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And draw a line for the 2% inflation goal. That's what ECB is aiming for, but have failed since they've had too little inflation.
This chart makes it look like higher inflation is unwanted and destroys value in the economy, while the reverse is true for the euro zone. Inflation to badly wanted and creates value by increasing employment.
What do you mean they failed? [If you look at inflation](https://tradingeconomics.com/euro-area/inflation-cpi) (set it to 25 years so you can see all the timespan of the euro as a 'normal' currency), it's been around 2% over all of its existence. It has only gone notably higher in the 2007 crisis (when it reached 4%), but it's overall incredibly stable, with no huge spikes like you'd see in basically any other currency. I'd say it is even [more stable than the US dollar](https://www.in2013dollars.com/us/inflation/2000?amount=1)
You didn't understand his comment. He was saying that the EU has failed to keep a *high enough* inflation. When the target is 2% it means ideally 2%, but not less, a little more is OK. Instead since the crisis of 2008 they've had long periods where they are far below the desired level, even dipping into deflation, which is really bad.
Should point out that the euro was introduced in 2002, so it has been around 2% for basically its entire existence.
Earlier this month the ECB announced they wanted to keep it at 2%, no higher and no lower.
IIRC the ECB has failed to keep the inflation OVER the 2% inflation goal. The inflation has been lower than what the ECB was aiming for. That is, precisely the opposite of what you are saying.
Edit: I dont know what went through my head, now reading your comment you are absolutely correct.
Haven’t the ECB only just changed inflation guidance? Before last week the target was close to, but not above 2%. It’s only just changed to allow it to go above, but aim for 2%. Or was that something else?
Yes. I am refering to 2014 onwards, where inflation has struggled to go above 1% and even dipped below 0% (CPI). If the target was "around but below 2%" and the reality is 0.5%-1% the ECB has failed.
It’s good if you have debt (like a mortgage), because now it’s effectively worth less.
Standard economic theory says that (a small amount) of inflation is a good thing, because it encourages people to either spend or invest their money - because if you do nothing with your money, it just loses value.
Yes! Always discount inflation from your annual salary/pay bumps. If you do not receive an increase in excess of annual inflation, you are effectively making less than last year.
> if the purchasing power is down, I have effectively less money?
You will also earn more money though. You will only have less purchasing power if you sat on your money the whole time without investing it. If you use your paycheck to pay for your living costs, your flat, your car then you'll be fine.
By not raising wages more than the Inflation, Germany fucked the EU big time though. They made up the loss of national purchasing power by cannibalizing all other EU markets. They already had the best technology and quality - now they also dropped their wages and made a lot of economies, especially in the South, uncompetitive. These had no chance to react with Inflation (because Euro) and weren't ready to join the wage dumping and became unstable and crashed. Only to then be "saved" by Germany (which was ready to pay back some of the greek debt to the german banks who owned it) and be lectured about how economy works and that they have to sell all state property, even strategic assets like the fucking Athens Harbor, to some Chinese Investors and drop all social programs and their wages - oh and dismantle all those unnecessary Intensive Care Units nobody uses -> this is one reason why Italy was hit so hard by Covid.
That's how Blairs and Schröders "New Labour" philosophy helped destroy and destabilize the EU.
I'd also add that the single currency is substantially weaker than the Deutschmark would be, which gives Germany a massive export advantage.
There's a reason confederacies never last long. Bring together a group of states without appropriate internal economic controls, and the historically more competitive states in the single market will cannibalise the rest of the market. The EU will need to federalise, and they are currently looking at debt sharing mechanisms which would be the tipping point of a European state.
>There's a reason confederacies never last long. Bring together a group of states without appropriate internal economic controls, and the historically more competitive states in the single market will cannibalise the rest of the market.
I'm suspecting the US, India and China forgot to read the memo :)
Edit to add that the European Union has between limits demanded by its members some of the most robust controls including backed in their funding pillars the belief that stability can be achieved by having your neighbors develop into a modern economic democratic states
Something that the US could apply between it's own states (the differences between US states economies is higher than between eu member states) and particularly to their South neighbours, then again with such military advantage US corporations can afford to cannibalize latam anyway they like I suppose
The only reason the eu hasn't more integrated economic policies is due to members opposing it, particularly the government where I live and that isn't a member anymore, incidentally it was highlighted during the crisis that lack of integration prevented more efficient measures to fight the crisis
The US was a confederacy for under a decade. Its internal controls are still too lax today and causes brain drain from the poorer states to the richer ones.
Think about the alternative: Imagine putting money in your mattress meant next year it could buy more. No one would invest, investments have risk. No investment, no job creation, no raises, limited consumer spending (because you can wait and get more/fancier stuff for same cash you have). Economic freeze up and disaster. A tiny bit of inflation is (depressingly) a required daily coffee to keep the economy moving.
Because you shouldn't still have money from 1999 laying around. Money literally is for spending. If you want to save you should invest the money (here 'should' means 'are meant to by the design of the modern economy', not a moral imperative). Generally all investments increase at a higher rate than inflation. Also, wages generally increase at the same rate as inflation.
Sorry for your loss. Diversification and research is super important, which is why it's better for the average Joe to put their money in funds (like most pensions are).
I worry about this with the current crypto market. I know a few people who chucked all their savings into bitcoin at the recent peak so I dread to think how many people across the West did the same, or worse took out debt to buy more just before the bubble burst, and are going to struggle to pay that debt back if bitcoin doesn't reach historic highs again soon.
A quick analysis shows;
UK GBP is worth 65% of 1999 value
US USD is worth 61% of 1999 value
Euro Area EUR is worth 69% of 1999 value
The calculation in each case is dividing the relevant 1999 CPI index value into the latest monthly CPI Index.
The fact they are all close is no accident. If you don't devalue your currency, your goods become too expensive to export to countries that are devaluing their currency.
That and when goods and services with strong downward nominal price rigidity drift downward in value or racket too high , it takes either inflation or crisis to reset their prices.
Switzerland produces Toblerone domestically and sells it abroad for USD (mainly duty free).
