Infographics: Bitcoin Was The Top Performing Currency in 2015

The Visual Capitalist writes:

The Money Project is an ongoing collaboration between Visual Capitalist and Texas Precious Metals that seeks to use intuitive visualizations to explore the origins, nature, and use of money.

For most investors, the major story of 2015 was the expectation and eventual fulfillment of a rate hike, signalling the start of tightening monetary policy in the United States. This policy is divergent to those of other major central banks, and this has translated into considerable strength and momentum for the U.S. dollar.

Using the benchmark of the U.S. Dollar Index, a comparison against a basket of major currencies, the dollar gained 8.3% throughout the year.

Despite this strength, the best performing currency in 2015 was not the dollar. In fact, the top currency of 2015 is likely to be considered the furthest thing from the greenback.

Bitcoin, a digital and decentralized cryptocurrency, staged a late comeback in 2015 to overtake the dollar by a whopping 35% by the end of the year.

Bitcoin is no stranger to extremes. During the year it came into the mainstream in 2013, Bitcoin gained 5,429% to easily surpass all other currencies in gains. However, the following year it would become a dog, losing -56% of its value to become the world’s worst performing currency in 2014.

The second best performing major currency, relative to the USD, was the Israeli shekel. It gained 0.3% throughout the year, and the Japanese yen (0%) and Swiss franc (0%) were close behind, finishing on par with how they started the year.

The world’s worst performing currencies are from countries that were battered by commodities or geopolitical strife.

Ukraine’s hryvnia fell -33.8% in the aftermath of Crimea. Brazil’s real (-30.5%), the Canadian dollar (-15.9%), Russian ruble (-20.8%), and South African rand (-26.7%) all lost significant value in the purging of global commodities. Gold finished the year down -10%, and silver at -11%.

Courtesy of: The Money Project

Zimbabwe’s Gono Lauds US and UK For "Seeing the Light" and "Making Positive Difference"

We frequently cite Zimbabwe because it has been a living example and the epitome of how government policies can, out of political motivations, deliberately cause the destruction of a nation’s currency and its aftereffects to its markets and economy.

Bizarrely, just last April, Dr. G. Gono, Governor of the Reserve Bank of Zimbabwe, or Zimbabwe’s central bank lauded the US and UK in his Zimbabwe’s Monetary Policy Statement (HT: FT Alphaville) for following his footstep.

Quoting Dr. G. Gono (all bold highlights his)

``As Monetary Authorities, we have been humbled and have taken heart in the realization that some leading Central Banks, including those in the USA and the UK, are now not just talking of, but also actually implementing flexible and pragmatic central bank support programmes where these are deemed necessary in their National interests.

``That is precisely the path that we began over 4 years ago in pursuit of our own national interest and we have not wavered on that critical path despite the untold misunderstanding, vilification and demonization we have endured from across the political divide.

``Yet there are telling examples of the path we have taken from key economies around the world. For instance, when the USA economy was recently confronted by the devastating effects of Hurricanes Katrina and Rita, as well as the Iraq war, their Central Bank stepped in and injected life-boat schemes in the form of billions of dollars that were printed and pumped into the American economy.

``A few months ago, the USA economy confronted a severe mortgage crisis, which threatened to spark an economy-wide recession. The USA Central Bank again responded by injecting over US$160 billion between December, 2007 and March, 2008, to provide impetus to the American economy and prevent a worse crisis from happening.

``A look at the recent developments in the UK equally reveals how increasingly, leading central banks in the global economy are bailing out troubled economic sectors to achieve macroeconomic and financial stability.

``Faced with a yawning threat of systemic bank failures on the back of the aftermaths of that country’s mortgage crisis, the Bank of England was directed by its Government to intervene by providing a £50 billion lifeline to the UK’s banking sector.

``Here in Zimbabwe we had our near-bank failures a few years ago and we responded by providing the affected Banks with the Troubled Bank Fund (TBF) for which we were heavily criticized even by some multi-lateral institutions who today are silent when the Central Banks of UK and USA are going the same way and doing the same thing under very similar circumstances thereby continuing the unfortunate hypocrisy [italics-mine] that what’s good for goose is not good for the gander.

``Those who yesterday did not see the interconnection between sanctions and the politics of this country as they sought conventional and dogmatic textbook methods of moving this economy now have good cause to reflect on these examples of quasi-fiscal interventions by the central banks in the USA and the UK and review their dogmas in the interest of adopting more flexible and dynamic approaches [italics mine] informed by the exigencies of the economic situation on the ground.

``Our economy is and has been in trouble for over ten years and our extraordinary interventions by whatever name have helped to keep the wheels of this economy moving.

``Even though our efforts have been criticized and derided clearly for undisguised political reasons, we are proud that we had the courage to do something that made a positive difference when it would have been far too easy for us to appear reasonable by doing nothing and thereby make the situation worse.

``As Monetary Authorities, we commend those of our peers, the world over, who have now seen the light on the need for the adoption of flexible and practical interventions and support to key sectors of the economy when faced with unusual circumstances.

