The concept of currency debasement

[Poker Player]

Today I would like to comment on this concept that I am hearing more and more about. Traditionally we talked about inflation as an index that reflects the rise in prices, but with the massive printing of the last few years and knowing that the components of the basket are chosen to manipulate the index I think it is becoming increasingly clear that it is not a reliable concept.

I have calculated inflation for the Eurozone over the last 5 years and according to a inflation calculator it has been 33.1%. As I was not sure how to calculate the currency debasement (although I have some idea) I asked ChatGPT and he tells me that the debasement of those years is between 7 and 8% on average, so when compounded over the 5 year period it gives a debasement of 50%. I don't trust ChatGPT 100% but the comparison is in line with the analysis I have seen of CPI vs debasement in the USA.

In other words, if 100 euros today only buys what 67 euros in July 2019 according to the CPI and only buys what 50 according to the currency debasement, where have the other 17 euros gone?

The answer is they have gone to financial assets and the one that has best attracted that capital has been Bitcoin.

[Findingnemo]

Currency has been the biggest scam of all time since 1933 for euros and 1971 for dollar and everybody understand the gold standard abandoned resulted to these kind of crisis. Government always fool their people with wrong data and sometimes those official numbers can't even be in acceptable level than reality and this is not exception to any government in this world.

The proper way of indexing the currency value will be comparing it with the gold then we realise how much we are trapped in this shitty centralized system which they call it as money.

[WillyAp]

Currency has been the biggest scam of all time since 1933 for euros and 1971 for dollar and everybody understand the gold standard abandoned resulted to these kind of crisis. Government always fool their people with wrong data and sometimes those official numbers can't even be in acceptable level than reality and this is not exception to any government in this world.

Luckily for us you are not in charge of any finance aka money.
Only due to loosing value its a scam?

[franky1]

Currency has been the biggest scam of all time since 1933 for euros

euros didnt exist before 1999

[GeorgeJohn]

Currency has been the biggest scam of all time since 1933 for euros and 1971 for dollar and everybody understand the gold standard abandoned resulted to these kind of crisis. Government always fool their people with wrong data and sometimes those official numbers can't even be in acceptable level than reality and this is not exception to any government in this world.

The proper way of indexing the currency value will be comparing it with the gold then we realise how much we are trapped in this shitty centralized system which they call it as money.

if you don't understand the bases of cryptocurrency and other cryptocurrencies you will not know that scam is every where, if you observe very well you will know that scam is everywhere you're,  so from my ways of understanding the cryptocurrency just make a research about it very well, so I know quite well that cryptocurrency is all about a fast transaction across other nations and that has been the reason while people like to invest in bitcoin.

So scam is everywhere and when looking around it's clear that you can be scam with anything you're interested of, including gold and other things you that can give you money.

[tottong]

Today I would like to comment on this concept that I am hearing more and more about. Traditionally we talked about inflation as an index that reflects the rise in prices, but with the massive printing of the last few years and knowing that the components of the basket are chosen to manipulate the index I think it is becoming increasingly clear that it is not a reliable concept.

It has to do with the value of goods that continue to rise and money loses value for the process of buying and selling.
So people say the value of money never increases for the sake of numbers and in fact money loses its purchasing value for the same goods in 5 or 10 years.
That's why there is a lot of deception from fiat currencies and we are forced to follow their system which in reality loses value.
Why do people see bitcoin as a step change before because we don't lose value when holding it and it's exactly like holding gold for the process used, both buying and selling goods in the past in the sense of barter.

If that is true then there is nothing wrong in saying run to the assets as they are indeed much more reliable there especially for bitcoin which we know very well here.

[Poker Player]

Currency has been the biggest scam of all time since 1933 for euros and 1971 for dollar and everybody understand the gold standard abandoned resulted to these kind of crisis.

  The Euro was born as a currency in 1999. Aren't you mistaking that for the Executive Order 6102?

The proper way of indexing the currency value will be comparing it with the gold then we realise how much we are trapped in this shitty centralized system which they call it as money.

That was the only way we had until recently, now we also have Bitcoin.

Luckily for us you are not in charge of any finance aka money.
Only due to loosing value its a scam?

if you don't understand the bases of cryptocurrency and other cryptocurrencies you will not know that scam is every where...

I don't know what you two are about. Aside from the error I mentioned, what Findingnemo says makes a lot of sense. Since the gold standard was abandoned, currency became a scam, that's why it is called fiat currency, because it is not backed by anything and can be printed as much as it pleases.

What I wanted to focus on here is the difference between CPI and the debasement of the currency, but you two smart guys don't get into it either.

