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By:

Kaustubh Kale

10 September 2024 at 6:07:15 pm

Silent Money Killer: Loss of Buying Power

In personal finance, we often worry about losing money in the stock market, dislike the volatility associated with equities or mutual funds, or feel anxious about missing out on a hot investment tip. Yet the biggest threat to our wealth is far quieter and far more dangerous: loss of buying power. It is the invisible erosion of your money caused by inflation - a force that operates every single day, without pause, without headlines, and often without being noticed until it is too late....

Silent Money Killer: Loss of Buying Power

In personal finance, we often worry about losing money in the stock market, dislike the volatility associated with equities or mutual funds, or feel anxious about missing out on a hot investment tip. Yet the biggest threat to our wealth is far quieter and far more dangerous: loss of buying power. It is the invisible erosion of your money caused by inflation - a force that operates every single day, without pause, without headlines, and often without being noticed until it is too late.
Inflation does not take away your capital visibly. It does not reduce the number in your bank account. Instead, it reduces what that number can buy. A Rs 100 note today buys far less than what it did ten years ago. This gradual and relentless decline is what truly destroys long-term financial security. The real damage happens when people invest in financial products that earn less than 10 per cent returns, especially over long periods. India’s long-term inflation averages around 6 to 7 per cent. When you add lifestyle inflation - the rising cost of healthcare, education, housing, travel, and personal aspirations - your effective inflation rate is often much higher. So, if you are earning 5 to 8 per cent on your money, you are not growing your wealth. You are moving backward. This is why low-yield products, despite feeling safe, often end up becoming wealth destroyers. Your money appears protected, but its strength - its ability to buy goods, services, experiences, and opportunities - is weakening year after year. Fixed-income products like bank fixed deposits and recurring deposits are essential, but only for short-term goals within the next three years. Beyond that period, the returns simply do not keep pace with inflation. A few products are a financial mess - they are locked in for the long term with poor liquidity and still give less than 8 per cent returns, which creates major problems in your financial goals journey. To genuinely grow wealth, your investments must consistently outperform inflation and achieve more than 10 per cent returns. For long-term financial goals - whether 5, 10, or 20 years away - only a few asset classes have historically achieved this: Direct stocks Equities represent ownership in businesses. As companies grow their revenues and profits, shareholders participate in that growth. Over long horizons, equities remain one of the most reliable inflation-beating asset classes. Equity and hybrid mutual funds These funds offer equity-debt-gold diversification, professional management, and disciplined investment structures that are essential for long-term compounding. Gold Gold has been a time-tested hedge against inflation and periods of economic uncertainty. Ultimately, financial planning is not about protecting your principal. It is about protecting and enhancing your purchasing power. That is what funds your child’s education, your child’s marriage, your retirement lifestyle, and your long-term dreams. Inflation does not announce its arrival. It works silently. The only defense is intelligent asset allocation and a long-term investment mindset. Your money is supposed to work for you. Make sure it continues to do so - not just in numbers, but in real value. (The author is a Chartered Accountant and CFA (USA). Financial Advisor.Views personal. He could be reached on 9833133605.)

A Leader Adrift

Updated: Mar 17


Balochistan
Shehbaz Sharif

The recent train hijacking in Balochistan is yet another grim testament to Pakistan’s accelerating descent into chaos. Armed militants from the Baloch Liberation Army (BLA) intercepted and seized control of the Peshawar-bound Jaffar Express near Mach, holding passengers hostage in a brazen display of defiance against the Pakistani state. This incident underscores not only the deteriorating security situation in Balochistan but also the sheer inability of Prime Minister Shehbaz Sharif and his government to exert control over a country increasingly resembling a failed state.


Since his return to power in February 2024, Shehbaz has faced an unrelenting barrage of crises - an economy in tatters, skyrocketing inflation, deepening ethnic and sectarian unrest, and a military establishment struggling to impose its will. His leadership, always seen as an extension of the real power centre - the military - has been rendered virtually impotent in the face of growing insurgency and political instability.


Shehbaz Sharif was never expected to be a leader in his own right. His political career has been defined by his role as a crisis manager rather than a visionary statesman. Unlike his elder brother Nawaz Sharif, who commanded a degree of personal authority, Shehbaz has long been seen as the military’s preferred administrator - a technocratic leader capable of executing orders rather than setting the national agenda. However, the challenges before him today are far greater than anything he faced during his tenure as Punjab’s chief minister.


In Punjab, Shehbaz was known for his hands-on approach, personally overseeing infrastructure projects and administrative matters. But governing Pakistan, particularly in its current fragile state, is a different beast altogether. The federal government’s control over large parts of the country is slipping, with Balochistan and Khyber Pakhtunkhwa increasingly resembling insurgency zones. Meanwhile, even within Punjab, which has historically been the power base of the Sharifs, discontent is growing as economic conditions worsen and political instability festers.


Balochistan, Pakistan’s largest but most neglected province, has long been a hotbed of insurgency. The Baloch separatist movement, catalysed by economic marginalization and heavy-handed military crackdowns, has evolved into a full-fledged rebellion. The recent train hijacking is a stark reminder that the insurgency is no longer confined to remote areas but is now brazenly challenging the state’s authority in broad daylight.


The BLA, which claimed responsibility for the attack, has intensified its operations in recent months, targeting security personnel, government installations, and key infrastructure. Their ability to hijack a train and take hostages without immediate retaliation exposes Islamabad’s weakening grip over the region. Shehbaz’s government issued the usual condemnations, but beyond rhetoric, there is little evidence that he has a coherent strategy to deal with the crisis.


Beyond security concerns, the economic situation in Pakistan continues to spiral out of control. The rupee is in freefall, inflation has skyrocketed and essential commodities are slipping beyond the reach of ordinary citizens. Shehbaz’s government has had to rely on repeated IMF bailouts to prevent economic collapse, but these come with stringent conditions that further erode his popularity.


Foreign investors remain wary of Pakistan’s instability, and local businesses are struggling under the weight of economic mismanagement. For a leader who built his reputation on efficiency, Shehbaz’s inability to stabilize the economy is proving to be one of his biggest failures.


His political challenges are exacerbated by the lingering influence of Imran Khan, whose PTI remains a potent force. Instead of consolidating power, Shehbaz is forced to navigate an uneasy coalition, dependent on allies like the PPP, while also placating an increasingly assertive military.


Traditionally, Pakistan’s military has been the ultimate arbiter of power, but even it appears overstretched. While General Asim Munir maintains a firm grip, the sheer number of internal security threats - from Baloch separatists to Tehreek-e-Taliban Pakistan (TTP) militants - has exposed the limits of the army’s reach.


Shehbaz’s reliance on the military for political survival means he cannot afford to challenge its authority. His tenure is fast proving to be one of firefighting without any real strategy, a premiership defined not by governance but by a desperate attempt to delay the inevitable collapse. If his government continues to drift, Pakistan may soon reach a point where no leader, military or civilian, can prevent it from slipping into the abyss.

 

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