Frisolac 1 Gold costs RM49.50 today when it was only RM45.00 two months ago – a whopping 10 percent increase within a span of only 2-month. With the current high petrol price, it’s not worth scouting around hoping to find cheaper Frisolac at some secluded shops. That’s a freaking high inflation if the basket of inflation was set to better reflect the actual daily consumption goods. People are getting used (or rather forced) to pay more but sadly served with smaller portion of foods. Politicians from ruling government are still screaming the country’s economy and fundamental are in superb condition though.

You’ve heard how some poor parents are substituting pricey infant formula with diluted condensed milk, rock sugar water or even black coffee and plain tea to feed their poor little infants. Instead of switch gear to boost economy and attract foreign investors, the ruling government still plays the racial card to stay in power. Guess it’s easier to move a mountain than to change a 50-year-old’s mentality. After an eight-day losing streak, its longest since its peg to the dollar was scrapped in July 2005, the ringgit finally staged a technical rebound today. The ringgit climbed 0.3 per cent to 3.3170 per dollar as of 4.45 pm in Kuala Lumpur compared to 3.3372 yesterday *phew*.

Worry not because politicians such as Second Finance Minister Nor Yakcop is ready to point his finger-of-blame to the strengthening of U.S. dollar. However there’re speculations that the Asian central banks have step in to help stabilize their currencies including Malaysia Central Bank (Bank Negara) today. Depending on whether you’re earning U.S. dollars or local currencies, the weakening ringgit or other regional currencies could be a blessing. Now, before you jump the gun and pull the trigger at me, you should take a step back and evaluate if things were really getting any better when the local currency (such as ringgit) was strong. I doubt so and if you care to buy shop for groceries or other daily goods you would noticed it makes no difference if local currency is strong or weak. Of course now certain quarters have obvious excuse to raise prices again.

Strangely there are economists who will tell you Asian currencies are mostly under-valued including Hong Kong. The reason – Big Mac Index says so. The Big Mac Index is based on the theory of purchasing-power parity (PPP), which says that exchange rates should move to make the price of a basket of goods the same in each country. The so-called basket however contains a single product – a Big Mac hamburger.

Based on July 2008 Big Mac Index, it appears that Norway’s Kroner is the most over-value currency – about 121 percent which means it costs more than double just to get that piece of burger. Sweden, Switzerland, Iceland, Denmark, Britain, Turkey and Canada are some of the countries which you should avoid their McDonald’s outlet. However if you happen to be in Kuala Lumpur then grab as many Big Macs as you can because it is freaking cheap due to its cheap currency (ringgit) which is under-value by a mind-boggling 52 percent, never mind that a piece of the burger will costs you RM5.50 *ouch*. In Indonesia it will costs you Rupiah 18,700 for a hamburger but still cheaper compared to Singapore.

But a Honda Accord in USA will only burn about US$21,000 (RM69,000 based on RM3.30 to a dollar) in your pocket while it would easily costs you more than double in Malaysia. Therefore I can’t argue that US dollar is under-value using Honda Accord Index, can I? And definitely I’m not going to load Hondas into my garage. As I’ve mentioned before, I would welcome the weakening of ringgit or the strengthening of dollar and I’m sure other U.S. options or stock traders will feel the same, no?

Other Articles That May Interest You …

• Governor Dr Zeti to resign, getting rid of final gatekeeper?
• Fuel hike from RM1.92 to RM2.70, Char-Kuey-Teow RM7.50?
• Things are getting uglier; I wish ringgit goes back to 3.80
• Why Can’t Public Enjoy the Benefits of Strong Ringgit?
• Oil price hike – Badawi’s greatest Economic Challenge
• Maths Genius Sufiah enjoys Sex career, no Regrets

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August 13th, 2008 by financetwitter

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