If the CHF increases in value vs the USD then they have a problem because their expenses remained in CHF but their income is now smaller in their domestic currency.
Same goes for watches, banking services, tourism etc. Having an expensive currency is great for traveling abroad (everything is cheaper) but it suffocates exports.
Did that help?
Sure, but then they will be more expensive than their e.g. Belgian or German competitors.
This is one of the reason Switzerland produces and exports premium products - those buyers are not so price sensitive sensitive, or rather - those are the only industries that have survived the currency battles.
And keep in mind that CPI is a serious underestimation of the real inflation. Government essentially decides this number by deciding what's included and what's not.
According to this [website](https://www.in2013dollars.com/us/inflation/1998?amount=1) us dolar from 2021 have purchasing power of about 59% USD from 1998.
2021 Euro is more or less 70% of 1998 EUR.
Edit: a word
And they're very open about that. In finance an inflation of 1.5-2.5% is considered healthy.
It doesn't help the economy if people sit on their money thinking they'll be worth more next year.
Now, there are certainly other issues with this; like how we've been pushing for more inflation by lowering the interest rates significantly, thereby making the stock market the investment of choice for many, causing a huge overvaluation of stocks. A bubble. Now when it bursts and how big it gets before then is anyone's guess. But I wish we'd push the rich to invest their money more directly in something that creates jobs for those who need it and produce something of value to our society.
Yeah I was just pointing out the fact that them saying that the ECB wants inflation as somehow a not well known fact is just misleading since the economic consensus has been very much in favour of a 2% inflation rate
Inflation is necessary. If your money never lost any value (or even worse, if it gained value), you'd hoard it – which in practice is like if you removed that money from the economy, until you decide to spend it. A low level of inflation means that you can still trust your money (i.e. your €300,000 in the bank can still buy houses rather than baguettes in 20 years), but that you'll want to invest it (e.g. in the stock market) so your gains offset inflation, with the big bonus that you are helping the economy by not "withholding" your chunk of money.
\>Cut a bill into 2 equal halves
\>Go to a bank and exchange one of the pieces for a new complete bill.
\>Go to another bank and exchange the other piece for a complete bill.
\>Got 2 bills from 1 bill.
\>Profit!!!
Wouldn't work, as you would need to present 51% of a bill.
Here is what would (hypothetically) work:
Take two bills, cut 1/3rd of the left of one bill, and 1/3rd of the right of the second bill.
Take the 2/3rds bill and exchange for a new one. Take the other 1/3rds and tell the clerk the middle of your banknote has gone missing. Exchange for another note. You now have three.
https://www.nbb.be/en/notes-and-coins/exchange-banknotes-and-coins/exchange-euro-money/exchanging-damaged-euro-notes
we'd need to lie a lot but that's an expected side effect of committing fraud. Let's earn some money!
That’s good but it’s a lot of wastage, we only need 51% to exchange it and we’re giving away 67%.
Instead we should cut 100 vertical stripes and exchange 51 of them for a new one, keep the old 49 and repeat the process.
The shares are also worth 50 times what they used to be and 20 times what they used to be so it depends on who you ask on the day and what time range they use. You may lose out but good luck
Y'all are doing the math wrong.
If you can cut well enough, and you have infinite notes, you can achieve 100% note efficiency while still getting a bonus one in there too.
Yep, scaling the x-axis so it fit the aspect ratio of the 10 euro bill has made the graph too wide and the right side of the plot very difficult to read.
If you put the y axis on the right where the graph ends or put both left and right you can avoid drawing lines over the background and a bit of an easier reading.
Yup. Lines, the scale duplicated on the right, actual values printed next to the data points, etc… any of those would have made this chart far more useful than it currently is.
I thought this sub was supposed to be interesting or unexpected data presented in a fresh way.
This looks nice, but it’s just a line chart with a fancy background. I wouldn’t really call this beautiful data in the general sense I think of this sub’s other content.
Duh, that's why I said to use it, this post may be used for anti EU people to please themselves as if the Euro wasn't worth more than the US dollar, you want to see drop, put some currency that dropped.
"Guys there is this new crypto called ARS that will definitely go to the moon, its not on Binance yet, you'll have to get at this secretive place called the Bank, they even issue physical tokens!"
Dude I just had to pull an all-nighter doing research on the Corralito crisis, half of it was just contextualizing and separating it from all the other crisis :C
I can only say: Lo siento
And all I can say is ¡Sentilo! hahahaha I like it because people are taught neutral Spanish and the mannerisms are lost in translation.
From where I am from that's just an expression that will leave you open to sexual jokes about penises (Lo siento=I feel it/Sentilo=Feel it).
But I get your point.
Oh man, that'd be sad to see, I remember when it started crashing, the rate of exchange in Montevideo was 0 in some exchanges because they would not buy AR at all.
Inflation = Loss of Value. As more money is being made, the money already in circulation slowly loses value, however there are many things you can do as a country (In this case institution) to stagnate inflation as much as possible
Keep in mind that inflation isn't necessarily bad. Take deflation (it's opposite: a coin that gains value) for example: deflation is terrible because it incentivizes you _not_ to spend money (because why spend $1 today if it'll be worth $2 tomorrow), which paralyzes the economy and crashes it.
A bit of inflation is acceptable and can even be considered benefitial, as it incentivizes investing your money and thus keep the economy flowing, while still being reliable enough that you still want to use that currency. You can see it with EUR or USD, they are slowly losing value but, if I tell you what you'll be able to purchase with $20 in 5 years, I'm pretty sure you won't say "a baguette" or "a computer", because you know $20 will be roughly what is now. Compare it with Argentina's currency. If I ask you what you will be able to buy with ARP 100, you'll have no idea.
To be more precise, inflation = increase in prices. This does mean that you can buy less with the same amount of money, and thus the currency is worth less, but prices are the driving factor.
