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Part II Economics

September 1, 1998

You know why international economics is so messed up?  A Big-Mac value meal, $3.19 in the states, is $4.50 here, and that's with the weak state of the yen right now -- 3 years ago, it was more like $5.50.  At the same time, a beautiful Aiwa (tm) tabletop stereo system, worth at least $400 in the states, only costs $180 here.  Even with a strong yen, it would still be a lot cheaper in Japan.   So, exchange rates mean absolutely nothing -- its all about what you are using the money to buy.  Well, duh, right?  But no, itís not that simple.  I mean, no matter what the exchange rate is, some things are going to be relatively more expensive in some countries than in others.  For instance, the price ratio of stereo to Big Mac is 400/3.19 (125) in the states, and 180/4.50 (40) in Japan.  So, in Japan, you can buy 40 Big Macs with one stereo, and in the US you can buy 125 Big Macs with one stereo.  If the international markets were actually working, this shouldn't be happening.  Or maybe it should be.  Whatever.  More importantly, these ratios do not change when the exchange rate changes, so it will always be relatively cheaper to buy Big Macs in the states.  I guess that's because beef is really hard to get in Japan and Aiwa is made in Japan so when itís bought in America tariffs and transportation costs are added, but that messes up my point so I will summarily dismiss those facts.  The fact is that I am rambling.  However, I would like, just once, to buy 80 Big Macs in America, bring them (speedily) to Japan, trade them for 2 stereos, return to the US, trade one of the stereos for 125 Big Macs, and then sell 80 of those Big Macs at street value. That way, I would be ahead 45 Big Macs and one phat stereo.  Aside from the perishable nature of Big Macs, why don't people do this?  Or are people already doing this?  And if so, how do I see some of that action?  Its seems to me that there is a lot of money to be made if you can figure out two goods that have vastly different relative values in two countries and that can withstand transportation.