Purchasing power is how much you can buy with your money. If prices rise 5% while your wages stay the same, the purchasing power of your wages falls by almost 5%. If your wages rise 8% over the same period, it grows by almost 3%. Purchasing power therefore says more about living standards than the number of krónur alone.
Purchasing power of wages
Statistics Iceland (Hagstofa Íslands) calculates the purchasing power of wages by comparing the wage index with the consumer price indexConsumer price index (CPI)Statistics Iceland's measure of the prices of goods and services that households buy. It measures inflation and is the basis of indexation., and publishes it as the wage index at constant prices. The figure shows whether wages have risen faster or slower than prices. After the 2008 banking collapse, the purchasing power of wages in Iceland fell sharply, because prices rose quickly while wages barely moved.
Purchasing power of savings
The same idea applies to savings. The number of krónur in your bank account grows with the interest, but if InflationInflationA general rise in prices over time, which means each króna buys less than before. is higher than the interest rate, their purchasing power shrinks. That is why the real interest rateReal interest rateThe interest rate minus inflation. Real interest shows whether savings are really growing in value or shrinking, even as the number of krónur rises. matters more than the rate the bank advertises.
Icelanders know well how purchasing power can wither. From 1974 to 1983, inflation here was above 30% every year. From May 1988 to October 2026, prices rose more than sevenfold, so something that cost ISK 1,000 then cost over ISK 7,000 by the end of the period.
Purchasing power and bitcoin
An asset that keeps its purchasing power over the long run is called a store of valueStore of valueAn asset that keeps its purchasing power over a long time, so it can be saved now and used later, as gold has done for centuries.. In the short run, bitcoin's purchasing power swings a lot, because its price in krónur can change by tens of per cent in a few weeks. Because of its fixed supply, though, many people believe it will hold its purchasing power better than fiat currencies over time.
Everything in Myntkaup Learn is written and regularly reviewed by the Myntkaup editorial team. It is for education and is not investment advice. Editorial policy. Updated 2 November 2026.