Everything you need to know about the cost of hamburger and inflation
Next time you pick up a hamburger or a delicious ground beef taco, remember that not only do you possess an amazing meal but also the key to foretelling your economic future! Strange as it may sound, ground beef can tell economists how well the world is doing financially, and you can plot how much you're going to spend on food.
The odd connection between your burger, your wallet and the world
Have you ever been about to eat some delicious ground beef and wondered how the price you were about to pay for that beef was a measure of the health of the national economy? If you're like most people, then probably not. Still, major economists, congresspeople and stock market analysts all keep a keen eye on the hamburger and what it means for your wallet, your pantry and the world.
The price of a Big Mac
Yes, in that image, that's a real congressman talking about the price of a Big Mac on the floor of the House. Now, it should make you wonder what, exactly, we're spending our tax dollars on when Congress is debating the price of a Big Mac. It should make you wonder about other things when said congresspeople are arguing over Big Macs while standing next to charts that improperly identify what appears to be a Whopper as a Big Mac.
Anyway, the point Maryland Representative Chris Van Hollen is trying to illustrate is inflation — the fact of life that causes prices to gradually increase over time. Inflation is basically why in the 1960s a burger cost 10 cents and in the 2060s will cost north of $10 (probably). As you can clearly see, the price of a Big Mac has increased nearly $2 in the past 10 years.
The price of a Big Mac all over the world
The problem is that this chart is not only mislabeled but also potentially misleading. Hard to believe that a congressional burger chart might not tell the whole truth, but just because a burger costs more doesn't necessarily mean horrible things for the economy. Or for you.
That's why The Economist created the Big Mac index, which shows how much it costs to buy McDonald's famous burger anywhere in the world. There's also the Big Mac minus inflation index, which looks at the cost of the burger vs. national inflation.
What those two indexes show is that you don't want to buy a burger in India and that you are paying almost 2 percent more for a Big Mac this year than you did last year.
Why should you care again?
This all might sound like the kind of junk they talked about in the economics class you skipped in college, and you'd be right. However, the price of hamburger (what should be a key component of a Big Mac...) is a pretty good barometer of how much you should expect to pay for food.
Hamburger is considered a survival item and something people have to buy to feed themselves. It's a huge worry to economists if ground beef becomes so unaffordable that no one can eat it.
To make matters worse, you've probably noticed how much you're paying for food is skyrocketing. That's because the price of food is increasing faster than inflation is (almost 2 percent, according to the Big Mac index). We're at a point now where ground hamburger is over $5 a pound in many places, and the trend is that when the price of hamburger rises, other food prices rise too.
That means once you notice the price of burgers rising, you can pretty much head home and redo your food budget, because everything else will be jumping too. Sadly there's not much you can do about it, but you can at least know it's coming.