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What Inflation?

McD-EconomistEconomists have frequently used the Big Mac Index to compare prices in different countries as a marker regarding exchange rates. It is nearly the perfect product as it is available nearly everywhere and quality and portion-controlled tightly by McDonalds Corporation. It can also be used domestically as this quote from munKNEE demonstrates:

The Big Mac Index vs. the Consumer Price Index Since 1986, the price of a Big Mac has increased 171% from $1.60 to $4.33 today. During this same time period, the consumer price index has increased at a much lower rate of 109%….In 1986, $1 would have purchased over half of a Big Mac. Today you would have to cut the Big Mac into five pieces and only eat one of the five pieces for $1. Consequently, each dollar we have is buying a lot less.

Who you going to believe? The Bureau of Labor Statistics or McDonalds?

The question sort of reminds me of the classic scene from Dr. Strangelove when the coke machine has to be blasted into. You'll have to watch the movie.