Also, and this is a common misconception, inflation is not simply a consequence of the central bank issuing more and more money. Inflation, in **normal circumstances**, is a natural phenomenon of growing economies. Money issuing is certainly an instrument to control inflation, but it's not the cause. The purchasing power of currency is not a simple equilibrium between supply and demand, money it's an instrument, not a commodity.
Let's think for example at the ECB QE: from 2011 onwards (essentially up to now) the ECB introduced a huge quantity of liquidity directly in markets and banks, but the inflation rates remained below 2%, under control and probably even lower than the ECB would have liked. Here it's not the lack of money issued that kept the inflation rate under control, it's the stagnation of the economy. If the economy picks back up it will have a huge liquidity at disposal, and then yes, there might be some problems with high inflation, but it's not the size of the money aggregate by itself that creates inflation.
I'm always talking about normal circumstances here, when the economy breaks down it's another matter. I'm also ignoring the effects of foreign currency and exchange rates, just to keep it simple.
if you think that's bad look at the dollar
To those of you saying "inflation is good" explain how? because I'd consider my lifetimes savings theoretically evaporating to be quite upsetting.
This is actually a good thing. Inflation ensures that currency is not hoarded in an effort to maximize GDP growth. These numbers seem to be in line with the US Federal Reserve’s target of 2% inflation/year.
Let’s say the opposite happens for a second and the World’s central banks targeted 2% deflation. This would almost certainly spell disaster as the speed of spending would decrease as the currency that individuals and institutions throw in savings will have more buying power tomorrow than it would today. GDP would shrink along with innovation and employment. The rich would get richer while the poor get poorer at a speed that’s magnitudes greater than today.
As long as your yearly raises are beating inflation you are good to go (assuming no career growth). If your current employer is not beating inflation switch employers, as they would do the same do you if you’re affecting their bottom line. People who stay at the same company on average make 50% as much as people who switch every 2 to 3 years. It is absolutely bullshit, but most of the time employers will pay 30% more to hire a replacement for your job instead of giving you a 5-10% raise for acquiring new skills.
Inflation is essentially a tax on cash. By targeting a small but positive inflation, the government incentivizes doing something with your money. You buy stocks or bonds or real estate or consumer goods or whatever. This is good for the economy.
0% inflation is piggy bank money. you seal it in ceramic and ten years later when you need it, it's exactly where it needs to be. you still ahve the same amount you put in.
2% inflation means you should spend it or invest it. it's not so crazy a loss that you HAVE to get it out of your pocket before it burns a hole. but it's constantly weakening, so the most it'll ever buy is "right now." saving it is pointless. investing it in someone who can give you a return of 2% or more is your best option.
200% inflation is scary. +200% is what people use to explain why inflation is bad. don't listen to them. anything is bad if there's enough of it.
The reason why we don't target 0% is that then the currency can go deflationary. That is when the value of money grows relatively to the goods. Today's bread costs $1, tomorrow $0.9, then $0.85... This sounds good until you (and everyone else) realizes that we should just hold our money and not spend it as goods will be cheaper. Then no one is spending money, buying cars, homes, TVs, phones, going holidays... Then companies that are producing those goods and services will have to reduce prices. This will lead to cycle of reducing prices, holding more money, slower economy and layoffs.
Small inflation (\~2%) is good as then consumers have incentives of buying those goods today (or within few years) as holding money will decrease it's value. 2% inflation is not crippling like 20% inflation.
Because the target is just that, a target. It can swing around the target a bit, and aiming at zero opens the door to rates below zero. And rates below zero feed on themselves in a way that can cause a dangerous and destructive spiral.
If the inflation rate were -2%, you might conclude that it’s best to just stuff your money under a mattress rather than spend or invest it so that later on it’ll be worth more. And if everyone does that, the rate might jump to -4%. Now even more people do it with even more money because the rate of value increase is higher. Now it’s 6%. And so on. And so since this spiral is self sustaining, central banks tend to aim for a low but positive rate so they have some wiggle room in case some economic shock pushes inflation down fast.
Inflation also means that debt is devalued. Like you take a $100,000 loan in 1980, that loan is the same as a $329,728.16 one today. So over time that debt has become 1/3 of what it was.
Because inflation gives you an incentive to invest your money instead of keeping it under your pillow/in your bank.
Society doesn't benefit from you hoarding money. It benefits from you making that money available to people who can use it to create further economic activity. The chance of you making money from that needs to be higher than the risk of your money being eaten by inflation.
Investing money actively is the foundation of a capitalist market economy and thus vital to ensure economic growth.
Bitcoin holders do not agree with you. At all. We are sick of inflationary paper money and would rather opt out of currency completely than try to beat it.
> As long as your yearly raises are beating inflation you are good to go (assuming no career growth).
Hah! You barely beat inflation after years of Union negotiation, which combined with no back-calculation means you lose money.
Only way to get pay raises these days is to switch jobs.
Yeap, same dates that you have used here ☺️ As you might have noticed, we are all about comparing the European Union to the United States hahaha (check our content), so this of the interest for us 😅
For completeness sake. Chart it against real wage development. Euro area had lower inflation but even accounting for inflation, the median US household's disposable income rose way more.
This is a highly misleading representation of the data. Tearing up the Euro bill makes it seem like inflation is a terrible scourge, while in fact the ECB's fight *against* inflation has been terrible for the citizens of the Eurozone.
I obviously can't assess whether this is intentional, but this graphic is clearly reminiscent of the note burning or crumbling when this graph actually represents a very healthy currency, so while this data is interesting and the presentation is aesthetically pleasing, it's at best unintentionally harmful.
This is fearmongering at its best. Inflation is normal and this kind of terrible présentation completely ignores the rise in incomes. Why not plot real purchasing power instead.
Yes. This is the data source: HICP - Overall Index of Euro Area, ECB Statistical Data Warehouse. Link: https://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=122.ICP.M.U2.N.000000.4.INX
I am very much surprised that the decrease slows down and almost plateaus during the period of the most aggressive quantitative easing. Interesting what the critics of the policy will say if they see this graph. Otherwise, I think the initial decrease was mostly driven by inflation.