[gunhell16]

Currency has been the biggest scam of all time since 1933 for euros and 1971 for dollar and everybody understand the gold standard abandoned resulted to these kind of crisis. Government always fool their people with wrong data and sometimes those official numbers can't even be in acceptable level than reality and this is not exception to any government in this world.

The proper way of indexing the currency value will be comparing it with the gold then we realise how much we are trapped in this shitty centralized system which they call it as money.

As far as I know, dude, in 1933, euros didn't exist, although in 1971, gold was abandoned by the US during these times. In my understanding, the dollar by this time can no longer be directly exchanged for gold; this is a significant event in global monetary history, as far as I know.

Although those of us who know the centralized system are not really happy with this system, there is nothing we can do but follow in the end. That's all.

[Algominer2]

There is something we can do my friend - hold Bitcoin! 

To be fair, holding just about any asset (other than fiat currency) will do the job, but some assets will move much faster than others. I choose to hold BTC and some tech stocks as the fastest moving horses in the race against debasement.

[Helena Yu]

I feel like both of them are same thing because anything that affects CPI (spend money to buy commodity, which make the commodity scarcer and increase the commodity price), also affects currency debasement. Something that affects currency debasement (printing new money, which increase the money supply and lower the value), also affects CPI.

I choose to hold BTC and some tech stocks as the fastest moving horses in the race against debasement.

Tech stocks seems risky now, AI hype is over.

[Minor Miner]

Currency has been the biggest scam of all time since 1933 for euros and 1971 for dollar and everybody understand the gold standard abandoned resulted to these kind of crisis. Government always fool their people with wrong data and sometimes those official numbers can't even be in acceptable level than reality and this is not exception to any government in this world.

The proper way of indexing the currency value will be comparing it with the gold then we realise how much we are trapped in this shitty centralized system which they call it as money.

Population increases, demand increases, supply and demand are imbalanced. If the gold standard continued today, no government would have enough gold to print more money. That would limit the economy and the poor would be further eliminated from the world because they would not be able to own 1$ if the gold standard remained in place today.
There are pros and cons to getting rid of the gold standard, let's not just look at the bad side and jump to the conclusion that the government is running the world's biggest scam.

For example, during the 2020-2021 Covid pandemic, the entire economy was closed, if the Government did not print money, how could the world survive during that period? How could we have had the crazy price surge that pushed bitcoin to $69k if the government didn't print money? But the price we will have to pay is inflation and the economic crisis we have been facing since 2022.

[WillyAp]

Aside from the error I mentioned, what Findingnemo says makes a lot of sense.

Go ahead tell us what made sense according to you?
That values devalue is kind of logical. That value should grow with age remains to a few items.
Wine to a certain degree and years.

Lets see if Bitcoin is as valuable in 50 Years.

[d5000]

[...] knowing that the components of the basket are chosen to manipulate the index [...]

What about an own basket of goods?

In Argentina there was rampant inflation manipulation in 2007-13, and in these years an "independent" index was created by a group of economists, called "Inflación Verdadera", with a basket of goods similar to the estimated average household consumption. It was later merged with a similar US project called the Billion Prices Project. It is no longer active but PriceStats, a project collecting prices online, is still there, and it has indices for 25 countries.

As I was not sure how to calculate the currency debasement (although I have some idea)

It would be interesting to know your idea

Mine would be approximately:

Step 1: If I don't trust the inflation index of my country, create an own index (or search for alternative indices).
Step 2: Compare the different money supply indices (M1, M2, M3) with the GDP and the price index.

Say for example:

(nominal) GDP delta / price index delta => real GDP delta (this is the "real" GDP growth or degrowth based on our own price index)
real GDP delta / M1 [or M2, or M3] delta => debasement

(delta = differences between two points in time we want to compare, e.g. from one year to another, or 2019 and 2024)

About gold standard: I don't know if it's a good idea to return to that, because gold is volatile as well ... A better idea would be a basket e.g. of energy, basic edibles like cereals (prices are widely available), construction materials, metals (precious and non-precious), real estate, and maybe some important end products but the last point would be already probably too complex.

[Poker Player]

What about an own basket of goods?

No, I don't think so, I think it is pretty clear that currency debasement is different from CPI or another basket of goods. Those baskets of goods don't account for the liquidity created that goes into Bitcoin, for example.

It would be interesting to know your idea

Mine would be approximately:

Step 1: If I don't trust the inflation index of my country, create an own index (or search for alternative indices).
Step 2: Compare the different money supply indices (M1, M2, M3) with the GDP and the price index.

