The money illusion

Money has no absolute value. The value it carries is relative to the area in which it is used. It may not be a geographical area, but rather, it is the area where money is competing between its owners for similar goods (kind of like supply-and-demand situation). For example, in a city the value of money is much lower than what it is in the rural area when it comes to competing for real estate. Yet the same currency will have the same value in both places when it comes to buying a car or a TV set, because the same item could be moved across the country to even out the demands.

Here is the money illusion. People with little fixed assets other than their homes (which means >90% of the population) generally measure their wealth by how much savings they have in the bank account. With the cost of utilities having risen by at least 30% over the last five years, people have been "robbed" right from under their nose without so much as a whimper. Indeed, experience has shown that when a country undergoes hyperinflation, the purchasing power of money can devalue to just a fraction of what it used to be. Inflation and hyperinflation differ only as a matter of degree. Money should be tuned into a fixed asset as soon as one can afford to put it aside, not as a fixed deposit or a big fat bank account.