Example:
US Dollar as a monetary item
The US Dollar is a monetary item only inside the US economy. Its nominal price is the nominal interest rate initially set by the Federal Reserve Bank. Its real price inside the US economy is its real interest rate which is the nominal interest rate charged in a contract or transaction minus the daily changing rate of inflation or deflation as indicated by the US Daily Consumer Price Index.US - Daily Reference CPI-Us Official future United States Daily CPI Sept 2016
US Dollar as a non-monetary item
The US Dollar is generally a variable real value non-monetary item in the hands of entities/people outside the US economy. US Dollars outside the US economy are non-monetary items in all other non-US economies where they are held.
Outside the US economy the US Dollar´s non-monetary price (real value) is mainly determined nano-second by nano-second in the USD 5.6 trillion global 24-hour-per-day, 5-working-day-a-week foreign exchange market in terms of most other currencies as well as in many other street markets, etc. where it is traded on the black market also called the parallel market at the daily changing parallel rate or black market rate.
The daily rate (general price level) can change more than once a day during hyperinflation. The parallel/black market rate can also change on Saturdays and Sundays. This is not the case in the official foreign exchange market which is closed on Saturday and Sunday.
This generally applies to other national or regional currencies too.
Hyperinflationary currencies are often not traded internationally.
Nicolaas Smith
Copyright (c) 2005-2016 Nicolaas J Smith. All rights reserved. No reproduction without permission.
A negative interest rate is impossible under CMUCPP in terms of the Daily CPI.
Thursday 1 September 2016
Wednesday 31 August 2016
Negative rates only negative under Historical Cost paradigm
Negative interest rates are only negative under the nominal Historical Cost Accounting paradigm.
The effect of negative interest rates is always positive under the Units of Constant Purchasing Power in terms of the Daily CPI paradigm during deflation.
Nicolaas Smith Copyright (c) 2005-2016 Nicolaas J Smith. All rights reserved. No reproduction without permission.
The effect of negative interest rates is always positive under the Units of Constant Purchasing Power in terms of the Daily CPI paradigm during deflation.
Nicolaas Smith Copyright (c) 2005-2016 Nicolaas J Smith. All rights reserved. No reproduction without permission.
Sunday 31 July 2016
An inconvenient accounting truth
No balance sheet has ever balanced in real value under Historical Cost Accounting and no balance sheet ever will while money, subject to inflation and deflation, is used as the unstable unit of measure.
Under IFRS and US GAAP authorised Capital Maintenance in Units of Constant Purchasing Power in terms of the Daily CPI the constant purchasing power of capital is automatically maintained constant in real value in all entities at all levels of inflation, hyperinflation and deflation - ceteris paribus.
Nicolaas Smith Copyright (c) 2005-2016 Nicolaas J Smith. All rights reserved. No reproduction without permission.
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