With $180B in deposits, SVB was as large as HDFC Bank which has deposits of ~₹15L cr. However, in reality, it's scale is similar to IndusInd Bank (₹3.3L cr).
How?🤔
Let's explain Purchasing Power Parity💡- the great equalizer! 👇
1/n #LearnwithICICIDirect
How?🤔
Let's explain Purchasing Power Parity💡- the great equalizer! 👇
1/n #LearnwithICICIDirect
https://twitter.com/dmuthuk/status/1634879223059062785
2/
What is PPP?
PPP compares a country's relative cost of goods/ services with its inflation to reflect the relative purchasing power of its currency.
It is basically the rate at which currency of one country is exchanged for another to buy the SAME amount of goods & services.
What is PPP?
PPP compares a country's relative cost of goods/ services with its inflation to reflect the relative purchasing power of its currency.
It is basically the rate at which currency of one country is exchanged for another to buy the SAME amount of goods & services.
3/
History of PPP
PPP came into existence after WW I.
Earlier, most countries relied on Gold standard - exch. rate was based on how much gold a country's currency was worth.
Countries abandoned GS to pay for the war & printed all the money they needed, which led to inflation.
History of PPP
PPP came into existence after WW I.
Earlier, most countries relied on Gold standard - exch. rate was based on how much gold a country's currency was worth.
Countries abandoned GS to pay for the war & printed all the money they needed, which led to inflation.
4/
After the war ended, Swedish economist Gustav Cassel proposed a theory to tackle the situation. He suggested to multiply each currency's pre-war value with its inflation rate to get the new parity.
This theory later evolved into PPP.
After the war ended, Swedish economist Gustav Cassel proposed a theory to tackle the situation. He suggested to multiply each currency's pre-war value with its inflation rate to get the new parity.
This theory later evolved into PPP.
5/
Why is PPP💰 important?
🔸PPP helps to determine country's economic health
🔸Assists investors & traders dealing in foreign currency
🔸Helps in determining exchange rates
🔸Economists use PPP to compare & draw parallels b/w the economic outputs of different countries
Why is PPP💰 important?
🔸PPP helps to determine country's economic health
🔸Assists investors & traders dealing in foreign currency
🔸Helps in determining exchange rates
🔸Economists use PPP to compare & draw parallels b/w the economic outputs of different countries
6/
Based on PPP, how much earnings to live a $100K lifestyle✈️ in India, US, UAE
🔸An earning of ₹23L in India suffices
🔸Similarly in UAE one would require ₹37L
🔸In Switzerland ₹65L
🔸And in the United States ₹79L
Based on PPP, how much earnings to live a $100K lifestyle✈️ in India, US, UAE
🔸An earning of ₹23L in India suffices
🔸Similarly in UAE one would require ₹37L
🔸In Switzerland ₹65L
🔸And in the United States ₹79L
For a more detailed understanding, read out blog here:
icicidirect.com/research/equit…
icicidirect.com/research/equit…
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