Have a Heart

Former Vice President, Dick Chaney, at 71, got a heart transplant over the weekend  (see: LA Times Story) ... to the consternation of many with Chaney Derangement Syndrome (CDS).  The Internet is full of  snipes deriding Chaney's medical good fortune with churlish comments which don't need any further airing.  I have been listening to talk radio this morning to many accusing Chaney's of line busting (and not).  Bottom line, it appears that, today, people of wealth and notoriety can only earn an advantage in the organ transplant lottery by paying to be listed on multiple transplant lists.

Many knowledgeable callers have said that each of these lists now have strict guidelines to keep movers and shakers from moving to the head of the line unfairly ... and after all Chaney has waited twenty months (with a mechanical heart-pump) for an organ transplant ... unlike Mickey Mantle and John Phillips who, years ago, did appear to have gotten favorable treatment (given the apparent expedited speed of their organ transplant operations.)

But no matter on what side of the CDS spectrum one resides, to me, it is a blessing that Dick Chaney should be with us for some more years.  He is a national resource in that he has been at the center of much of the history-making events over almost forty years and many of his (and President G.W. Bush's) policies are still in effect to push back against international terrorism.  So much of what he knows still is to be captured and writ large in determining how this country continues to navigate our way through the minefields that still await us.

The Big Mac Index

Being that my wife and I are traveling to France this fall, I am watching the euro, hoping against hope that it will deflate relative to the dollar before we have to pay the bills then.  One of the more interesting ways of comparing monetary exchange rates is by using the Big Mac index created by The Economist magazine.  I won't go into the details of this calculation here but those of you who are curious please visit The Economist for its very interesting algorithm.  The bottom line is that the euro seems to be overvalued by about 35% ... which means that the euro should currently trade at about $1.10 per euro ... not the current $1.45 per euro.  Wouldn't it be nice if this adjustment were to occur before our trip?

Another salient part of this investigation involves what might happen to the economy in the European Economic Community before and during our trip.  Any shocks here might well affect the exchange rates to which we would be subjected  To pursue this analysis I have found an interesting website that shows the cost of credit default swaps (CDSs) in many countries (see: Credit Default Swap Costs).  Think of this credit default swap data as the cost to buy insurance against a particular country defaulting on $10 million of its 5-year sovereign debt.  Obviously, the higher the cost ... the greater the risk of default ... and the greater the chance of this country's currency deflation. 

Today, it costs $47.35 for such insurance against the U.S.'s sovereign debt versus $164.84 against France's (and $2,218.27 to insure Greece's).  Now the euro is used in many of the countries represented in this table so to be very accurate, one would have to use a GDP-weighted average of these CDS figures.  So, forgetting about how our Federal Reserve Bank and the European Central Bank intervene to manipulate these exchange rates, surely the cost of the euro would/should move close to the Big-Mac-index parity figure by the time of our trip.  If it doesn't, I think then my wife and I will be buying lots of Big Macs in France this fall.