Say for example:

(nominal) GDP delta / price index delta => real GDP delta (this is the "real" GDP growth or degrowth based on our own price index)
real GDP delta / M1 [or M2, or M3] delta => debasement

(delta = differences between two points in time we want to compare, e.g. from one year to another, or 2019 and 2024)

It is not that it is my idea, but it is a concept that I have seen mentioned, in several authors, one of them would be Mark Moss, another one Michael Saylor, but if I have not misunderstood the concept has to do with part of step 2, the total money created. If your CPI or your basket of goods increases by 3% year-on-year and liquidity has increased by 8% somewhere else the other 5% goes somewhere else, usually to financial assets that are not in the basket of goods, for example Bitcoin.

[Yatsan]

Today I would like to comment on this concept that I am hearing more and more about. Traditionally we talked about inflation as an index that reflects the rise in prices, but with the massive printing of the last few years and knowing that the components of the basket are chosen to manipulate the index I think it is becoming increasingly clear that it is not a reliable concept.

I have calculated inflation for the Eurozone over the last 5 years and according to a inflation calculator it has been 33.1%. As I was not sure how to calculate the currency debasement (although I have some idea) I asked ChatGPT and he tells me that the debasement of those years is between 7 and 8% on average, so when compounded over the 5 year period it gives a debasement of 50%. I don't trust ChatGPT 100% but the comparison is in line with the analysis I have seen of CPI vs debasement in the USA.

In other words, if 100 euros today only buys what 67 euros in July 2019 according to the CPI and only buys what 50 according to the currency debasement, where have the other 17 euros gone?

The answer is they have gone to financial assets and the one that has best attracted that capital has been Bitcoin.

The statement means currency devaluation and how this affects financial assets. Traditionally, one of the ways of measuring it is through indicators like the Consumer Price Index, which follows changes in the price level of a basket of goods and services. Will I say that the CPI has numerous limitations, one being probable inaccuracies of the basket structure and the volatility that does not indicate clearly a change in the individual cost of living based on my college days' economics course?. In other words, depending on the subject, deflation can also be defined as a decrease in the value of money due to the overprinting of this money, which inevitably leads to a fall in its purchasing power. Your comparison strikingly illustrates a huge difference between inflation and inflation as measured by the CPI. If the CPI is showing a 33.1% appreciation in five years, against the currency depreciation of a combined 50%, then surely some sort of perceived value discrepancy is at work here. For me, These differences are because of factors like changes in the CPI basket, which might not capture all changes in purchasing power and this was also in line with the behavior of investors looking for stores of value or protection from inflation as more flows into financial assets, particularly bitcoin, during periods of sharp depreciation. The trend illustrates how investors change strategies in response to exchange-rate changes. While the CPI is a source of information on consumer price changes, currency depreciation provides an even broader perspective into the ramifications of monetary policy and reactions of investors, thus reflecting volatility in the complexity among inflation, deflation, and financial markets.

[Findingnemo]

Luckily for us you are not in charge of any finance aka money.

Currency is not money anymore, it is just printed paper issued by the government on no basis.

The Euro was born as a currency in 1999. Aren't you mistaking that for the Executive Order 6102?

The proper way of indexing the currency value will be comparing it with the gold then we realise how much we are trapped in this shitty centralized system which they call it as money.

That was the only way we had until recently, now we also have Bitcoin.

I meant to say Britain followed by some briefing but lazy to type from my smartphone that much. _{fat fingers}

Indexing with bitcoin is not a great choice because we all know it's highly volatile in nature so it maybe used for indexing purpose after few decades later and once it reaches stable value or closer to it.

Although those of us who know the centralized system are not really happy with this system, there is nothing we can do but follow in the end. That's all.

We didn't until 2008 but then we had a decentralized monetary system that is an alternative to these centralized monetary policies but still we can't use bitcoin everywhere you you can fairly manages with bitcoin and only convert them into fiat when it's needed instead of keeping the stash in paper.

[Fortify]

Today I would like to comment on this concept that I am hearing more and more about. Traditionally we talked about inflation as an index that reflects the rise in prices, but with the massive printing of the last few years and knowing that the components of the basket are chosen to manipulate the index I think it is becoming increasingly clear that it is not a reliable concept.

I have calculated inflation for the Eurozone over the last 5 years and according to a inflation calculator it has been 33.1%. As I was not sure how to calculate the currency debasement (although I have some idea) I asked ChatGPT and he tells me that the debasement of those years is between 7 and 8% on average, so when compounded over the 5 year period it gives a debasement of 50%. I don't trust ChatGPT 100% but the comparison is in line with the analysis I have seen of CPI vs debasement in the USA.

In other words, if 100 euros today only buys what 67 euros in July 2019 according to the CPI and only buys what 50 according to the currency debasement, where have the other 17 euros gone?

The answer is they have gone to financial assets and the one that has best attracted that capital has been Bitcoin.