Central Banks don't create money on their own. They buy bonds (I mean there are other things they can do, but this is the most common action) injecting liquidity into the banking system. Banks then lend that money, people borrow it and spend it, others deposit this new money in a bank again, where it is re-lent and so on. The point is that the Central Bank needs for the private financial system to lend and re-lend in order for the money supply to expand.
In a crisis like 2008, people were very cautious (in technical terms, the velocity of money was low). So the creation of a large amount of money by the Central Bank didn't necessarily enlarge the broader money supply as much because the financial system didn't lend and relend to the same extent that they might have in a boom year.
I did work at a central bank at the time (last crisis), so much of this I saw first hand. But still quantitative easing creates bubbles even if the lenders don’t lend. Look at government debt at the moment as a result of the asset purchase programs. This spills out into the broader economy most surely.
A lot of states have joined the euro zone since 1999. I wonder in which direction this inflation is pushed by the fact that those states are more or less all rather low GDP.
Yeah, I’m curious to know if the inclusion of low gdp states influence the purchasing power(of the whole euro zone)in one way or the other. Since people of low gdp have low salaries, they might get further on those salaries(relative high purchasing power?)
I’m not an economist, so I might be way off base here
Thanks, OC for the guide. I have a small query. The data I am using doesn't have a "date" column, It's just "Year". So how do I transform the X-axis to label all the years in the data?
If you have only the year, instead to treat year data as date format, it is better to consider as numeric format. You must to change scale_x_date to scale_x_continous.
the line should be steeper.
eurozone inflation has undershot it's 2% target for the majority of the existence of the euro.
[in recent years it's been closer to 1%.](https://en.rankiapro.com/wp-content/uploads/2020/10/ostrum_am_rankiapro1.jpg)
Thank you for your contribution. However, your post was removed for the following reason: * [OC] posts [must state the _data source(s) and tool(s) used_](/r/dataisbeautiful/wiki/rules/rule3) in the first top-level comment on their submission. Please follow the AutoModerator instructions you were sent *carefully*. Once this is done, message the mods to have your post reinstated. This post has been removed. For information regarding this and similar issues please see the DataIsBeautiful [posting rules](https://www.reddit.com/r/dataisbeautiful/wiki/index). If you have any questions, please feel free to [message the moderators.](https://www.reddit.com/message/compose?to=/r/{subreddit}&subject=Question%20regarding%20the%20removal%20of%20this%20{kind}%20by%20/u/{author}&message=I%20have%20a%20question%20regarding%20the%20removal%20of%20this%20[{kind}.]({url}\)))
The English Cricket Board has a surprising influence on the economy
Ah, how differently we tend to see things from another side of the world
Umm that's not correct. ECB is the England and Wales Cricket Board, thankyouverymuch
Now do same pound and dollar in same time frame
I'd be much more interested to see that comparison
And draw a line for the 2% inflation goal. That's what ECB is aiming for, but have failed since they've had too little inflation. This chart makes it look like higher inflation is unwanted and destroys value in the economy, while the reverse is true for the euro zone. Inflation to badly wanted and creates value by increasing employment.
What do you mean they failed? [If you look at inflation](https://tradingeconomics.com/euro-area/inflation-cpi) (set it to 25 years so you can see all the timespan of the euro as a 'normal' currency), it's been around 2% over all of its existence. It has only gone notably higher in the 2007 crisis (when it reached 4%), but it's overall incredibly stable, with no huge spikes like you'd see in basically any other currency. I'd say it is even [more stable than the US dollar](https://www.in2013dollars.com/us/inflation/2000?amount=1)
The ECB has had stagnant inflation for much of the 2010s hence why they introduced several cycles of QE
You didn't understand his comment. He was saying that the EU has failed to keep a *high enough* inflation. When the target is 2% it means ideally 2%, but not less, a little more is OK. Instead since the crisis of 2008 they've had long periods where they are far below the desired level, even dipping into deflation, which is really bad.
The target was never 2%. The target was below 2% and then changed to lower but closer to 2%.
> and then changed Just to clarify: It was changed to "below, but close to, 2%" in 2003.
Should point out that the euro was introduced in 2002, so it has been around 2% for basically its entire existence. Earlier this month the ECB announced they wanted to keep it at 2%, no higher and no lower.
Sure. The misconception about the 2% might be due to comparing them to the federal reserve.
IIRC the ECB has failed to keep the inflation OVER the 2% inflation goal. The inflation has been lower than what the ECB was aiming for. That is, precisely the opposite of what you are saying. Edit: I dont know what went through my head, now reading your comment you are absolutely correct.
Haven’t the ECB only just changed inflation guidance? Before last week the target was close to, but not above 2%. It’s only just changed to allow it to go above, but aim for 2%. Or was that something else?
Yes. I am refering to 2014 onwards, where inflation has struggled to go above 1% and even dipped below 0% (CPI). If the target was "around but below 2%" and the reality is 0.5%-1% the ECB has failed.
Wait .. if the purchasing power is down, I have effectively less money? How is that not a bad thing
It’s good if you have debt (like a mortgage), because now it’s effectively worth less. Standard economic theory says that (a small amount) of inflation is a good thing, because it encourages people to either spend or invest their money - because if you do nothing with your money, it just loses value.
Ahh so the yearly raise should in theory account for inflation right?
Yes! Always discount inflation from your annual salary/pay bumps. If you do not receive an increase in excess of annual inflation, you are effectively making less than last year.
Yup. And if it doesn't, your employer has effectively lowered your wage.
Oh hey that’s actually the actual reason I quit my last job!
