Tag Archive: purchasing power

The Purchasing Power of Capital, Report 29 Sep

We discuss capital consumption all the time, because it is the megatrend of our era. However, capital consumption is an abstract idea. So let’s consider some concrete examples, to help make it clearer. First, let’s look at the case of Timothy Housetrader. Tim has a small two-bedroom house. Next door, his neighbor Ian Idjit, owns a four-bedroom house which is twice the size.

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Asset Inflation vs. Consumer Goods Inflation, Report 1 Sep

A paradigm is a mental framework. It has a both a positive pressure and a negative filter. It structures one’s thoughts, orients them in a certain direction, and rules out certain ideas. Paradigms can be very useful, for example the scientific method directs one to begin with facts, explain them in a consistent way, and to ignore peyote dreams from the smoke lodge and claims of mental spoon-bending.

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What Causes Loss of Purchasing Power, Report 7 Apr

We have written much about the notion of inflation. We don’t want to rehash our many previous points, but to look at the idea of purchasing power from a new angle. Purchasing power is assumed to be intrinsic to the currency. We have said that the problem with the word inflation is that it treats two different phenomena as if they are the same.

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The Prodigal Parent, Report 9 Dec 2018

The Baby Boom generation may be the first generation to leave less to their children than they inherited. Or to leave nothing at all. We hear lots—often from Baby Boomers—about the propensities of their children’s generation. The millennials don’t have good jobs, don’t save, don’t buy houses in the same proportions as their parents, etc.

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A Gold Guy’s View Of Crypto, Bitcoin, And Blockchain

Bitcoin was on my radar far back as 2011, but for years, I didn’t think much of it. It was a curiosity. Nothing more. Sort of like the virtual money you use in World of Warcraft or something. In 2015, looking deeper, I slowly (not the sharpest tool in the shed) arrived at that “aha” inflection point that most advocates of honest money arrive at. I realized that a distributed public ledger has the power to change, well, everything.

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The Latte Index: Using The Impartial Bean To Value Currencies

Like any other market, there are many opinions on what a currency ought to be worth relative to others. With certain currencies, that spectrum of opinions is fairly narrow. As an example, for the world’s most traded currency – the U.S. dollar – the majority of opinions currently fall in a range from the dollar being 2% to 11% overvalued, according to organizations such as the Council of Foreign Relations, the Bank of International Settlements, the...

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Shrinkflation – Real Inflation Much Higher Than Reported

600 new words entered our official lexicon this week as the Oxford English Dictionary announced the latest new additions to their online records.

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These Are The Most Expensive (And Best) Cities Around The World

Every year Deutsche Bank releases its fascinating index of real-time prices around the world which looks at the cost of goods and services from a purchase-price parity basis, to determine the most expensive - and in this year's edition, best - cities. As have done on several occasions in the past, we traditionally focus on one specific subindex: the cost of & cheap dates in the world's top cities.

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What Will Trump Do About The Central-Bank Cartel?

The US is by far the biggest economy in the world. Its financial markets — be it equity, bonds or derivatives markets — are the largest and most liquid. The Greenback is the most important transaction currency. Many currencies in the world — be it the euro, the Chinese renminbi, the British pound or the Swiss franc — have actually been built upon the US dollar.

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The US Dollar Is Now Overvalued Against Almost Every Currency In The World

In September 1986, The Economist weekly newspaper published its first-ever “Big Mac Index”. It was a light-hearted way for the paper to gauge whether foreign currencies are over- or under-valued by comparing the prices of Big Macs around the world. In theory, the price of a Big Mac in Rio de Janeiro should be the same as a Big Mac in Cairo or Toronto.

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Who Has To Work The Longest To Afford An iPhone?

How many hours must you work to buy a new iPhone? It varies dramatically around the world, reflecting disparities in productivity and purchasing power. According to a recent report by UBS that aims to measure well-being by estimating how many minutes workers in various countries must work to afford either an iphone, a Big Mac, a kilo of bread or a kilo of rice, the average worker in Zurich or New York can buy an iPhone 6 in under three working days.

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When It Comes To Household Income, Sweden & Germany Rank With Kentucky

Annual Median Equivalized Disposable Household Income in USD
Last year, I posted an article titled "If Sweden and Germany Became US States, They Would be Among the Poorest States" which, produced a sizable and heated debate, including that found in the comments below this article at The Washington Post. The reason for the controversy, of course, is that it has nearly reached the point of dogma with many leftists that European countries enjoy higher standards of living thanks to more government regulation and...

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Negative and the War On Cash, Part 2: “Closing The Escape Routes”

History teaches us that central authorities dislike escape routes, at least for the majority, and are therefore prone to closing them, so that control of a limited money supply can remain in the hands of the very few. In the 1930s, gold was the escape route, so gold was confiscated. As Alan Greenspan wrote in 1966:

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Golden Stockpiles – The Key to Gold as a Store of Value and Safe Haven

The behaviour of the gold price allows gold to play the role of unique financial asset that retains its purchasing power over time, acts as a safe haven, diversifies risk, and provides hedging benefits.

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Real vs. Nominal Interest Rates

Calculation Problem. What is the real interest rate? It is the nominal rate minus the inflation rate. This is a problematic idea. Let’s drill deeper into what they mean by inflation. You can’t add apples and oranges, or so the old expression claims. However, economists insist that you can average the prices of apples, oranges, oil, rent, and a ski trip at St. Moritz.

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Fearing Confiscation, Japanese Savers Rush To Buy Gold And Store It In Switzerland

Japan has pushed further away from being the nation that embraces "Krugman Era" economics and deeper into the new "Bernanke Era" economics of helicopter money. As a result Japan's citizens have been on a blitz to save what little purchasing power they still possess, before hyperinflation finally arrives.

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Financial Revolution: ECB Blames You For Negative Interest Rates

Simon Black of the Sovereign Man explain how revolutions start. Using negative rates, the ECB blames the own people that it is saving too much. But revolutions can also start in the financial system and lead to its collapse.

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The Bull Market in Stocks May Be Done

The great stock bull market is, perhaps, done. To most people, a bull market is good, and its end is bad. After all, a rising market signifies a healthy economy. Investors are making money. Share prices are connected to business productivity, aren’t they?

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Economic Forecasts for 2015: Swiss Banks were too Optimistic

Our analysis of the forecasts of economic data for 2015 shows that the Swiss banks were too optimistic for most data. US growth, the oil price, inflation and interest rates are far lower than expected. The errors for stock indices were smaller.

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