Forget the Renminbi, Revalue the Latte

Forget the Renminbi, Revalue the Latte

September 18, 2006

(Greenwich, 9/18/06) You won’t see this story any place else. In a terrific piece of investigative journalist I have discovered that Starbucks has devalued the Latte in China. It’s a little difficult to read the type in the “steath photo” I took with my little spy camera at the Beijing Starbucks last week–I spent a lot of time there–but if you look closely you will see that the 3 cup sizes in the photo are not Venti, Grande, and Tall we are familiar with in the US but Grande, Tall, and Short. Someone has kidnapped the Venti.

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The prices of the 3 sizes, translated into US dollars, were about the same as we would pay in the US which means the “per ounce” prices in China are actually higher, not lower, as many Americans believe. (using one ounce of cappuchino–defined in Wikipedia as 1/3 espresso, 1/3 steamed milk, and 1/3 foam–as the unit of account I have determined than one unit of cappuchino in Beijing is 50% more expensive (the tall/short volume ratio being 12/8=1.5) , measured in US dollars, as it is in the US.

This discovery has major implcations for global currency markets. Instead of revaluing the RMB by 25% as the US government wants, my research indicates that china should actually devalue the RMB by 50% to restore Cappuchino Purchasing Power Parity (CPPP) and correct global imbalances. I am trying to get this information to Treasury Secretary Paulson before his meetings in Beijing this week to avoid a potentially disastrous policy mistake that could have global repercussions.

JR

John Rutledge

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