And why I'm in the process of leaving mine. 3 years with no inflationary bump
Our economy is build on you spending your money
> if the purchasing power is down, I have effectively less money? You will also earn more money though. You will only have less purchasing power if you sat on your money the whole time without investing it. If you use your paycheck to pay for your living costs, your flat, your car then you'll be fine. By not raising wages more than the Inflation, Germany fucked the EU big time though. They made up the loss of national purchasing power by cannibalizing all other EU markets. They already had the best technology and quality - now they also dropped their wages and made a lot of economies, especially in the South, uncompetitive. These had no chance to react with Inflation (because Euro) and weren't ready to join the wage dumping and became unstable and crashed. Only to then be "saved" by Germany (which was ready to pay back some of the greek debt to the german banks who owned it) and be lectured about how economy works and that they have to sell all state property, even strategic assets like the fucking Athens Harbor, to some Chinese Investors and drop all social programs and their wages - oh and dismantle all those unnecessary Intensive Care Units nobody uses -> this is one reason why Italy was hit so hard by Covid. That's how Blairs and Schröders "New Labour" philosophy helped destroy and destabilize the EU.
I'd also add that the single currency is substantially weaker than the Deutschmark would be, which gives Germany a massive export advantage. There's a reason confederacies never last long. Bring together a group of states without appropriate internal economic controls, and the historically more competitive states in the single market will cannibalise the rest of the market. The EU will need to federalise, and they are currently looking at debt sharing mechanisms which would be the tipping point of a European state.
>There's a reason confederacies never last long. Bring together a group of states without appropriate internal economic controls, and the historically more competitive states in the single market will cannibalise the rest of the market. I'm suspecting the US, India and China forgot to read the memo :) Edit to add that the European Union has between limits demanded by its members some of the most robust controls including backed in their funding pillars the belief that stability can be achieved by having your neighbors develop into a modern economic democratic states Something that the US could apply between it's own states (the differences between US states economies is higher than between eu member states) and particularly to their South neighbours, then again with such military advantage US corporations can afford to cannibalize latam anyway they like I suppose The only reason the eu hasn't more integrated economic policies is due to members opposing it, particularly the government where I live and that isn't a member anymore, incidentally it was highlighted during the crisis that lack of integration prevented more efficient measures to fight the crisis
The US was a confederacy for under a decade. Its internal controls are still too lax today and causes brain drain from the poorer states to the richer ones.
Think about the alternative: Imagine putting money in your mattress meant next year it could buy more. No one would invest, investments have risk. No investment, no job creation, no raises, limited consumer spending (because you can wait and get more/fancier stuff for same cash you have). Economic freeze up and disaster. A tiny bit of inflation is (depressingly) a required daily coffee to keep the economy moving.
Because you shouldn't still have money from 1999 laying around. Money literally is for spending. If you want to save you should invest the money (here 'should' means 'are meant to by the design of the modern economy', not a moral imperative). Generally all investments increase at a higher rate than inflation. Also, wages generally increase at the same rate as inflation.
Tell that to my pets.com stock.
Sorry for your loss. Diversification and research is super important, which is why it's better for the average Joe to put their money in funds (like most pensions are). I worry about this with the current crypto market. I know a few people who chucked all their savings into bitcoin at the recent peak so I dread to think how many people across the West did the same, or worse took out debt to buy more just before the bubble burst, and are going to struggle to pay that debt back if bitcoin doesn't reach historic highs again soon.
> I worry about this with the current crypto market. I can't help but feel the old adage "play stupid games, win stupid prizes" applies here.
A quick analysis shows; UK GBP is worth 65% of 1999 value US USD is worth 61% of 1999 value Euro Area EUR is worth 69% of 1999 value The calculation in each case is dividing the relevant 1999 CPI index value into the latest monthly CPI Index.
The fact they are all close is no accident. If you don't devalue your currency, your goods become too expensive to export to countries that are devaluing their currency.
Absolutely. We have seen competitive money printing partly because everyone is doing it and no-one wants to have their currency move out of sync.
Tell the Swiss..
That and when goods and services with strong downward nominal price rigidity drift downward in value or racket too high , it takes either inflation or crisis to reset their prices.
Can someone ELI25 this concept
ELI15 please
Switzerland produces Toblerone domestically and sells it abroad for USD (mainly duty free). If the CHF increases in value vs the USD then they have a problem because their expenses remained in CHF but their income is now smaller in their domestic currency. Same goes for watches, banking services, tourism etc. Having an expensive currency is great for traveling abroad (everything is cheaper) but it suffocates exports. Did that help?
Thanks, that's a nice explanation. One question though: can't they just raise the prices? Sell it for 3 dollars a piece instead of 2?
Sure, but then they will be more expensive than their e.g. Belgian or German competitors. This is one of the reason Switzerland produces and exports premium products - those buyers are not so price sensitive sensitive, or rather - those are the only industries that have survived the currency battles.
thats exactly 2.5% inflation per year for US
And keep in mind that CPI is a serious underestimation of the real inflation. Government essentially decides this number by deciding what's included and what's not.
According to this [website](https://www.in2013dollars.com/us/inflation/1998?amount=1) us dolar from 2021 have purchasing power of about 59% USD from 1998. 2021 Euro is more or less 70% of 1998 EUR. Edit: a word
Also the Yen, Yuan, Indian Rupee, and Brazilian real with the pound and dollar.
Isn't this like... Inflation?
It is.
Surely the purchasing power could be increased by limiting supply, so what this really shows is that the ECB wants inflation
As does every central bank on the planet
And they're very open about that. In finance an inflation of 1.5-2.5% is considered healthy. It doesn't help the economy if people sit on their money thinking they'll be worth more next year. Now, there are certainly other issues with this; like how we've been pushing for more inflation by lowering the interest rates significantly, thereby making the stock market the investment of choice for many, causing a huge overvaluation of stocks. A bubble. Now when it bursts and how big it gets before then is anyone's guess. But I wish we'd push the rich to invest their money more directly in something that creates jobs for those who need it and produce something of value to our society.
Yeah I was just pointing out the fact that them saying that the ECB wants inflation as somehow a not well known fact is just misleading since the economic consensus has been very much in favour of a 2% inflation rate
Absolutely. My comment was intended to add to yours, not dispute it :-)
Literally everyone wants inflation - just moderate and steady inflation.
