Go to any large, high-density city like New York or San Francisco, and you’ll notice a difference in costs immediately.
The price you pay for groceries, dinner at the restaurant, filling up your tank, or even your daily coffee goes up substantially. With high-paying jobs, booming economies, limited space, and soaring levels of density, cities can be expensive.
While this effect on costs is most evident in cities, it’s actually present throughout the country.
What you can buy for your paycheck varies wildly depending on where you are, greatly impacting purchasing power and the cost of living. Sometimes even a short one-hour drive can make a difference in some cases.
Today’s two maps come from TaxFoundation.org, and they look at regional differences in purchasing power, based on information from the Bureau of Economic Analysis.
Bang for Buck, by State
The following map shows the buying power of $100 by state.
If the number is below, such as $90, it means money buys less than the federal average. If a state’s number is higher, such as $110, that means each dollar goes further, giving residents more purchasing power.
Generally speaking, dollars go furthest in states in the Southeast and Midwest parts of the country. Go to places like Arkansas or South Dakota, and you’ll see higher purchasing power.
Here are the five states that have the most buying power:
|Rank||State or District||Relative Value of $100|
And here are the five with the least buying power:
|Rank||State or District||Relative Value of $100|
|#50||District of Columbia||$85.47|
Bang for Buck, by County
The state map does not tell the whole story, however.
The reality is that density makes a big difference for buying power, and large metropolitan areas tend to be more expensive. The following chart breaks it down based on county, creating a much more interesting contrast.
The above rendition makes it clear that the Bay Area, New York City, and Washington D.C. are the places where the relative value of a dollar is lowest.
Meanwhile, it also shows that metropolitan areas in some parts of the country are not too bad for the cost of living. Cities like Atlanta ($104.10), Nashville ($106.50), Phoenix ($102.90), Milwaukee ($104.50), Kansas City ($106.70), Jacksonville ($104.40), and New Orleans ($104.60) buck the trend, being cheaper than the American average.
Here’s another look – this time with an interactive map that allows you to hover over individual metro areas:
The World’s Most Powerful Reserve Currencies
Here are the reserve currencies that the world’s central banks hold onto for a rainy day.
The World’s Most Powerful Reserve Currencies
When we think of network effects, we’re usually thinking of them in the context of technology and Metcalfe’s Law.
Metcalfe’s Law states that the more users that a network has, the more valuable it is to those users. It’s a powerful idea that is exploited by companies like LinkedIn, Airbnb, or Uber — all companies that provide a more beneficial service as their networks gain more nodes.
But network effects don’t apply just to technology and related fields.
In the financial sector, for example, stock exchanges grow in utility when they have more buyers, sellers, and volume. Likewise, in international finance, a currency can become increasingly entrenched when it’s accepted, used, and trusted all over the world.
What’s a Reserve Currency?
Today’s visualization comes to us from HowMuch.net, and it breaks down foreign reserves held by countries — but what is a reserve currency, anyways?
In essence, reserve currencies (i.e. U.S. dollar, pound sterling, euro, etc.) are held on to by central banks for the following major reasons:
- To maintain a stable exchange rate for the domestic currency
- To ensure liquidity in the case of an economic or political crisis
- To provide confidence to international buyers and foreign investors
- To fulfill international obligations, such as paying down debt
- To diversify central bank portfolios, reducing overall risk
Not surprisingly, central banks benefit the most from stockpiling widely-held reserve currencies such as the U.S. dollar or the euro.
Because these currencies are accepted almost everywhere, they provide third-parties with extra confidence and perceived liquidity. This is a network effect that snowballs from the growing use of a particular reserve currency over others.
Reserve Currencies Over Time
Here is how the usage of reserve currencies has evolved over the last 15 years:
|🇺🇸 U.S. Dollar||🇪🇺 Euro||🇯🇵 Japanese Yen||🇬🇧 Pound Sterling||🌐 Other|
Over this timeframe, there have been small ups and downs in most reserve currencies.
Today, the U.S. dollar is the world’s most powerful reserve currency, making up over 61% of foreign reserves. The dollar gets an extensive network effect from its use abroad, and this translates into several advantages for the multi-trillion dollar U.S. economy.
The euro, yen, and pound sterling are the other mainstay reserve currencies, adding up to roughly 30% of foreign reserves.
Finally, the most peculiar data series above is “Other”, which grew from 2.0% to 8.4% of worldwide foreign reserves over the last 15 years. This bucket includes the Canadian dollar, the Australian dollar, the Swiss franc, and the Chinese renminbi.
There have been rumblings in the media for decades now about the rise of the Chinese renminbi as a potential new challenger on the reserve currency front.
While there are still big structural problems that will prevent this from happening as fast as some may expect, the currency is still on the rise internationally.
What will the composition of global foreign reserves look like in another 15 years?
Why Gold is Money: A Periodic Perspective
Gold has been used as money for millennia. People often attribute this to beauty, but there are basic physical properties for why gold is money.
Why Gold is Money
The economist John Maynard Keynes famously called gold a “barbarous relic”, suggesting that its usefulness as money is an artifact of the past. In an era filled with cashless transactions and hundreds of cryptocurrencies, this statement seems truer today than in Keynes’ time.
However, gold also possesses elemental properties that has made it an ideal metal for money throughout history.
Sanat Kumar, a chemical engineer from Columbia University, broke down the periodic table to show why gold has been used as a monetary metal for thousands of years.
The Periodic Table
The periodic table organizes 118 elements in rows by increasing atomic number (periods) and columns (groups) with similar electron configurations.
Just as in today’s animation, let’s apply the process of elimination to the periodic table to see why gold is money:
- Gases and Liquids
Noble gases (such as argon and helium), as well as elements such as hydrogen, nitrogen, oxygen, fluorine and chlorine are gaseous at room temperature and standard pressure. Meanwhile, mercury and bromine are liquids. As a form of money, these are implausible and impractical.
- Lanthanides and Actinides
Next, lanthanides and actinides are both generally elements that can decay and become radioactive. If you were to carry these around in your pocket they could irradiate or poison you.
- Alkali and Alkaline-Earth Metals
Alkali and alkaline earth metals are located on the left-hand side of the periodic table, and are highly reactive at standard pressure and room temperature. Some can even burst into flames.
- Transition, Post Transition Metals, and Metalloids
There are about 30 elements that are solid, nonflammable, and nontoxic. For an element to be used as money it needs to be rare, but not too rare. Nickel and copper, for example, are found throughout the Earth’s crust in relative abundance.
- Super Rare and Synthetic Elements
Osmium only exists in the Earth’s crust from meteorites. Meanwhile, synthetic elements such as rutherfordium and nihonium must be created in a laboratory.
Once the above elements are eliminated, there are only five precious metals left: platinum, palladium, rhodium, silver and gold. People have used silver as money, but it tarnishes over time. Rhodium and palladium are more recent discoveries, with limited historical uses.
Platinum and gold are the remaining elements. Platinum’s extremely high melting point would require a furnace of the Gods to melt back in ancient times, making it impractical. This leaves us with gold. It melts at a lower temperature and is malleable, making it easy to work with.
Gold as Money
Gold does not dissipate into the atmosphere, it does not burst into flames, and it does not poison or irradiate the holder. It is rare enough to make it difficult to overproduce and malleable to mint into coins, bars, and bricks. Civilizations have consistently used gold as a material of value.
Perhaps modern societies would be well-served by looking at the properties of gold, to see why it has served as money for millennia, especially when someone’s wealth could disappear in a click.
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