Wednesday, 14 December 2011

Strengths of CIPPA compared to HCA during LOW inflation

Strengths of CIPPA compared to HCA during LOW inflation

1.    It automatically maintains the constant purchasing power of capital constant forever in all entities that at least break even in real value during LOW inflation and deflation – ceteris paribus.

2.    It is also authorized in IFRS – in the same sentence.

3.    It can right now be implemented by any individual company implementing IFRS.

4.    It can be used to eliminate the effect of inflation from the entire money supply - zero inflation - (excluding from actual bank notes and coins which generally make up about 7% of the money supply) only in the case of complete coordination with all money and other monetary items inflation-adjusted daily in terms of a Daily Consumer Price Index. Chile currently inflation-indexes 20 to 25% of its broad M3 money supply on a daily basis in terms of the Unidad de Fomento which is a monetized daily indexed unit of account.

Strengths of HCA

1.    It is the 3000-year-old generally accepted, globally implemented, traditional accounting model.

Nicolaas Smith

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