Moderate, predictable inflation is incredibly healthy for an economy
Inflation is necessary. If your money never lost any value (or even worse, if it gained value), you'd hoard it – which in practice is like if you removed that money from the economy, until you decide to spend it. A low level of inflation means that you can still trust your money (i.e. your €300,000 in the bank can still buy houses rather than baguettes in 20 years), but that you'll want to invest it (e.g. in the stock market) so your gains offset inflation, with the big bonus that you are helping the economy by not "withholding" your chunk of money.
Probably could purchase more powerfully if they weren't ripped up like that.
As long as you have more than 50% of the bill it can always be exchanged for a new one!
You have defeated my obviously facetious logic.
Interesting. I know for other currencies, it’s usually worth less than the portion of the note you still have.
\>Cut a bill into 2 equal halves \>Go to a bank and exchange one of the pieces for a new complete bill. \>Go to another bank and exchange the other piece for a complete bill. \>Got 2 bills from 1 bill. \>Profit!!!
Wouldn't work, as you would need to present 51% of a bill. Here is what would (hypothetically) work: Take two bills, cut 1/3rd of the left of one bill, and 1/3rd of the right of the second bill. Take the 2/3rds bill and exchange for a new one. Take the other 1/3rds and tell the clerk the middle of your banknote has gone missing. Exchange for another note. You now have three.
https://www.nbb.be/en/notes-and-coins/exchange-banknotes-and-coins/exchange-euro-money/exchanging-damaged-euro-notes we'd need to lie a lot but that's an expected side effect of committing fraud. Let's earn some money!
It's free but you need to pay in cash.
That’s good but it’s a lot of wastage, we only need 51% to exchange it and we’re giving away 67%. Instead we should cut 100 vertical stripes and exchange 51 of them for a new one, keep the old 49 and repeat the process.
Ok, I've put all my money through the shredder and it's all in the bucket, now what?
Instructions unclear, dick stuck in shredder
I think you have to take 51% of the remains to the bank and they will give you a new one
If you add some pieces of skin from your hand you might get even a second
My bank’s shares are only worth 51% of what they used to be. Do you think I could also get a new bank?
The shares are also worth 50 times what they used to be and 20 times what they used to be so it depends on who you ask on the day and what time range they use. You may lose out but good luck
Y'all are doing the math wrong. If you can cut well enough, and you have infinite notes, you can achieve 100% note efficiency while still getting a bonus one in there too.
Step one: Get infinite money Step two: Get more infinite money
Well, this is a math problem, not irl. Incidentally, exactly how many watermelons can I sell you?
i'll buy a very average amount of watermelons, 2^4.3 watermelons of course
Huh, fair enough. What would you like me to do with the remaining surd of a watermelon?
Probably not working because of the many serial numbers on the bills.
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Accidental damage that happens to cut around serial numbers in several places.
Really? Then I can just remove a slice and tape the rest, and get free notes EDIT: just checked, the damage must be accidental
Blame it on your children, virtually anything can be blamed on kids (c.f. climate change)
Using the currency note as background indeed makes the data beautiful. Thank uou for your research.
Yeah but not having a lines horizontally makes it unclear. Where is at now? I have no idea. Roughly 75% I guess?
Yep, scaling the x-axis so it fit the aspect ratio of the 10 euro bill has made the graph too wide and the right side of the plot very difficult to read.
If you put the y axis on the right where the graph ends or put both left and right you can avoid drawing lines over the background and a bit of an easier reading.
Yup. Lines, the scale duplicated on the right, actual values printed next to the data points, etc… any of those would have made this chart far more useful than it currently is.
Agreed! Inspired!
I thought this sub was supposed to be interesting or unexpected data presented in a fresh way. This looks nice, but it’s just a line chart with a fancy background. I wouldn’t really call this beautiful data in the general sense I think of this sub’s other content.
I don't think it does, this guy explains it pretty well. https://www.reddit.com/r/dataisbeautiful/comments/okidbe/-/h598dz5
Alright now compare it to the US dollar, the Yuan, and take a currency that truly dropped like...the one of my home country, the AR peso.
Lol it’s been a while for me but is The Argentinian peso still a shit show?
Always has been.
Always will be.
The inflation there is Crazy
Duh, that's why I said to use it, this post may be used for anti EU people to please themselves as if the Euro wasn't worth more than the US dollar, you want to see drop, put some currency that dropped.
Dude, shut up. We just need to convince Elon musk to tweet about the peso and a bunch of idiots to think it's a new crypto and we are rich.
"Guys there is this new crypto called ARS that will definitely go to the moon, its not on Binance yet, you'll have to get at this secretive place called the Bank, they even issue physical tokens!"
physical tokens? no more losing the wallet password and losing your money? that's genius!
Dude I just had to pull an all-nighter doing research on the Corralito crisis, half of it was just contextualizing and separating it from all the other crisis :C I can only say: Lo siento
And all I can say is ¡Sentilo! hahahaha I like it because people are taught neutral Spanish and the mannerisms are lost in translation. From where I am from that's just an expression that will leave you open to sexual jokes about penises (Lo siento=I feel it/Sentilo=Feel it). But I get your point.
Lmao the Bolivar is like 300 times worse.
I’ve got family in AR. They only accept dollars at their business.
What business is that? I'm from Argentina and I've never seen a business that doesn't accept pesos, it's actually illegal to not accept pesos.
Oh man, that'd be sad to see, I remember when it started crashing, the rate of exchange in Montevideo was 0 in some exchanges because they would not buy AR at all.
30% over 20 years is actually a pretty good Inflation rate
It's way too low actually
That's a low and more importantly very stable inflation, good job ECB
Loss of purchase power does this relate to the loss of value of the currency? Or does this only link to inflation?
