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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.)

Indonesia’s Protests: Perks, Politics, and Public Anger

For many Indonesians, trust in the state depends on visible outcomes—prosecutions, discipline, and policing reforms.

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Indonesia has a long history of protests, with recent demonstrations and violence erupting in major cities. The death of a young motorbike rider highlights the human cost of civic unrest. Beyond the immediate trigger, the turmoil raises deeper questions about accountability, governance, and economic fairness in one of the world’s largest democracies.


The unrest was sparked when details of MPs’ housing, travel, and other perks spread on social media, fuelling anger over rising living costs. Protests began in Jakarta and spread to other cities. Tensions rose after a 21-year-old motorbike rider was killed in a police collision during a rally. In some places, protesters torched government offices; in Makassar, three people died in one blaze. Parliament has since suspended overseas travel for MPs and promised to review allowances. The government has tightened security and opened enquiries into both the perks scandal and the fatality.


President Prabowo Subianto took office with a strong mandate and a platform of stability and development, yet his leadership is scrutinised for authoritarian tendencies linked to his military past. Parliament’s fragmented party system demands constant deal-making, with allowance controversies seen as part of wider “money politics”. Civil society, students, and media remain active but struggle to hold power to account. Though the post-1998 Reformasi opened democratic space, weak institutions leave public trust fragile when scandals erupt.

The police response has drawn scrutiny, with past protests marred by excessive force. Oversight bodies have opened enquiries into the fatality and misconduct, but credibility rests on transparent follow-through. For many Indonesians, trust in the state depends on visible outcomes—prosecutions, discipline, and policing reforms. Without them, faith in the rule of law will erode further.


Economic backdrop

Economic pressures have fuelled public anger. Despite five per cent growth, many Indonesians struggle with insecure livelihoods. Youth underemployment is high, and urban workers often depend on gig or informal jobs. The gap between headline growth and household security drives perceptions of unfairness.


Markets reflect this tension, with the rupiah and equities volatile as investors weigh governance risks. Institutional credibility thus matters not only domestically but also for investment and long-term growth.


The latest protests follow a long pattern. The 1998 Reformasi ended authoritarian rule and entrenched protest as a legitimate channel. Since then, student and labour groups have mobilised against corruption, fuel hikes, and legislative reforms. Protests in 2019 and 2020 showed how grievances can rapidly converge. With slow or opaque institutions, the streets remain vital for accountability—both a pressure valve and a signal of gaps in representation.


Protests touch all levels of society. The presidency must balance public anger with stability, while parliament manages divisions and reputational damage from the benefits scandal. Police and the military face contested roles in handling unrest. Student groups, unions, professional bodies, and faith networks lend protests organisation and moral weight. Businesses and investors watch stability closely, as it shapes decisions. Digital platforms amplify mobilisation and frame narratives, influencing opinion at home and abroad.


Regional and global significance

Indonesia’s importance extends beyond its borders. As a G20 member, ASEAN’s largest economy, and a hub in global supply chains and maritime routes, its domestic governance signals resonate internationally. Partners and investors observe Jakarta’s handling of dissent as an indicator of stability, continuity of policy, and respect for civil liberties. Effective crisis management enhances Indonesia’s reputation as a reliable regional anchor. Conversely, heavy handed responses risk raising concerns about political risk and governance credibility.


Scenarios and indicators to watch

Three broad scenarios are possible. A reform track would involve credible investigations, concrete ethics reforms in parliament, and structured engagement with civil society. A muddle-through path would involve symbolic concessions that ease tensions temporarily but leave structural issues unresolved, leading to periodic flare-ups. A hardline reflex, meanwhile, would rely on securitised responses, risking deeper alienation and long term instability. Key indicators to monitor include outcomes of investigations, whether legislative reform on remuneration and disclosure is enacted, changes in rules of engagement for security forces, signals from coalition negotiations, and clarity in government economic communication.


At the heart of the protests lies a simple question: Do political rules align with the public’s expectations of fairness? Indonesia’s democratic test is to convert promises of accountability into enforceable standards that citizens can trust. If visible reforms follow, the unrest could strengthen institutions and reinforce the credibility of the system. If not, the same pressures will resurface, ensuring that public discontent remains a recurring feature of Indonesia’s political landscape.


(The writer is a foreign affairs expert. Views personal.)

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