It's a bit of a false calculation really, because what are you comparing this against? Currencies around the world are always fluctuating and in order for you to buy 100 euros today you would presumably be swapping it for some other currency like the dollar or pound sterling. Every country, especially America and China, are trying to debase their currency using all kinds of tricks - because when your currency becomes cheaper it boosts your exports market and goods flow out more easily as you sell stuff to other countries. That is why America engages in so much "quantitative easing" which is just a fancy name for printing money. There are a lot of complexities that are hard to condense down into a quick and easy answer.

[doomloop]

Aside from the error I mentioned, what Findingnemo says makes a lot of sense.

Go ahead tell us what made sense according to you?
That values devalue is kind of logical. That value should grow with age remains to a few items.
Wine to a certain degree and years.

Lets see if Bitcoin is as valuable in 50 Years.

I think what he said is already clear, though there might be other things too that @findingnemo missed out which can also made sense for him. I agree when you say that values devalue is logical and the logic behind it is that it is due to inflation, or something like if it's an asset, there are other people who are selling the same asset. Negative news such as wars, the decline of the stock market, etc... are also another factors that are responsible for this.

We can only wish that value can grow together with our age. The value that we mean here is of course not the value or price of the basic necessities but it was our money and other valuable items. We are still lucky that a few of them are like that, as you said. We can't predict the future but when it comes to BTC, many are optimistic about it that its value can only rise more the longer it gets.

[silpersurfer]

Today I would like to comment on this concept that I am hearing more and more about. Traditionally we talked about inflation as an index that reflects the rise in prices, but with the massive printing of the last few years and knowing that the components of the basket are chosen to manipulate the index I think it is becoming increasingly clear that it is not a reliable concept.

I have calculated inflation for the Eurozone over the last 5 years and according to a inflation calculator it has been 33.1%. As I was not sure how to calculate the currency debasement (although I have some idea) I asked ChatGPT and he tells me that the debasement of those years is between 7 and 8% on average, so when compounded over the 5 year period it gives a debasement of 50%. I don't trust ChatGPT 100% but the comparison is in line with the analysis I have seen of CPI vs debasement in the USA.

In other words, if 100 euros today only buys what 67 euros in July 2019 according to the CPI and only buys what 50 according to the currency debasement, where have the other 17 euros gone?

The answer is they have gone to financial assets and the one that has best attracted that capital has been Bitcoin.

The points you make are interesting and relevant to the discussion of inflation and currency debasement. Traditional methods of calculating inflation often do not reflect the reality on the ground. Especially when we consider the effects of money printing and price index manipulation, it is true. Your observations about currency debasement and how money is flowing into financial assets like Bitcoin make sense, also. With issues of currency instability and high inflation, many people are indeed looking for ways to protect their wealth; Bitcoin is often seen as one such option. Where the lost value goes question is what shows how much important it is to understand shifts in capital allocation in these challenging economic times.

[WillyAp]

I agree when you say that values devalue is logical and the logic behind it is that it is due to inflation, or something like if it's an asset, there are other people who are selling the same asset. Negative news such as wars, the decline of the stock market, etc... are also another factors that are responsible for this.

Houses loose value from a certain point. Fresh onions fetch a higher price than older ones.
Wine becomes better over time, and turns into vinagre a moment later.

Fact is we live in a society based on growth. Population is growing so more money is needed.
The balance between more and too much created inflation.
Extremists thing printing one $ is devaluing,

So is no new money printed?

New money is printed every day, but this is often not for the reasons people think. Only a small amount of money printed is due to measures such as Quantitative Easing. This is because there is a tendency today to use online banking and electronic money – almost all of us do it, from having most of our money in bank accounts, to paying with debit cards or phone apps, it is actually possible to avoid coming into contact with paper money a lot.


How much paper money is printed in the US?

The amount of bank notes printed varies from day to day as the Federal Reserve decides exactly how much money needs to be made. However, looking at averages, during the fiscal year of 2014, the Bureau of Engraving and Printing made almost 6.6 billion bank notes. This means they were printing almost 24.8 million notes a day – and this has a face value of roughly $560 million. However, this doesn’t mean that there is $560 million more entering the economy per day. As already mentioned, the vast majority of this is used to replace old bank notes that have become too damaged for use. New bank notes are also used to replace bank notes periodically as the design updates – this is often used as a way to stop people from making counterfeit bank notes, as constantly changing the design makes it harder for people to fake the notes, and the Bureau of engraving and printing adds in new features which can be very difficult to replicate without their machines and printing plates. This new money is distributed into commercial banks and ATMs, ready to go out into the country as a whole.
 

source: https://thefinanceshub.com/how-much-money-is-printed-each-day/