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Wednesday, 29 January 2014

PERFECT (not easily attainable) implementation of DAILY INDEXING

The PERFECT (not that easily attainable) implementation of DAILY INDEXING  
a.k.a. 

"correcção monetaria" in terms of a Daily Index, 

restatement in terms of a Daily Index, 

monetary correction in terms of a Daily Index, 

Capital Maintenance in Units of Constant Purchasing Power in terms of a Daily Index or 

CMUCPP in terms of a Daily Index 

is
NOT ONLY
(A) measuring all constant real value non-monetary items, e.g., salaries, wages, rent, fees, pensions, employee benefits, taxes, trade debtors, trade creditors, all non-monetary payables, all non-monetary receivables, issued share capital, all items in the profit and loss account, retained profits, all other items in shareholders equity, provisions, etc in units of constant purchasing power in terms of an index that follows all – at least DAILY – changes in the general price level
BUT ALSO
(B) inflation-indexing ALL local currency monetary items together with keeping all local currency cash – during the same general price level (normally one day) always in the banking system (not 100% possible).
The idea is to
(1) eventually adjust all prices instantaneously every time the Central Bank creates inflation (creates too much local currency in an inflationary way) – so that it would stop doing that since it would realize that it serves no purpose since all prices adjust automatically –
and
(2) the same as (1) would happen in the forex market. (2) would only happen when the internal monetary economy and the internal constant item economy are totally stabilized with indexation every time the general price level changes, i.e., at least DAILY and preferably instantaneously as described above. This would be a very advanced application of DAILY INDEXATION.

Nicolaas Smith 

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