The Grande Latte Index

By now, we hope that you are familiar with the Big Mac Index compiled by The Economist. Now, The Wall Street Journal has developed the Starbucks grande latte index, a measure of the price of a grande latte in dollars across various countries to examine purchasing power parity. Of course, we have the same dollar purchasing power parity problem since a grande latte costs $4.30 in New York and $3.55 in Detroit and San Francisco. As with any financial or economic estimate, there can be a great deal of disparity on the answer. In this case, one expert estimates the value of the yen will fall to ¥120/$, while another argues that the yen is already devalued 12 percent from its fair value of ¥84/$.