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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.)

Northern Sentinels

A Cold War–style naval partnership returns to the North Atlantic, as Britain and Norway prepare to guard the arteries of the modern world from a resurgent Russia.

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The recent Lunna House pact between Britain and Norway is a telling marker of how Europe’s northern flank is being quietly remilitarised by necessity amid the steady shadow of Russia’s submarines.


The deal allows the Royal Navy and the Royal Norwegian Navy to operate a joint fleet of British-built Type-26 frigates, among the most advanced submarine-hunters afloat. Officially, the mission is to protect critical undersea cables and monitor naval movements across the long arc of water stretching from Greenland past Iceland to Britain (the famous GIUK gap that once obsessed Cold War planners.) Its unambiguous aim is to make life harder for Moscow’s increasingly visible maritime presence in northern Europe.


The choice of name is no sentimental flourish. Lunna House, in the Shetland Isles, served as a clandestine base for the Norwegian resistance during the Second World War, a quiet outpost in the struggle against Nazi occupation. By invoking it now, Britain and Norway are placing their new naval arrangement within a lineage of northern vigilance against continental threats - first German, now Russian.


Undersea cables have become the world’s most delicate arteries. More than 95 percent of global internet traffic flows through them. Financial systems, energy networks, military communications and everyday commerce depend on glass fibres barely thicker than a garden hose. Russia, whose navy never fully recovered from the Soviet collapse, has made asymmetric disruption a strategic calling card.


The British Ministry of Defence reports a 30 percent rise in Russian vessels sighted in UK waters over the past two years. Moscow protests that its ships are merely exercising their rights in international waters. Western officials are unconvinced.


During the Cold War, the North Atlantic was the primary arena for Soviet attempts to break into the open ocean through the narrow sea lanes between Greenland, Iceland and Britain. NATO built an elaborate system of sonar arrays, patrol aircraft and escort fleets to bottle up Soviet submarines before they could threaten transatlantic shipping or loom beneath American cities. That system decayed after 1991, casualties of peace dividends and shrinking budgets. The oceans were meant to be boring again.


They are not. Russia’s modern navy is smaller than its Soviet predecessor but no less determined. Its submarines are quieter; its doctrine more elastic. Rather than seeking fleet-to-fleet confrontation, Moscow probes for vulnerabilities like energy pipelines, wind farms, data cables whose destruction would paralyse societies without firing a missile. The Baltic pipeline explosions of 2022 were a brutal demonstration of what sabotage beneath the waves can achieve, even when the perpetrator remains officially unknown.


Against this background, the UK–Norway pact looks less like a bilateral curiosity than a down payment on a rebuilt northern NATO. The agreement rests on a £10bn warship deal under which Oslo will buy five Type-26 frigates from Britain’s BAE Systems, built in Glasgow. Combined with eight British vessels, the two navies will field at least 13 specialised anti-submarine hunters operating as a single force. For Britain, the arrangement flatters its self-image as a serious maritime power after Brexit. For Norway, whose vast offshore energy infrastructure makes it uniquely vulnerable, it is an exercise in survival.


Prime Minister Keir Starmer has framed the pact as both a security necessity and an industrial strategy, touting shipyard jobs alongside national defence. His description of Norway as an “absolutely vital member of the coalition of the willing” is equally telling.


NATO may be the formal structure, but coalitions within coalitions now do much of the work. Europe’s northern states - Britain, Norway, the Nordics and the Netherlands - are knitting themselves into tighter operational clusters, often faster than alliance bureaucracy can manage.


For Russia, a  joint Anglo-Norwegian fleet patrolling the approaches to the Arctic and the Atlantic constrains its options and sharpens the sense of encirclement it already claims to feel. Yet Moscow’s own behaviour has invited exactly this response. By turning the seabed into a potential battlefield, it has forced democracies to rediscover the strategic importance of waters they once took for granted.

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