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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.)

An Ominous Future

Updated: Mar 17


Bashar al-Assad

Three months after the overthrow of Bashar al-Assad, interim president Ahmed al-Sharaa has signed into law a document that, far from paving the way for democracy, cements Islamist rule for at least five years. If history is any guide, this interim phase may well usher in an era even more repressive than the dictatorship it replaced.


The constitutional declaration, which serves as Syria’s governing framework until a permanent constitution is drafted, enshrines Islamic jurisprudence as the main source of legislation rather than a main source - a significant shift that places Sharia at the heart of governance. The document mandates that the president must be Muslim and recognizes only the so-called ‘heavenly religions’ of Islam, Christianity and Judaism, effectively marginalizing long-persecuted minorities like the Druze and Yazidis. The drafters of the document claim it guarantees freedom of expression, women’s rights and judicial independence. But these promises ring hollow given that Syria’s new rulers are Islamists at their core.


For those who assumed Assad’s downfall would usher in a semblance of a ‘liberal’ democracy, this should be a moment of reckoning. Sensible voices had long warned that the Syrian rebellion was not a straightforward struggle between tyranny and democracy, but a complex, multi-factional war where Islamist groups were often the most powerful opposition forces. Now, with Hayat Tahrir al-Sham (HTS), an al-Qaeda offshoot, leading the transitional government, Syria appears to have traded one form of autocracy for another, this time cloaked in the language of religious justice.


Despite claims of separation of powers, the transitional government’s structure is anything but democratic. Sharaa will wield executive power for at least five years, and while a new People’s Assembly is set to take charge of legislation, its formation is deeply undemocratic. Two-thirds of its members will be appointed by a committee selected by the president, while the remaining third will be chosen directly by him. In effect, Sharaa is entrenching one-man rule under a veneer of institutional legitimacy. The only ‘exceptional power’ granted to the president is the ability to declare a state of emergency - a seemingly small caveat that opens the door to unchecked authority. If the past decade of Middle Eastern politics has taught anything, it is that emergency powers have a way of becoming permanent.


The document’s critics, including legal scholars and Kurdish-led opposition groups, argue that it does little to reflect Syria’s ethnic and religious diversity. While it vaguely refers to “Syrians who resisted the regime,” it maintains Assad-era rhetoric by explicitly defining Syria as an Arab republic, ignoring the country’s sizable Kurdish, Assyrian and other minority populations. The exclusion signals that the new regime sees Syria’s identity through an Islamist-Arab nationalist lens rather than as a pluralistic society.


The new government is already facing accusations of sectarian retribution. Reports have surfaced of revenge killings targeting members of Assad’s Alawite sect, particularly in Syria’s western coastal regions. A war monitor estimates that 1,500 civilians have been killed in clashes since Assad’s fall. Sharaa has vowed to hold perpetrators accountable, but trust in his administration is low, especially among Syria’s religious minorities who fear that his Islamist leadership will be as intolerant as Assad’s Baathist rule, if not worse.


Meanwhile, the United Nations, ever eager for a diplomatic victory, has welcomed the constitutional declaration as a step toward ‘restoring the rule of law.’ But the reality is that their calls for pluralism have been ignored, and the failure to prevent extremist groups from seizing power has now made Syria’s future even more precarious.


What is unfolding in Syria is not the dawn of democracy but a predictable descent into Islamist authoritarianism. Sharaa’s government will undoubtedly seek international legitimacy by presenting itself as a necessary stabilizing force after years of war. The West should resist any temptation to grant it premature recognition. The constitution it has unveiled is not a blueprint for democracy but a roadmap for continued oppression. Those who saw this coming were dismissed as cynics. They are now being proven right.


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