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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.)

Taming the Unseen

The Physics Nobel for three pioneering Berkeley physicists this year marks a watershed moment for quantum mechanics.

John Clarke, Michel Devoret and John Martinis
John Clarke, Michel Devoret and John Martinis

Earlier this week, the Royal Swedish Academy of Sciences presented the field of quantum mechanics with a fitting centennial gift: the 2025 Nobel Prize in Physics, which went to physicists John Clarke, Michel Devoret and John Martinis for their work done four decades ago at the University of California, Berkeley.


The trio have redefined what quantum physics could mean. Their work showed that the spooky, counterintuitive laws governing the atomic world could be coaxed into appearing at human scales, bridging a divide that had existed since the birth of the discipline itself. It echoed debates and problems chronicled in classic texts such as Max Born’s ‘Atomic Physics’ (English translation pub. 1935) and Werner Heisenberg’s ‘The Physical Principles of the Quantum Theory’ (1930).


Quantum mechanics, forged in the intellectual ferment of the 1920s by pioneers such as Niels Bohr, Werner Heisenberg, and Erwin Schrödinger, has long unsettled even its greatest minds.


In 1926, Albert Einstein famously wrote: “The theory [quantum mechanics] produces a good deal but hardly brings us closer to the secret of the Old One. I am at all events convinced that He [meaning God] does not play dice.” Einstein was responding to Max Born, who had argued that the heart of the new theory beats randomly and uncertainly, as if suffering from arrhythmia. Whereas classical physics promised that push here yields a predictable outcome there, quantum mechanics suggested that even under identical conditions, the same action could produce a range of results, each with a calculable probability and sometimes outcomes that seemed entirely contrary. Einstein’s objection was not to the mathematical formalism itself, which worked brilliantly, but to the probabilistic interpretation that suggested nature at its core was inherently uncertain.


In the quantum realm, particles exist not in fixed positions but as clouds of probability; they can appear to tunnel through barriers they have no right to cross. It is a world in which determinism dissolves, to be replaced by shimmering uncertainty. For decades, this bizarre behaviour was thought to belong exclusively to the infinitesimal (electrons, photons, and atoms) and never to the tangible world of wires and circuits (something that was explored in Richard Feynman’s celebrated lectures on physics in the 1960s).


Clarke, Devoret and Martinis upended that assumption. In the early 1980s, at the University of California, Berkeley, they took inspiration from the tools of low-temperature physics and turned it to a new purpose: showing that the quantum could be engineered.


Working with ultracold superconducting circuits, they demonstrated that vast swarms of electrons could collectively display ‘quantum tunnelling.’ The circuits, visible to the naked eye, behaved like giant quantum particles, a revelation that suggested quantum mechanics was not a special rulebook for the microscopic but a universal language that, under the right conditions, governed everything.


By taming that chaos, the Berkeley trio blurred a boundary that had seemed immovable since the days of Bohr’s Copenhagen debates.


The implications were profound. Their findings virtually birthed ‘quantum electrical engineering’ - a discipline that transformed quantum mechanics from philosophical curiosity into practical craft. Circuits inspired by the trio’s experiments are now used to simulate atoms, detect faint particles, and serve as qubits, the building blocks of quantum computers.


That last application, curiously, went largely unmentioned in this year’s Nobel citation. Yet it is impossible to ignore. Without the pioneering work at Berkeley, the race now underway between Google, IBM, and Chinese labs to build a fault-tolerant quantum computer would have remained a fantasy. John Martinis himself would later lead Google’s quantum supremacy experiment in 2019, when a superconducting circuit performed a calculation no classical supercomputer could manage in a feasible time. The roots of that triumph trace directly back to the trio’s early insight: that quantum effects could be scaled up, controlled and harnessed - an insight foreshadowed in foundational studies like British-American theoretical physicist Anthony Leggett’s seminal ‘Macroscopic Quantum Systems’ (1980).


Leggett’s theoretical framework laid the groundwork for understanding phenomena such as superconducting circuits, which Clarke, Devoret and Martinis would later manipulate in the laboratory to make quantum effects tangible and measurable.


Quantum theory has always been as much a philosophical challenge as a scientific one. Its discovery in the early 20th century forced physicists to abandon the certainties of Newtonian order. The 2025 Nobel Prize celebrates the moment where quantum mechanics, once the physics of the invisible, has finally become the physics of possibility.

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