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Kingsman Solution Pvt. Ltd. is commencing an event on "Impact of Inflation and Equity Power".
Do you have any idea about the Impact of Inflation on your Pocket?
Do you know how to use your Power of Equity?
Want to know the optimising techniques of value of money by the financial experts?
So to Enlighten your Knowledge regarding them we are Brainstorming with our honorable speakers " Vishal Bhatt , Director at Kingsman Solution Pvt Ltd and CA Shaili Kansara, CEO at Kingsman" to guide you about your Money.
Because at Kingsman we aim of providing one stop solution for all kind of financial, human resource & legal services.
Inflation affects different people differently. This is because of the fall in the value of money. When price rises or the value of money falls, some groups of the society gain, some lose and some stand in-between. Broadly speaking, there are two economic groups in every society, the fixed income group and the flexible income group.
People belonging to the first group lose and those belonging to the second group gain. The reason is that the price movements in the case of different goods, services, assets, etc. are not uniform. When there is inflation, most prices are rising, but the rates of increase of individual prices differ much. Prices of some goods and services rise faster, of others slowly and of still others remain unchanged. We discuss below the effects of inflation on redistribution of income and wealth, production, and on the society as a whole.
The effects of inflation on different groups of society are discussed below:
(1) Debtors and Creditors:
During periods of rising prices, debtors gain and creditors lose. When prices rise, the value of money falls. Though debtors return the same amount of money, but they pay less in terms of goods and services. This is because the value of money is less than when they borrowed the money. Thus the burden of the debt is reduced and debtors gain.
(2) Salaried Persons:
Salaried workers such as clerks, teachers, and other white collar persons lose when there is inflation. The reason is that their salaries are slow to adjust when prices are rising.
(3) Wage Earners:
Wage earners may gain or lose depending upon the speed with which their wages adjust to rising prices. If their unions are strong, they may get their wages linked to the cost of living index. In this way, they may be able to protect themselves from the bad effects of inflation.
(4) Fixed Income Group:
All such persons lose because they receive fixed payments, while the value of money continues to fall with rising prices.
(5) Equity Holders or Investors:
Persons who hold shares or stocks of companies gain during inflation. For when prices are rising, business activities expand which increase profits of companies. As profits increase, dividends on equities also increase at a faster rate than prices. But those who invest in debentures, securities, bonds, etc. which carry a fixed interest rate lose during inflation because they receive a fixed sum while the purchasing power is falling.
Businessmen of all types, such as producers, traders and real estate holders gain during periods of rising prices.
Agriculturists are of three types, landlords, peasant proprietors, and landless agricultural workers. Landlords lose during rising prices because they get fixed rents. But peasant proprietors who own and cultivate their farms gain.
The government as a debtor gains at the expense of households who are its principal creditors. This is because interest rates on government bonds are fixed and are not raised to offset expected rise in prices. The government, in turn, levies less taxes to service and retire its debt.