Big Macs and the Cost of Living Crisis

This is an overdue submission from mainstream media. The good thing is that this particular inflation example cannot be denied.

33% increase in food prices can be seen in many other products. The general inflation is of course due to reckless COVID spending and rising energy prices as well as reckless and ineffective sanctions.

33% increase also applies to health insurance in Europe as well as rents.

Now, I wish we had journalists who would pick up these issues in a timely manner and not two years after the damage has been done and is too big to ignore.

There's one factor that isn't mentioned here that really should be: the cost of real estate.

Australia used to have a really good quality-of-life. This all started to change in the 2000s when housing prices skyrocketed. Now look at the median prices for Australian major cities [1]. Over $1.1 million for Sydney as the median price.

Now bear in mind that wages haven't changed that much in the past 2 decades. A good salary is still $100-200k and not much more than that. Any job you have in tech in Australia, outside of Google, is likely to still start with a 1, maybe into the low 200s.

Now if you happen to have bought 20 years ago, you're fine. If not, you're screwed. In an election a few years ago, the Opposition threatened to remove or reduce negative gearing and they pretty much lost because of it. What is negative gearing? The ability to deduct losses on investment properties against your ordinary income. Crazy, right? For a country where buying your primary residence is increasingly out of reach. More [2].

Why does this matter? It affects commercial real estate too. Now imagine 20 years ago a lot for your McDonald's franchise and the building cost $500,000. Now it's $2.5 million. That cost is built into every burger sold.

Rising house prices are simply stealing from the next generation and it cannot continue indefinitely. The end state here is a sea of housing people have to spend their entire income to pay for dotted with the occasional Aldi store and a bunch of virtual kitchens.

[1]: https://propertyupdate.com.au/the-latest-median-property-pri...

[2]: https://www.afr.com/property/residential/why-albanese-can-t-...

It's important to also note that these deals from before still exist when using each fast food chain's app. They have some insanely good deals there, while they increase the costs of non-app users in order to subsidize frequent app users' cost, I suppose.

I guess this is probably related:

Soup Dumpling Index: How prices compare around the world - https://news.ycombinator.com/item?id=41172923 - Aug 2024 (3 comments)

I really wish editorial-style reporting would stop doing this particular style of article. It's very hard to browse and and jump between visual landmarks, whilst the dynatism offers very little for making the subject-matter more compelling.

Sadly this article does not give any clue about how the evolved the income/profit of the mother holding of McDonald's. This is probably where we can check if big mac inflation went to profit and dividends or just covering expenses.

In my experience burger prices are going down this summer. Whopper and McDouble value meals are reasonably priced now, and coupons for Big Macs are more plentiful.

The worst part is the shrinkflation which is the biggest insult as this occurs.

Governments cannot handle the money printers and elastic currencies are a scam.

When they talk about things "costing more", I think that framing is confusing. Things don't cost more the dollars instead cost less.

Why does the y-axis of the price chart not start at 0?

Is it just me that's a little perplexed by this article? It begins with a promise to explain what drives burger prices and what it tells us about the cost of living. It then concludes that the prices are driven by some nebulous combination of forces and says nothing about the cost of living.

“This is why interest rates are an effective tool for lowering inflation”

Increasing interest rates just increases government transfer payments but the money goes to people who already have money, and they happily spend it.

Any reduction in spending is matched by an increase in a different demographic.

Once the central bank starts increasing interest rates that’s what drives inflation.

The real reason increasing interest rates is a popular response to inflation is because of academic capture by right wing libertarians, all to benefit the wealthy.

After all, if there are inflationary pressures it’s the creditors that lose out unless they can charge more interest.

TLDR:

> McDonald’s royalty fees, which redirect profits overseas, went up by 29 per cent that year — more than 10 times faster than its sales did.

For Australia, it's not wages or ingredients, it's royalty fee.

Discussion by actual Australians :

https://old.reddit.com/r/AusEcon/comments/1ek6rk0/whats_driv...

The most important quote is :

Do you seriously think McDonalds has that much market power to be able to raise margins without any issue? If you're having trouble finding an alternative to McDonalds, you might need to reconsider your weight mate.

Also, this ABC article is fucking bullshit, putting quotations on domestic profits. The RBA calculates the profits based on the sales and costs accrued domestically, and profits are usually offshored through transfer pricing or intercompany lending after the fact. Hence, the calculation of their measure regarding profit margins and profit share as a % of the economy accounts for offshoring as it considers the sales and costs a company incurs before any of this income is shifted overseas.

Not only that, but I also don't think McDonald's has the market power to raise its profit margins as high as a telecommunications monopoly when you can walk yourself down the road for a cheaper burger that's better in quality. There's a reason why the sales for McDonald's are going down. If you can't handle McDonald's raising its prices, eat a god damn salad.