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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.)

Gaza’s Water Wars Amid Trump’s Peace Gambit

Without secure access to clean water, even the most ambitious ceasefire will be little more than a cease-fire.

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Recently, U.S. President Donald Trump announced what he calls a ‘breakthrough’ in Gaza’s interminable war. The framework for an agreement between Israel and Hamas for the first phase of a peace deal includes a ceasefire, release of hostages, withdrawal of Israeli forces to a mutually agreed line and the opening of humanitarian aid channels. These developments foster cautious hope that more than just violence might be halted. But lurking beneath the headlines is an even more intractable crisis that may determine whether any future peace will hold. That is Gaza’s water system, which is presently dead on its feet.


Gaza is one of the most densely populated places on earth, squeezed between Israel, Egypt, and the sea. Its main source of fresh water, the coastal aquifer, has been degraded by decades of overuse and by saltwater intrusion. Much of the water that does reach people is polluted by untreated sewage.


Breaking point

The war that reopened in October 2023 has pushed this system past its breaking point. Fuel shortages driven by blockades and border restrictions have crippled desalination plants, pumping stations, wastewater treatment, and sewage networks. Reports show that over 85 percent of Gaza’s water and sanitation infrastructure is now either damaged or in partial disrepair.


For most Gazans, access to clean water has fallen far below even the bare minimum. Estimates range from only 3-5 litres per day per person for drinking and basic cooking needs. That is a fraction of the World Health Organization’s emergency benchmark of 15 litres. Meanwhile, nearly 96 percent of groundwater is deemed undrinkable, whether because of salinity, chemical pollution or sewage contamination.


Water in Gaza is not just a tool of survival. It has become a bargaining chip, a tool of coercion. The supply lines from Mekorot (Israel’s utility) once supplied up to 70 percent of Gaza City’s needs. But the damage to those pipelines in the ongoing war and the numerous blockades have sharply reduced that share.


To control water is to control life, or at least to make survival dependent on others. For any peace plan to take root, negotiators must somehow guarantee not just a ceasefire or a troop withdrawal, but reliable and sustainable access to water, power, fuel, and repair of broken infrastructure.


The articles and statements emerging from recent negotiations suggest that Trump’s deal includes a phased Israeli withdrawal, hostage exchanges and perhaps an interim governance mechanism for Gaza under international supervision. But governance over water and infrastructure has so far received scant public detail.


Perilous existence

Critics warn that unless control over fuel supply, electricity, and access for reconstruction is explicitly addressed, water access will remain unstable. If Gaza’s desalination plants cannot run, if its wells have no power, if its sewage cannot be treated and if transmission pipelines are unusable, then its daily survival will still depend heavily on external aid.


Needless to say, humanitarian urgency is paramount at the moment. Disease, malnutrition and death will not wait for diplomacy. Tens of thousands already face life-threatening shortages, and unsafe water spreads cholera, typhoid, and other preventable illnesses. Any peace deal that fails to deliver essentials - clean water, sanitation, electricity - is unlikely to be accepted by Gaza’s population, and hollow peace will further breed resentment and instability. Control over water provides leverage not only for humanitarian relief but also for regional influence; the U.S., Egypt, Qatar, Israel, and others can shape the balance of power depending on who oversees infrastructure, aid flows and utilities.


Scarcity of water is a proven catalyst for conflict, and in Gaza, water could either spark renewed hostilities or serve as the fragile anchor holding peace together.


For peace to endure, fuel and electricity for water and sanitation infrastructure must be guaranteed, because without power, desalination plants, pumps, and treatment works cannot meet daily needs.


Repair and protection of pipelines, wells, and sewage systems must be prioritised, with existing damage not only fixed but safeguarded against further disruption, and technicians, materials, and shipping granted safe and sustained access. Governance of water services must be transparent and accountable. An interim body, if agreed upon, should include water experts and ensure neutral oversight of tariffs, maintenance, and supply chains. Reliable cross-border and international aid flows are critical, with spare parts, chemicals, and generators reaching Gaza without interruption, and logistical agreements structured to survive diplomatic breakdowns. Finally, monitoring and accountability mechanisms must be in place, including independent audits of water quality and infrastructure integrity to guarantee transparency and prevent failures from being hidden or ignored.


Trump’s recent announcement of a first-phase Gaza peace deal is a first step in what has turned into the most violent conflict of our times. Yet, unless water systems are front and centre, the deal risks being undone by what it fails to deliver, rather than affirmed by what it wins.


For its longevity, any proposed peace deal in Gaza must grapple with pipes as much as politics.


(The author is a Mumbai-based educator and an expert on the Indus Waters Treaty. Views personal.)

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