``Of course, in the short-term such interventions are without doubt inflationary but in the medium to long-term they trigger and propel economic growth and development that everyone craves for.”

Our comment:

Well, Dr. Gono should be exceptionally pleased to know that his peers have since been gradually and methodically assimilating his paradigm, albeit in a developed economy version and as showcase of the manifold tools available to the modern banking system.

Where Dr. Gono gloats, ``we are proud that we had the courage to do something that made a positive difference when it would have been far too easy for us to appear reasonable by doing nothing and thereby make the situation worse.”

Making a positive difference?

We refer to this top-10 “worst list” article where Zimbabwe is ranked the worst currency of the world.

Why?

Because $1 USD = 642,371,437,695,221,000 Zimbabwean Dollars!

According to top10-list.com, ``It's hard to keep track of just how fast the Zimbabwean dollar has fallen since the government reinstated electronic parallel market transfers on Nov. 13, but even before that the currency of Zimbabwe was the most worthless in the world.

``While the official rate on Monday was 19,393.94 Zimbabwean dollars to the $1 USD, the old mutual implied rate, generated from comparing the Zimbabwe and London stock exchanges, valued the currency at more than 642 quadrillion to one.

``When the currency was revalued this summer, an egg cost about $35 billion Zimbabwean dollars.”

Zimbabwe’s currency is losing value almost every minute, and that’s the positive and speediest difference!

Well for the list of the other worst currencies…

2^nd worst currency $1 USD = 35,000 Shillings

3^rd worst: Turkmenistan $1 USD = 24,000 Manat

4^th worst, Vietnam $1 UDS = 16,975.00 Dong

5^th Sao Tome and Principe $1 USD = 14,350 Dobra

6^th Indonesia $1 USD = 11,198.40 Rupiah

7^th Iranian Rial $1 USD = 10,179 Rial

8^th Laos $1 USD = 8,640.75 Kip

9^th Guinea Franc $1 USD = 5,115.00

10^th Paraguay $1 USD = 4,615.00 Guarani

Read the details here

Burgernomics: Where is the world’s most Expensive and Cheapest Big Mac? Peso one of the world’s cheapest.

The Economist magazine has used its premier product the Big Mac, which is served in McDonald’s 31,000 outlets in 119 countries, to gauge on a domestic currency’s purchasing power against the US dollar. These are applied to nations where McDonald's has existing branches.

So where is the cheapest and most expensive Big Mac?

Courtesy of the Economist

The most Expensive are found mainly in European countries, while the cheapest are in Asia.

According to the Economist, ``Many of the currencies in the Fed's major-currency index, including the euro, the British pound, Swiss franc and Canadian dollar, are overvalued and trading higher than last year's burger benchmark. Only the Japanese yen could be considered a snip. The dollar still buys a lot of burger in the rest of Asia too. China's currency is among the most undervalued, but a little bit less so than a year ago.”

For a little technicality on how they arrived at this comparative, we will further excerpt the Economist (highlight mine),

``The Big Mac Index is based on the theory of purchasing-power parity (PPP), which says that exchange rates should move to make the price of a basket of goods the same in each country. Our basket contains just a single item, a Big Mac hamburger, but one that is sold around the world. The exchange rate that leaves a Big Mac costing the same in dollars everywhere is our fair-value yardstick…

``PPP measures show where currencies should end up in the long run. Prices vary with local costs, such as rents and wages, which are lower in poor countries, as well as with the price of ingredients that trade across borders. For this reason, PPP is a more reliable comparison for the currencies of economies with similar levels of income…

``If that judgment is right, the squalls stirred up by the credit crises have moved at least one currency—the world’s reserve money—closer to fair value. Curiously the crunch has not shaken faith in two currencies favoured by yield-hungry investors: the Brazilian real and Turkish lira. These two stand out as emerging-market currencies that trade well above their Big Mac PPPs. Both countries have high interest rates. Turkey’s central bank recently raised its benchmark rate to 16.75%; Brazil’s pushed its key rate up to 13% on July 23rd. These rates offer juicy returns for those willing to bear the risks. Those searching for a value meal should look elsewhere.”

Courtesy of the Economist

So where does the Philippines stand?

At 44.5 per US dollar, the Philippine Peso, as measured from the Big Mac Index above, shows of a notable discount of FORTY FIVE percent against the US dollar.

The Peso is one of the cheapest after Malaysia (-52%), Hong Kong (-52%), China (-49%), Thailand (-48%), Sri Lanka (-47%) and at par with Pakistan (-45%).

This means if we take heed of the Economist advice of “PPP measures show where currencies should end up in the long run”, the Peso and most of the currencies mentioned above are likely to appreciate significantly over the longer term (all things being equal).

Another aspect worth to consider in the Economist article is that currencies of high interest rates countries such as Brazil’s Real and Turkey’s Lira appear to remain unaffected by the credit crunch.

Translation: Global liquidity appears to remain abundant enough to lure global investors towards selective high yielding "high risk" currencies.

Yes, the risk aversion has increased, but apparently the chase for yields has NOT entirely vanished.