Having read the Big Mac Index discussion, it seems you could take this one step (or several steps) further and try to create a CPI token (decent read on investopedia, couldn’t post link)
Could be based on basket of goods, or somehow be a hybrid and involve a cost of living index (related token idea: a house price index token for cities/countries). The basket of goods could be made much more interesting though (include tech related items?). Might be tricky to get data for some of it but you could reward people for submitting correct info and pool it (loaf of bread in Khazakstan v Namibia; iPhone in Canada v China).
Could make for some interesting economic data, and be independent of governments who might not have the same incentives to report certain metrics.
An interesting project here from MIT takes a different approach and could even be used for the data source: http://www.thebillionpricesproject.com/
Finally a good article on the difficulties with different indices and a nice point about how CPI varies depending on your circumstances (employed, retired etc) as well as some of the biases: How changes in the cost of living are measured (article) | Khan Academy
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Great idea!
There is a mainstream precident for this in the Unidad de Fomento, introduced in Chile in the 60s as a notional currency tracking inflation. Its still used today - in Chile substantial purchases like houses are advertised in the UF, even tho people pay in Pesos
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Totally agree on the usefulness of a CPI measure. I know a large portion of the current financial system makes choices based on this measure.
For this idea, are you looking at creating a new basket or want to tokenize an existing basket?
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Sorry for the radio silence. All good points. I just think that creating an independent measure of fiat inflation, currently lacking, would be most interesting. Especially one that is not dependent on what any one government decides should be in that basket (also secretive I understand). If you look at M2 in last year it’s clear that there is a lot of liquidity in the markets…amazing graphic here:
I’m just not sure the value here in tokenizing this though…how does going long or short a CPI help anyone…not really a valuable hedge is it? Although with recent BTC vs Altcoin domination project (https://domination.finance/) you could certainly do some something pitting fiat inflation again crypto inflation. And very valuable information nonetheless that could use the Oracle as price truth this generating interest from economists no doubt. Crypto TVL would have to be adjusted for inflation though too, as this this often distorts the picture: https://dappradar.com/blog/75-of-makerdao-tvl-increase-fueled-by-token-price
Anyway would love to hear others thoughts, and whether there is a way to simplify it down and then perhaps even make something happen…?
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To specifically answer you question, I’m not sure! I’m no economist. Tokenizing an existing basket seems to make more sense perhaps. If you knew what was in these baskets you could be able to source the data perhaps even on a country by country basis. Alternative data companies (like https://eaglealpha.com ) collates this data, and I’m sure others too. I just know these guys.
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This is a very interesting idea i don’t know how familiar you are with the ISM and its relative accuracy of predicting consumer confidence. Through my learning the ISM is the precursor prediction for CPI and consumer confidence. I believe it has also been the most accurate prediction tool for both recession and depression.
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This is Modern Money Theory in Practice. It will be considered a successful policy unless inflation goes 4x to match the amount of circulating dollars. I think the thinking behind this is that no institution could increase the prices of their goods or services with out being eliminated by “free market competition” to match the massive amount of dollars put into play there for your dollar value is not diluted. Here is where going long on CPI vs Inflation would make sense. You are hedging against the commodity value of all consumer goods VS the value of the dollar. what a graphic.
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ISM is same as Purchasing Managers Index?
Anyone keep to help me put together this concept as a submission for XIO accelerator?!
