I’ll take a Big Mac and the Crawfish Bisque

Twenty years ago when I went to Hong Kong for the first time, I was amazed out how cheap McDonald's was. I know, go all the way to the Far East and what are you doing eating that American crap! I am a very adventurous eater, I try anything. I love to eat strange foreign things. Breakfast however is a different story. Asian breakfast is just too bland. When it starts with a bowl of rice porridge, things can only go downhill from there.

I recently went to Hong Kong again and found myself transported back 20 years. McDonald's is still cheap there! The Economist magazine puts out a Big Mac Index every year showing the price of a Big Mac in 120 countries. (Check out the chart I posted, you will need to click it to enlarge the chart). The purpose is to show purchasing power parity and the over or undervaluation of foreign currencies against the dollar. For example you will pay over $7 US Dollars for a Big Mac in Scandinavia and only $1.41 in China. This shows the overvalued Kroner and the Chinese Yuan is undervalued to the US Dollar.

The second cheapest place to buy a Big Mac in the world was Hong Kong. The interesting piece of this fast food puzzle is the Hong Kong Dollar has been pegged to the USD since 1983. Hong Kong also has relatively high labor costs now and the rents so high you would get vertigo writing the check each month. Hong Kong, Tokyo, Manhattan and London are always neck and neck for the highest commercial rents in the world.

So what gives? When I can go to Causeway Bay and order two English muffins, sausage and scrambled eggs and orange juice for $2.50 US and get a bowl of crawfish bisque for an extra .80 cents, this is fast food heaven! I find the McDonald's Hong Kong prices 60% cheaper than Manhattan prices.

With a pegged currency the only explanation is the lack economic restraints. Could 60% of the costs be chalked up to regulatory and bureaucratic fat? According to the Heritage Foundation’s annual Index of Economic Freedom ranking, they put Hong Kong again at #1 for 2008 for economic freedom. http://www.heritage.org/Index/country.cfm?ID=HongKong

Hong Kong runs a tight ship. Last week they announced that they had an extra 5 Billion (In US Dollars) they needed to return to tax payers. This was not an American style rebate to help juice the economy by printing more money. It was an actual old fashion kind of surplus. The kind that you have when more money is left over after you pay all the expenses, you know those strange exotic types of surpluses. The tax payers will get a 75% rebate on their taxes paid and the checks will be sent out over an 11 month period. When asked why so long to get the rebates out, finance minster Tsang said, “we do not want to send out the checks immediately because we fear taxpayers will spend the money and worsen inflation”.

What a contrast to the politicians here in the America. They want people to spend it, and fear they might save it.

Can high tax rates, soaring budget and trade deficits and a choking regulatory environment explain why a Big Mac is 60% more expensive here than in Hong Kong? I think so, I would love to hear your take on it. Meanwhile “I’ll take the crawfish bisque and some fries to go please.”

Hey buddy can you spare 168 Billion?

Did the last “tax rebate debate” go a little too fast for you? It went scary fast for me. Remember the good old days; you know the “2000 Bush tax rebates.” Ah, the fights, the deals, the arm twisting, it was like a six month battle before they decided to give 38 billion. Last time it was $300 and $600 but no kid credits. This round they threw in kids and some small business and franchise incentives and rounded it up to 168 Billion in less than a month! The rebates grew in size by 300% since the 2000 rebates! I am predicting the next slowdown they will probably announce 600-700 billion dollar rebates and they will approved them within a week.

In this case I wish it was just election year political prostitutes that allowed the give-a-way to happen so fast. I see a problem much greater than politics at work here. I am not against lower taxes, I am against rebates. It never fixes the problem, it makes it worse. Like some chronic spender that runs to the check cashing store and pays 1% a day because they need it now. They never took the time to stop and fix the problem permanently; it is easier to just put off the hard decisions for another day. The government just ran to the corner check cashing store and cut itself 168 big ones.

We are in the biggest bubble in the history of the world and they are trying to just move the paper economy from one bubble to the next. When they want you to “spend” the rebate and not “save” it, that is a huge clue how much hot air is in the system.

The reality, we are broke. The United States is broke. Well “we still have more ink in the printer” broke. A 3.1 trillion dollar budget for 2008, who are we kidding? That is 10k per man, woman and child! So my friends in Washington have budgeted $60,000 for my family of six this year as my proportional share of this year’s federal budget. I don’t want to sound ungrateful but “what do I get for my 60k and do I need to pay it this year?”

You see giving rebates are much easier pills to swallow politically than having the guts to bite the bullet and take out a machete to the entire system. We can at least get really good at giving great rebates! You know “vote for us, we know how you love rebates and we bring em to ya big and fast, like In-N-Out Burger without all the mess!”

If you ever want a real eye opener, Jump on a plane and go to Dubai. You will find a country that provides a better standard of living for all it's citizens than the United States does! Here is the real trick. No income taxes! The place is absolutely fantastic and just shows you that a good, intelligent, honest King, beats a democracy hands down. Democracies are great at smoothing out the Lyndon Johnson types and moving on, no big deal. Unless a good King is willing to live 300 years, it is a safer bet to run a democracy. The big down side, as democracies mature, it’s the inertia of the spending that goes into the election cycles that makes even honest men and women slaves to their constituencies. We just have too much invested to elect an impartial politician today. It is not their fault; they run on what is popular. Paying for our past financial mistakes now is not popular. I am sure I might have ruffled a few red white and blue feathers with that one, but before you respond, you need to make a trip to Dubai first.

Dubai has a modern, global, safe, laid back, resort feeling drenched in happy people. Did I mention duty free shopping and free emergency medical care for everyone? I could do an entire story about Dubai, but let Uncle Sam show you a slice of the good life; just buy your ticket with your next tax rebate!