Once I noticed an interesting thing — the same coffee in New York costs twice as much as in Bangkok.

It led me to ask: how do people generally compare prices between countries?
This is where the concept of purchasing power parity, or PPP, as economists call it, comes in handy.

At its core, PPP is based on a simple idea — the so-called law of one price.
If you take the same product, say an iPhone, then after adjusting for the exchange rate, its cost should be roughly the same everywhere.
It sounds logical, but in practice, it’s more complicated.
Taxes, shipping, local demand — all of these influence the final price.

Therefore, economists look not at a single product, but at an entire basket — food, clothing, housing, energy.
By comparing this basket across countries, you can understand which currency is actually stronger.
This is the real-world application of purchasing power parity in action.

Why is this needed?
When calculating a country’s GDP, PPP helps understand the actual standard of living.
Take India — if you look just at the exchange rate, per capita income seems tiny.
But if you consider purchasing power parity and the fact that everything is cheaper there, the picture is quite different.
The IMF and the World Bank use PPP-adjusted figures for this reason.

There’s a fun way to test PPP in practice — the Big Mac Index.
A hamburger is the same everywhere, but prices differ.
If a Big Mac costs five dollars in the US and three dollars in India, it says a lot about the currencies.
Later, indices like the iPad Index, KFC Index emerged — the principle is the same.

But PPP isn’t perfect.
Product quality can differ, even if they look the same.
Plus, there are goods that aren’t traded between countries at all — real estate, hairdresser services, electricity.
Their prices depend on local conditions and vary greatly.
Inflation can also break all calculations — what worked a month ago might no longer be relevant.

And where PPP becomes especially interesting is in the world of crypto.
Bitcoin and stablecoins are global assets, not tied to a single country.
But in countries with weak currencies, where PPP shows low real incomes, people often use crypto as a way to preserve their savings.
In hyperinflation scenarios, stablecoins become a lifeline — they allow maintaining purchasing power while the local currency collapses.

Here’s the point: PPP helps explain why cryptocurrencies are so popular in certain regions.
It’s not just speculation — it’s a real necessity.
Purchasing power parity shows us where people are seeking alternatives to traditional money.

So if you’ve ever wondered why things are cheaper abroad or why crypto is so popular in developing countries, now you know — it’s all about PPP and the real value of money in different parts of the world.