa, have paid a total of $866m to be official sponsors of the Beijing Olympics—and they want exclusivity.

Global markets | Bearish battalions

Global markets | Bearish battalions | Economist.com

Almost everything that could is going wrong for world stockmarkets

THEY rarely ring a bell at the bottom of bear markets. Investors who thought they had heard a tinkling sound when Bear Stearns, a failing American investment bank, was bundled into JPMorgan Chase in March have been disappointed. The Dow Jones Industrial Average is now weaker than it was in the spring (see chart).

The American stockmarket had its worst month since 2002 in June and is now down more than 20% from its peak, the definition of a bear market. It is not alone. According to Standard & Poor’s, a rating agency, the value of global stockmarkets fell by $3 trillion during the month, thanks in particular to a 10% decline in emerging markets.

Share prices are suffering because of the outlook for four forces that impel stockmarkets: economic growth, profits growth, interest rates and inflation (see article). At the moment, the first two seem to be slowing while the last two are rising. That is the worst possible combination.

Visas | Beauty and the Geek

Visas | Beauty and the Geek | Economist.com

A new bill proposes more visas be allocated to fashion models

IT’S not often that fashion models are paired with IT workers, except in the lurid fantasies of computer geeks. But because of a decision made back in 1990 they must compete for the same over-subscribed H-1B, a temporary work visa for specialised occupations. Until 2004, when the government lowered the cap on the number of H-1Bs it issued, it didn’t matter so much. But now demand has far outstripped the limited number of visas available, and many foreign models are being denied the chance to sashay down America’s catwalks.

Anthony Weiner, a New York congressman, wants to fix this tragic glitch. He has proposed a bill amending the rules so that the models will be reclassified into their own special immigration category. This would free up more visas for the nerds; and it would allow 1,000 models to strut their stuff in America each year, compared with just 349 in 2007, half the annual number admitted between 2000 and 2005.

The visas for models bill is still far from becoming reality, and comprehensive immigration reform is a distant dream. Luckily though, supermodels like Gisele Bündchen are in the clear. They are eligible for O-1 visas, given to those with “extraordinary ability,” like Nobel laureates.

An amusing read. Sorry for giving away the ending paragraph, that made me laugh a bit.

The power and the glory

The power and the glory | Economist.com

EVERYONE loves a booming market, and most booms happen on the back of technological change. The world’s venture capitalists, having fed on the computing boom of the 1980s, the internet boom of the 1990s and the biotech and nanotech boomlets of the early 2000s, are now looking around for the next one. They think they have found it: energy.

Many past booms have been energy-fed: coal-fired steam power, oil-fired internal-combustion engines, the rise of electricity, even the mass tourism of the jet era. But the past few decades have been quiet on that front. Coal has been cheap. Natural gas has been cheap. The 1970s aside, oil has been cheap. The one real novelty, nuclear power, went spectacularly off the rails. The pressure to innovate has been minimal.

In the space of a couple of years, all that has changed. Oil is no longer cheap; indeed, it has never been more expensive. Moreover, there is growing concern that the supply of oil may soon peak as consumption continues to grow, known supplies run out and new reserves become harder to find.

Chinese invention | Question marks

Chinese invention | Question marks | Economist.com

Why did China’s scientific innovation, once so advanced, suddenly collapse? A British academic made this question his life’s work

FEW people, other than scholars, will be familiar with the story of the Cambridge don whose study of China’s scientific history helped to change the West’s appraisal of a civilisation once thought hopelessly backward. By the time Joseph Needham died in 1995, he had published 17 volumes of his “Science and Civilisation in China” series, including several that he wrote entirely on his own.

The Chinese began printing 600 years before Johannes Gutenberg introduced the technique in Germany. They built the first chain drive 700 years before the Europeans. And they made use of a magnetic compass at least a century before the first reference to it appeared elsewhere. So why, in the middle of the 15th century, did this advanced civilisation suddenly cease its spectacular progress?

Education and sex | Vital statistics

Education and sex | Vital statistics | Economist.com

TRADITION has it that boys are good at counting and girls are good at reading. So much so that Mattel once produced a talking Barbie doll whose stock of phrases included “Math class is tough!”

Although much is made of differences between the brains of adult males and females, the sources of these differences are a matter of controversy. Some people put forward cultural explanations and note, for example, that when girls are taught separately from boys they often do better in subjects such as maths than if classes are mixed. Others claim that the differences are rooted in biology, are there from birth, and exist because girls’ and boys’ brains have evolved to handle information in different ways.

Luigi Guiso of the European University Institute in Florence and his colleagues have just published the results of a study which suggests that culture explains most of the difference in maths, at least. In this week’s Science, they show that the gap in mathematics scores between boys and girls virtually disappears in countries with high levels of sexual equality, though the reading gap remains.

Cognitive disenhancement | From he that hath not

Cognitive disenhancement | From he that hath not | Economist.com

NEW drugs may help to enhance people’s mental powers (see article). But a study carried out by Pamela Smith, of Radboud University Nijmegen in the Netherlands, and her colleagues suggests a less pharmacological approach can be taken, too. Their work, just published in Psychological Science, argues that simply putting someone into a weak social position impairs his cognitive function. Conversely, “empowering” him, in the dread jargon of sociology, sharpens up his mind.

Cognitive enhancement | All on the mind

Cognitive enhancement | All on the mind | Economist.com

FOR thousands of years, people have sought substances that they hoped would boost their mental powers and their stamina. Leaves, roots and fruit have been chewed, brewed and smoked in a quest to expand the mind. That search continues today, with the difference only that the shamans work in pharmaceutical laboratories rather than forests. If asked why, the shamans reply that they are looking for drugs to treat the effects of Alzheimer’s disease, attention-deficit disorder, strokes, and the dementias associated with Parkinson’s disease and schizophrenia—and that is the truth. But by creating compounds that benefit the sick, they are offering a mental boost to the healthy, too.

