INFLATION & SAVINGS: SAVING FOR THE RAINY DAY
------------------------------------------------------------------------------.
There is a tendency in most people that when there is high inflation (i.e. over 7% per annum), that is, when prices of things are going up & one is finding to buy things (any, small to big getting costlier by the day), to hold money, i.e. tendency is not to buy or defer purchases & hold.
The tendency develops because of an inherent tendency to keep, envisaging a gloomy future, sensing a rainy day looming ahead, as high inflation that causes the fast price rise, generates a fear psychosis, which makes people more prone to keep money as deposits & to hold more for future safety.
But here they actually go absolutely wrong. That, theory is, which does not come to anybody’s mind, that when it is good time, inflation is moderate, one should save, not go for over spending, and set aside some money, more or less keeping in mind one’s future need, one’s plan & ambition.
But never overdo with savings (I have come across many middle class old persons over 60, keeping as fixed deposits more than Rs30, 40 lac,(Indian rupees), without a need, just anticipating a rainy day, they spent whole life i.e. up to 60 miserly & curtailing expenses & now still doing the same, is there a life after 60? You may die at 70 or 80, does it matter? Because you will not get younger, your abdomen will not support your tongue, your body will not match your thoughts, then why the money? Spend it & if you can’t, give away to the needy. BUT, DON’T HOARD.
In this nature everything will perish & decay; the human the most valuable thing created by the nature also does not live for ever only 70/80 years & after 60 begins to sag & the universe itself will one day perish, when The Nature itself does not hoard, then why should you?
2nd part of the theory is, spending when there is high inflation, that is in an inflationary economy one must increase one’s spending to gain maximum out of inflation or minimize the loss due to inflation, avoid erosion of value of money, it may appear a very bad idea & absurd to many, but is actually a truth.
That, in high inflation if you keep paper money (in the shape of cash, bank deposits, fixed deposits or bonds), you are actually amassing worthless papers,(I am not talking about stocks & equities as they are actually not money but materials I will explain why so, just now), so do away with your money in high inflation & spend or change them to materials: goods, metals, land, house & stocks, now you can follow why I categorized stocks as materials, as value of a stock lies in the value of an entity(the company), surely one has to be very prudent about picking up a suitable stock i.e. a good company & has to envisage future prospect of that entity & be very selective in this matter, it is like seeing the future prospect of a material.
But, main point, THE THEORY, is in high inflation one must do away with cash & cash forms & spend & take up material & material forms & at good times save reasonably.
Conceptualized: 01/01/11
Written: 02/06/11
------------------------------------------------------------------------------.
There is a tendency in most people that when there is high inflation (i.e. over 7% per annum), that is, when prices of things are going up & one is finding to buy things (any, small to big getting costlier by the day), to hold money, i.e. tendency is not to buy or defer purchases & hold.
The tendency develops because of an inherent tendency to keep, envisaging a gloomy future, sensing a rainy day looming ahead, as high inflation that causes the fast price rise, generates a fear psychosis, which makes people more prone to keep money as deposits & to hold more for future safety.
But here they actually go absolutely wrong. That, theory is, which does not come to anybody’s mind, that when it is good time, inflation is moderate, one should save, not go for over spending, and set aside some money, more or less keeping in mind one’s future need, one’s plan & ambition.
But never overdo with savings (I have come across many middle class old persons over 60, keeping as fixed deposits more than Rs30, 40 lac,(Indian rupees), without a need, just anticipating a rainy day, they spent whole life i.e. up to 60 miserly & curtailing expenses & now still doing the same, is there a life after 60? You may die at 70 or 80, does it matter? Because you will not get younger, your abdomen will not support your tongue, your body will not match your thoughts, then why the money? Spend it & if you can’t, give away to the needy. BUT, DON’T HOARD.
In this nature everything will perish & decay; the human the most valuable thing created by the nature also does not live for ever only 70/80 years & after 60 begins to sag & the universe itself will one day perish, when The Nature itself does not hoard, then why should you?
2nd part of the theory is, spending when there is high inflation, that is in an inflationary economy one must increase one’s spending to gain maximum out of inflation or minimize the loss due to inflation, avoid erosion of value of money, it may appear a very bad idea & absurd to many, but is actually a truth.
That, in high inflation if you keep paper money (in the shape of cash, bank deposits, fixed deposits or bonds), you are actually amassing worthless papers,(I am not talking about stocks & equities as they are actually not money but materials I will explain why so, just now), so do away with your money in high inflation & spend or change them to materials: goods, metals, land, house & stocks, now you can follow why I categorized stocks as materials, as value of a stock lies in the value of an entity(the company), surely one has to be very prudent about picking up a suitable stock i.e. a good company & has to envisage future prospect of that entity & be very selective in this matter, it is like seeing the future prospect of a material.
But, main point, THE THEORY, is in high inflation one must do away with cash & cash forms & spend & take up material & material forms & at good times save reasonably.
Conceptualized: 01/01/11
Written: 02/06/11
No comments:
Post a Comment