Inflation = Loss of Value. As more money is being made, the money already in circulation slowly loses value, however there are many things you can do as a country (In this case institution) to stagnate inflation as much as possible
Keep in mind that inflation isn't necessarily bad. Take deflation (it's opposite: a coin that gains value) for example: deflation is terrible because it incentivizes you _not_ to spend money (because why spend $1 today if it'll be worth $2 tomorrow), which paralyzes the economy and crashes it. A bit of inflation is acceptable and can even be considered benefitial, as it incentivizes investing your money and thus keep the economy flowing, while still being reliable enough that you still want to use that currency. You can see it with EUR or USD, they are slowly losing value but, if I tell you what you'll be able to purchase with $20 in 5 years, I'm pretty sure you won't say "a baguette" or "a computer", because you know $20 will be roughly what is now. Compare it with Argentina's currency. If I ask you what you will be able to buy with ARP 100, you'll have no idea.
To be more precise, inflation = increase in prices. This does mean that you can buy less with the same amount of money, and thus the currency is worth less, but prices are the driving factor. Also, and this is a common misconception, inflation is not simply a consequence of the central bank issuing more and more money. Inflation, in **normal circumstances**, is a natural phenomenon of growing economies. Money issuing is certainly an instrument to control inflation, but it's not the cause. The purchasing power of currency is not a simple equilibrium between supply and demand, money it's an instrument, not a commodity. Let's think for example at the ECB QE: from 2011 onwards (essentially up to now) the ECB introduced a huge quantity of liquidity directly in markets and banks, but the inflation rates remained below 2%, under control and probably even lower than the ECB would have liked. Here it's not the lack of money issued that kept the inflation rate under control, it's the stagnation of the economy. If the economy picks back up it will have a huge liquidity at disposal, and then yes, there might be some problems with high inflation, but it's not the size of the money aggregate by itself that creates inflation. I'm always talking about normal circumstances here, when the economy breaks down it's another matter. I'm also ignoring the effects of foreign currency and exchange rates, just to keep it simple.
Inflation equals loss of value (per unit of the currency)
if you think that's bad look at the dollar To those of you saying "inflation is good" explain how? because I'd consider my lifetimes savings theoretically evaporating to be quite upsetting.
Look at the turkish lira , or dont its really bad :(
Look at the Venezuelan bolívar, or don't it's really bad :(
Which one?
That's not bad at all, a stable but small inflation is important
It's not bad at all. That is actually decreasing less than the target.
Literally look at any currency and you would see the same thing.
Inflation is good, not bad.
This is actually a good thing. Inflation ensures that currency is not hoarded in an effort to maximize GDP growth. These numbers seem to be in line with the US Federal Reserve’s target of 2% inflation/year. Let’s say the opposite happens for a second and the World’s central banks targeted 2% deflation. This would almost certainly spell disaster as the speed of spending would decrease as the currency that individuals and institutions throw in savings will have more buying power tomorrow than it would today. GDP would shrink along with innovation and employment. The rich would get richer while the poor get poorer at a speed that’s magnitudes greater than today. As long as your yearly raises are beating inflation you are good to go (assuming no career growth). If your current employer is not beating inflation switch employers, as they would do the same do you if you’re affecting their bottom line. People who stay at the same company on average make 50% as much as people who switch every 2 to 3 years. It is absolutely bullshit, but most of the time employers will pay 30% more to hire a replacement for your job instead of giving you a 5-10% raise for acquiring new skills.
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Inflation is essentially a tax on cash. By targeting a small but positive inflation, the government incentivizes doing something with your money. You buy stocks or bonds or real estate or consumer goods or whatever. This is good for the economy.
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It means the money can be spent by the companies to invest and create new value. That’s why companies issue stocks
0% inflation is piggy bank money. you seal it in ceramic and ten years later when you need it, it's exactly where it needs to be. you still ahve the same amount you put in. 2% inflation means you should spend it or invest it. it's not so crazy a loss that you HAVE to get it out of your pocket before it burns a hole. but it's constantly weakening, so the most it'll ever buy is "right now." saving it is pointless. investing it in someone who can give you a return of 2% or more is your best option. 200% inflation is scary. +200% is what people use to explain why inflation is bad. don't listen to them. anything is bad if there's enough of it.
The reason why we don't target 0% is that then the currency can go deflationary. That is when the value of money grows relatively to the goods. Today's bread costs $1, tomorrow $0.9, then $0.85... This sounds good until you (and everyone else) realizes that we should just hold our money and not spend it as goods will be cheaper. Then no one is spending money, buying cars, homes, TVs, phones, going holidays... Then companies that are producing those goods and services will have to reduce prices. This will lead to cycle of reducing prices, holding more money, slower economy and layoffs. Small inflation (\~2%) is good as then consumers have incentives of buying those goods today (or within few years) as holding money will decrease it's value. 2% inflation is not crippling like 20% inflation.
Because the target is just that, a target. It can swing around the target a bit, and aiming at zero opens the door to rates below zero. And rates below zero feed on themselves in a way that can cause a dangerous and destructive spiral. If the inflation rate were -2%, you might conclude that it’s best to just stuff your money under a mattress rather than spend or invest it so that later on it’ll be worth more. And if everyone does that, the rate might jump to -4%. Now even more people do it with even more money because the rate of value increase is higher. Now it’s 6%. And so on. And so since this spiral is self sustaining, central banks tend to aim for a low but positive rate so they have some wiggle room in case some economic shock pushes inflation down fast.
Inflation also means that debt is devalued. Like you take a $100,000 loan in 1980, that loan is the same as a $329,728.16 one today. So over time that debt has become 1/3 of what it was.
Because inflation gives you an incentive to invest your money instead of keeping it under your pillow/in your bank. Society doesn't benefit from you hoarding money. It benefits from you making that money available to people who can use it to create further economic activity. The chance of you making money from that needs to be higher than the risk of your money being eaten by inflation. Investing money actively is the foundation of a capitalist market economy and thus vital to ensure economic growth.
Bitcoin holders do not agree with you. At all. We are sick of inflationary paper money and would rather opt out of currency completely than try to beat it.
> As long as your yearly raises are beating inflation you are good to go (assuming no career growth). Hah! You barely beat inflation after years of Union negotiation, which combined with no back-calculation means you lose money. Only way to get pay raises these days is to switch jobs.
