Inflation is hurting everyone, across age segments, geographies and social strata. It is hurting investments, businesses and markets, too. In fact, inflation spares no one, except for the few who benefit from it, including corrupt officials, hoarders and speculators.
And inflation will not come down till it has brought down everything else with it. We have seen this happen time and again, in India in the 1990s, the developed world in the 1970s, South America in the 1980s.
Unfortunately, there isn’t much one can do about it except grin and bear the pain, or can one?
The worst affected on account of inflation are the senior citizens, who live off interest income. All other strata can fend for themselves, either by cutting down consumption in the case of younger, working population or by tightening finances in the case of businesses. Senior citizens, however, have no place to go to.
The savings earned in their working lives are their only asset and if that is earning real negative returns, they suffer much pain. They cannot cut down consumption and they cannot cut down medical costs. They are forced to draw down on their savings and if that gets exhausted, they have nowhere to go.
What can senior citizens do to avoid a crisis?
The first is obviously to ask their children to fund them, but this may not be possible if the children themselves are hard pressed in inflationary times or are not inclined to part with money.
The second is to increase the return on their savings by lending to their children and asking them to pay market rates of interest. They can replace vehicle, personal and housing loans taken by their children by lending to them at market rates (which will obviously be high when inflation is high). However, the children should be trustworthy or the senior citizen will lose capital.
The third is to either rent out or sell property, if they are living in prime locations, and move to a cheaper area. Infrastructure considerations will have to be taken into account for such a move.
The fourth is to relook at all their investments and liquidate them to fund rising costs. Investments are more likely to lose value than gain in inflationary times.
The fifth is to start selling jewellery where prices are ruling at higher levels. Jewellery should be looked upon as an asset that can be liquidated in such times.
Unfortunately, in India, where there is no social security, the vulnerability of non-working age population increases. The policy makers will not seriously look at protecting the vulnerable sections if they do not form a large part of their vote bank. This leaves such people to fend for themselves, unless someone is listening somewhere.
arjun@arjunparthasarathy.com
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