discovering the numéraire

The numéraire is the unit of account.  It's how goods and services are priced.  It typically comes in the same form as the medium of exchange, or money, that you use.  It is the asset that most people "want to be in," and therefore, that asset's exchange rate (for other assets, or its price) is typically the most familiar to people, to participants in an economy.  Today that's US dollars (and in rare cases cents) in most countries.  Historically it was gold and silver (mostly silver, but most recently gold); however, we did see plenty of periods with other, more localized commodities, such as tobacco or sea shells.

If we scan the long arc of history, we had silver, and then gold, that emerged as the unit of account.  Gold was the numéraire.

If we scan the modern arc of history, we had the British pound sterling (originally backed by silver, then gold, now nothing), and now US dollars (ditto for backing as British pounds) that emerged as the unit of account.  The US dollar has become the world's numéraire.

It is quite possible that in the future we will have bitcoin.  It is possible that bitcoin will emerge as the world's numéraire.

The table below will help you compare these three different numéraires, across many assets.  It is all broken down for you, in terms of what the exchange rate is for these three numéraires to other assets, and what that means, over the years.

discovering the numéraire explained

Further notes on the above table:

  1. Download. The speed will be slow, perhaps very slow. Give it a second!
  2. Data. Bitcoin will always be the most current pricing. The other assets will be current as of today, or yesterday, or a few days ago.
  3. Today is important. The dark shaded columns (green for US$, yellow for Gold, and orange for Bitcoin) will always reflect the pricing / exchange rate of that asset as of today. Understand that all other data essentially "flows backward from this," or needs data from today, in order to appropriately calculate the multiples and compound returns.
  4. Days. Every day in the calendar is included, going back 50 years. If an asset didn't have any pricing / exchange rate data on that day (weekend, holiday), the price from the previous business day is used.
  5. Blue shaded boxes. These are the "best performers" for each asset, per time period (1 year ago, 5 years ago, etc.)
  6. Blue colored fonts. These are notable performers:
    • Gross multiple: Any asset that has doubled in terms of the numéraire.
    • Compound return: Any asset that has returned over 10% compounded annually in terms of the numéraire.
    • Doubling trend: Will be same as compound return; meaning, any asset that doubles in less than ~7.2 years (see rule of 72!) in terms of the numéraire.