Such drugs are known as cognition enhancers. They work on the neural processes that underlie such mental activities as attention, perception, learning, memory, language, planning and decision-making, usually by altering the balance of the chemical neurotransmitters involved in these processes. This week a report* from the Academy of Medical Sciences, a British learned society, says that a large number of such brain-affecting drugs are likely to emerge over the next few decades. Sir Gabriel Horn, a researcher at Cambridge University who chaired the group that produced the report, reckons that scientists are working on more than 600 drugs for neurological disorders.

History suggests that most of these will fall by the regulatory wayside, but given their numbers, a fair few are likely to be approved. And although none of the companies working on cognition-enhancing drugs designed to treat illness intends to license them for wider use, that is what is likely to happen—at least going by the growing “off-label” use of existing drugs such as Ritalin (methylphenidate) and Provigil (modafinil) by people who want to pep themselves up.

All that glitters

Market.view | All that glitters | Economist.com

PLENTY of people believe in owning gold as a safeguard against hyperinflation or financial apocalypse. They see the rise in gold to more than $1000 an ounce earlier this year as signalling the debasement of paper money, particularly the dollar.

But what does the price of gold really tell us when measured against other assets? One particular ratio that might be of interest is the relationship between gold and the oil price (see chart). In other words, how many barrels of oil does it take to buy an ounce of gold?

According to Capital Economics, if we go back to the early 1980s, it has taken, on average, 16 barrels of oil to buy one ounce. Given that the current ratio is around 7, that suggests either that oil is very expensive or gold is very cheap. Indeed, if you believe in the latter, then gold could be heading above $2000 an ounce.

Read to the end before investing all your assets in gold.

Zimbabwe | Billionaires’ woe

Zimbabwe | Billionaires’ woe | Economist.com

Zimbabwe issues a Z$500m banknote, as inflation rockets to unbelievable highs

A BOTTLE of beer may cost half a billion dollars; by next week it could be a billion. Hyperinflation in Zimbabwe reached a terrifying 355,000% in March, with prices doubling roughly once a week. It is probably much higher now. In a vain attempt to keep up, the country has just issued a Z$500m banknote, which is worth some $2 (or less by the time you reach the end of this sentence). The billion-dollar note is surely on its way. After a decade of recession Zimbabwe is reaching all sorts of extremes: it has the fastest-contracting peacetime economy; its people are fleeing both repression and chronic hunger; life-expectancy is plummeting to the mid-20s. Despite all this, Robert Mugabe, the incumbent, expects to win a run-off presidential election on June 27th.

Life-expectancy in the mid-20s?!

I was looking for a place to buy these and I found some on eBay! At $24 for something that’s worth about $1, that’s quite the profit margin.

Obama leads in superdelegates for first time

globeandmail.com: Obama leads in superdelegates for first time

WASHINGTON — Barack Obama erased Hillary Rodham Clinton’s once-imposing lead among superdelegates Saturday when he added more endorsements from the group of Democrats who will decide the party’s nomination for president.

Mr. Obama added superdelegates from Utah and Ohio, as well as two from the Virgin Islands who had previously backed Ms. Clinton. The additions enabled Mr. Obama to surpass Ms. Clinton’s total for the first time in the campaign. He had picked up nine endorsements Friday.

The milestone is important because Ms. Clinton would need to win over the superdelegates by a wide margin to claim the nomination. They are a group that Ms. Clinton owned before the first caucus, when she was able to cash in on the popularity of the Clinton brand among the party faithful.

I thought the cover of this week’s The Economist was very fitting.

Is IKEA the World’s Largest Charity?

mental_floss Blog » Is IKEA the World’s Largest Charity?

If it’s possible to assemble a piece of IKEA furniture without cursing at the top of your lungs, I’ve never seen it happen. There’s always a missing piece of hardware, an unclear spot on the instructions, or an excruciating amount of hex wrenching to be done. The next time you ball your fists mid-assembly and curse all things Swedish, though, try to calm down. After all, IKEA’s just another charity trying to get by.

Wait, what? You read that correctly; IKEA’s technically a charity. But before you write down the umlaut-riddled name of your most recent dresser purchase as a charitable donation on your next tax return, it’s worth exploring this ownership structure, which was brought to light by a 2006 article in The Economist.

Ingvar Kamprad founded IKEA in Almhult, Sweden in 1943 when he was just 17 years old. Kamprad originally sold low-priced consumer goods from his home and by mail, but added a furniture line in 1948. As the company began opening its trademark sprawling stores, Kamprad grew fabulously wealthy, although he retained frugal tastes like driving an aging Volvo and always flying economy class. By some debated estimates, Kamprad is the world’s richest man, and even Forbes’ more conservative accounting pegs him as the seventh-richest person in the world with a net worth in the neighborhood of $31 billion.

Here’s the original article. Looks like a very clever way to avoid paying taxes.

The $200 barrel of oil?

Oil | The $200 barrel of oil? | Economist.com

OIL briefly reached another record on Tuesday May 6th as West Texas Intermediate traded at over $122 a barrel for the first time. Ten years ago a barrel fetched around $15. The feeble dollar, soaring demand and supply constraints have all helped to push up prices by 25% in the past four months alone. And there is little sign of respite for worried governments and consumers. This week Goldman Sachs, a bank, predicted that oil could reach $200 a barrel before the end of the year.