A request w.r.t. inflation and Normalization

Guy Baruch guybar@plasma-gate.weizmann.ac.il
Thu, 26 Sep 2002 20:47:41 +0300

Hello gnucash developers, please CC replies.

First, I've recently started using gnucash for personal finance and find 
it a
very practical, useful tool. Thank-you all !

However, the only treatment I've found in the documentation for inflation
is the expense-account for inflation-adjustment .

IMHO,  this approach is inadequate, for the following reasons:
1) for the user, it may be unclear how to calculate this number,
and for which accounts.
2) more importantly, reports give a biassed picture, since the dolar
(or israelly Sheqel, in my case) of last year is not the dollar of today.
This means that for every number in a transaction or report,
the buying power of that number is unclear. Definately adding numbers
 from years ago and today gives a missleading report !

This problem is more acute in countries (such as mine) where inflation
is generaly in the 10% range.

In Israel, the buying power of the Sheqel is measured by an index called
CPI (Consumer Price Index), I do not know what is the equivalent in
other countries. Whatever it's called, though, there needs to be in gnucash
a numerical representation of the value of money as a function of time.

So my proposition is this: gnucash should keep a monthly record of the
value of curency (which I shall call CPI for now on).

This needs to be an input from the user. This may be automatically
updated from the net, but the CPI is needed for accurate reports.

Optionally (and IMHO, by default), whenever a transaction or a report
is shown, the adjusted numbers should be shown (read-only, of course)
normalized w.r.t. the change in the CPI. In other words, the real value .

Thus, If I made any transactions last year, I will instantly see both
the nominal and the real values of that transaction, enabling me to
better assess that transaction.

also, reports will now add the real values over time, thus giving
more meaningful results.

I'm not sure of the best way to implement this, however, because
this is also dependant on gnucash's internals, on which I know
close to nothing about.

Note: I searched the last-year archive for a discussion of this issue,
but could not find any. I appologize in advance if this was already 

disclaimer: I am not an accountant or financial expert, one such will 
 have much better sugestions than me on this matter.

-- regards

+ Guy Baruch , Plasma Laboratory, Weizmann Institue.
+ mailto:guybar@plasma-gate.weizmann.ac.il
+ phone: 972-8-934-2211

They hang the man and flog the woman
That steal the goose from off the common,
But let the greater villain loose
That steals the common from the goose.

-- English folk poem, circa 1764