Inflation Wise

Its the old story, but with a twist. Government is of the opinion the forward trading in commodities " ..have driven up prices and the benefit of increased prices has not been cornered by farmers". Analyst point out that consumption is rising faster than supplies and affecting increase in inflation and government is to be blamed for ignoring supply-side constraints and allege that futures trading are being made a scapegoat.

In this game there are three players and we can call this game 'Inflation'.

First, the RICH. Inflation may affect their business in a negative manner, but not much to their personal expenditures or budgets. They have a major say in the polices that are framed in the governance of the country.

Second, the famous MIDDLE CLASS. Inflation is the bane word here. It affects their budgets, spending habits and to a major extent their think about money in general. They form the salaried class and are squeezed the two powerful group the 'RICH' and 'BPL'.

Third, the Below Poverty Line (BPL) families. Every day is hard for them and inflation can make it still harder. But, surprising they have a wild card. They form the biggest vote bank and hence have a say in the political future and ultimately economic policies and in a way, inflation ( Inflation has come up as a major issue due to elections in various States).

In this blame game, it is hard to decide who is the culprit. Though there are three. The Government, the Private Sector and your Personal Income. If you have a very high income, forget what inflation means.

So, if you are pondering who the main culprit is, let me add that 'Money Supply' grew at an annual rate of 21.1 per cent for the year to 19 January, 2007, much higher than the 15.6 percent growth up a year ago. So you know now that the main culprit is money supply.

What are the ways available to hedge against inflation? The answer is, increase your 'money supply'[ try making more money]. No other hedges are available as of yet.

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