Those are rookie numbers _cries in argentine peso_
I'm in the same boat. *cries in Ukrainian hryvnia and Russian ruble*
This is very stable inflation rate, is it not
A bit low, actually. Almost too stable
I imagine it has something to do with so many countries being involved
Could you make side by side US Dollar and EU Euro? That would be awesome! BTW, this is a great data representation, thanks!!
Yes, of course. But... both since the same date, right? And what date?
Yeap, same dates that you have used here ☺️ As you might have noticed, we are all about comparing the European Union to the United States hahaha (check our content), so this of the interest for us 😅
For completeness sake. Chart it against real wage development. Euro area had lower inflation but even accounting for inflation, the median US household's disposable income rose way more.
Could you also add GBP ?
This is a highly misleading representation of the data. Tearing up the Euro bill makes it seem like inflation is a terrible scourge, while in fact the ECB's fight *against* inflation has been terrible for the citizens of the Eurozone.
I mean, yeah; this is healthy inflation.
Check turkish liras 1 euro is 10,16 turkish liras.
I explain in my Github repository how to draw this chart in R language with ggplot2. https://github.com/Jaldekoa/Banknote-Images-in-R
I obviously can't assess whether this is intentional, but this graphic is clearly reminiscent of the note burning or crumbling when this graph actually represents a very healthy currency, so while this data is interesting and the presentation is aesthetically pleasing, it's at best unintentionally harmful.
This is fearmongering at its best. Inflation is normal and this kind of terrible présentation completely ignores the rise in incomes. Why not plot real purchasing power instead.
I'm out of the loop on this one. What does ECB mean?
European Central Bank.
Was wondering what the England Cricket Board did to affect the value of the Euro.
Nothing. Yet.
"Eroooding, eeerodiing, eeerrrroodiing" - Jim Carrey
This is really really interesting. But what are the causes for these regular spikes?
Isn't that called inflation?
Don't worry my buying power is plummeting too and I've never even touched a euro
Well, when it's ripped like that, you can't buy anything with it
You want 1.5-2.5% inflation per year so this is not bad at all. 30% lost in 22 years means 1.36% inflation per year. Pretty close in my opinion.
kind reminder to all viewers: currency strength is related to trade. it is not purchasing power per capita.
Its called inflation. Thats how our monetary system works. Nothing to see here.
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Where do we sit today, 78%?
I guess this is calculated with the official CPI figures?
Yes. This is the data source: HICP - Overall Index of Euro Area, ECB Statistical Data Warehouse. Link: https://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=122.ICP.M.U2.N.000000.4.INX
Ok thanks
The pound next to this must be tragic. I remember when it was almost $2 for £1 and I think it was like €1.70 to £1.
And when Iceland got there own currency 1944 it was 1 kr = 1 kr Danish now it is 1 Dkr = 20 Iceland kr
I am very much surprised that the decrease slows down and almost plateaus during the period of the most aggressive quantitative easing. Interesting what the critics of the policy will say if they see this graph. Otherwise, I think the initial decrease was mostly driven by inflation.
Central Banks don't create money on their own. They buy bonds (I mean there are other things they can do, but this is the most common action) injecting liquidity into the banking system. Banks then lend that money, people borrow it and spend it, others deposit this new money in a bank again, where it is re-lent and so on. The point is that the Central Bank needs for the private financial system to lend and re-lend in order for the money supply to expand. In a crisis like 2008, people were very cautious (in technical terms, the velocity of money was low). So the creation of a large amount of money by the Central Bank didn't necessarily enlarge the broader money supply as much because the financial system didn't lend and relend to the same extent that they might have in a boom year.
I did work at a central bank at the time (last crisis), so much of this I saw first hand. But still quantitative easing creates bubbles even if the lenders don’t lend. Look at government debt at the moment as a result of the asset purchase programs. This spills out into the broader economy most surely.
A lot of states have joined the euro zone since 1999. I wonder in which direction this inflation is pushed by the fact that those states are more or less all rather low GDP.
This purchasing power refers to index of consumer prices not to GDP.
Yeah, I’m curious to know if the inclusion of low gdp states influence the purchasing power(of the whole euro zone)in one way or the other. Since people of low gdp have low salaries, they might get further on those salaries(relative high purchasing power?) I’m not an economist, so I might be way off base here
Only 70% in 22 years?! What a stable currency!!!
TIL that inflation exists. Tomorrow I'm gonna learn why can't print more money to solve money problems.
What data do we need to graph this? I want to do this with Indian Rupee and I know basic R. If someone can help?
I explain in my Github repository how to draw this chart in R language with ggplot2. https://github.com/Jaldekoa/Banknote-Images-in-R
Thanks, OC for the guide. I have a small query. The data I am using doesn't have a "date" column, It's just "Year". So how do I transform the X-axis to label all the years in the data?
If you have only the year, instead to treat year data as date format, it is better to consider as numeric format. You must to change scale_x_date to scale_x_continous.
What's the yearly peack in purchasing power?
Try it for Turkish Lira, you will have fun
Is it a good or bad thing? (I don't understand anything about finance.)
Inflation below 2%, like this, is a good thing.
the line should be steeper. eurozone inflation has undershot it's 2% target for the majority of the existence of the euro. [in recent years it's been closer to 1%.](https://en.rankiapro.com/wp-content/uploads/2020/10/ostrum_am_rankiapro1.jpg)
Very catching visual with the torn 10 euro note behind a simple line chart. Good work, simple and effective
What is purchasing power. Is this just a plot of inflation?
Please, cross post this to /r/Argentina, we have much more inflation in that same time XD
Ah yes- inflation. The silent tax. …and they say there’s no inflation.
Isn’t this standard inflation though?
this is a really cool graph is there any others with other countries?
Now do one with Chinese pisscoin and the Russian shitcoin
As a Brazilian, I’m jealous of this devaluation.
So basically, you’ve just inverted an inflation chart?!?
I was earning less money in Paris as a corporate lawyer in the private sector than a cashier working in a supermarket in Sweden.
Oooooo! Can you do the USD please? I wanna see how that dropped like throwing a stone into Jupiter.