Dollars, Doughnuts and Capital Gains

Bought cider doughnuts at the farmers market  last weekend – six bucks for a half dozen. A dollar a doughnut.

"Dollars to doughnuts" was how our forebears described a virtually sure bet. At the dawn of the 20th century a loaf of bread cost a nickel, so doughnuts must have sold for a penny or less. After more than a century of inflation, my doughnuts cost 100 times as much.

Since the Great Recession, inflation has been so muted that the Federal Reserve has wished for more. We sometimes forget how even low inflation keeps dinging the value of a dollar. Savers suffer, and so do investors who may assume they're reaping profits.

Say you bought stock at $100 in 2008 and now sell at $120. A modest profit? Not after paying federal income tax on your capital gain. Thanks to a decade of "low inflation," you need to net more than $117 just to break even.

From time to time Congress has toyed ineffectually with the idea of indexing capital gains to inflation. Could the Treasury do the job for them, perhaps by issuing a regulation redefining capital gain?

Anything's possible, but we'd guess it's a dimes to doughnuts bet.

Work Four Days a Week, Get Paid for Five

Auckland Harbor, New Zealand

If you like working with wills and trusts, head for New Zealand, where you can work four days a week and get paid for five.

A few years ago, Andrew Barnes combined two trustee companies, Perpetual Trust and Guardian Trust, to form Perpetual Guardian. According to its web site, Barnes decided to move the company away from financial advice and wealth management and back to a pure fiduciary services model.

Inspired by a report finding that workers were actually productive less than three hours a day, Barnes also launched a bold experiment: Employees would be paid for a five-day week but would be required to work only four days.

According to The New York Times, the experiment is a success. Employees love the extra day off, of course, and they have found ways to do their full week's work. They work smarter, they don't allow themselves to be distracted by personal stuff, and two-hour meetings now take 30 minutes.

OK, which U.S. trust company would like to grab a great idea and run with it?

The Darien Scheme: How Scotland Lost Everything

The Scots invented almost everything. But when they miscalculated, they did so on a grand scale. On this day, July 12, in 1698, a Scottish fleet set sail for the Isthmus of Darien in Panama. It was one of the most disastrous investment ventures ever launched.

The Darien Scheme was born of desperation. Scotland had endured decades of political turmoil followed by famine and the effects of a little ice age. As a last, bet-the-farm hope, the Company of Scotland was formed, funded with about 20-25 percent of all the money Scots possessed.  Its goal: transform Scotland into a great trading nation like England or Spain.

Scotland didn't merely aim to join those countries in making settlements in the New World. The Scots thought bigger. They intended to create a colony, Caledonia, that would straddle Panama, linking the Atlantic and the Pacific and becoming a global trading hub.

The Darien Scheme was a disaster. The site could not support settlers. Disease was rampant, the neighbors were unfriendly and both the English and the Spanish resisted the Scots effort to become a trading nation.Within a year the colony was abandoned. Soon after, in 1707, the Kingdom of Scotland agreed to unite with England and ceased to be an independent nation.

Today the site of Caledonia remains virtually uninhabited. Only a name on the map, "Puerto Escoces" ("Scottish Port") remains to commemorate one of the world's all-time worst investments.