Saturday, February 23, 2013

The Starbucks Grande Latte Index

WSJ explains:

One way to determine how currencies stack up is purchasing-power parity, or PPP, which compares the amount of currency needed to buy the same item in different countries. A grande latte at Starbucks costs $4.30 in New York, but the equivalent of $9.83 using Norwegian krone in Oslo, and just $3.92 in Turkish lira in Istanbul.


  1. The fact that Oslo, Stockholm, Zurich, and Helsinki have higher prices is due to currency inflation, coupled with an industrious and talented workforce that has been able to produce goods that are in demand in Europe. When Europe and its currency falls, the price of the lattes will fall.

    Omar R. Valdimarsson of Bloomberg reports in article Iceland Foreshadows Death of Currencies Lost in Crisis that In the Nordic region that Iceland is a part of, Sweden and Norway have free-floating currencies. Denmark pegs its krone to the euro, while Finland is a full euro member. Sweden’s krona soared to a four-month record against the euro last week, while Norway’s krone touched a nine-year high in August as capital poured into the AAA rated nations. Yet the direction of those flows has varied as investors try to gauge whether the euro area is over the worst of its crisis, or whether they need to keep buying safer assets.
    In neighboring Norway, central bank Governor Oeystein Olsen said last week he’s ready to cut rates should the krone appreciate too much. Both Sweden and Norway rely on exports for about half their total economic output.

  2. I think it is time that we norwegians start being concerned about prices. We are being screwed by some international companies. And the prices are part of the tendency making Norway uncompetitive. And the STARBUCKS coffe is not that good. Let us demand money back when it is not perfect!