INFLATION

INFLATION IN THE USA

Definition

According to Investopedia, Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.

As a result of inflation, the purchasing power of a unit of currency falls. For example, if the inflation rate is 5%, then a pack of gum that costs $1 in a given year will cost $1.05 the next year. As goods and services require more money to purchase, the implicit value of that money falls.

Inflation in the USA

 

In 1964, inflation measured a little more than 1 percent per year. It had been in this vicinity over the preceding six years. Inflation began ratcheting upward in the mid-1960s and reached more than 14 percent in 1980. It eventually declined to average only 3.5 percent in the latter half of the 1980s. 

While economists debate the relative importance of the factors that motivated and perpetuated inflation for more than a decade, there is little debate about its source. The origins of the Great Inflation were policies that allowed for an excessive growth in the supply of money—Federal Reserve Policies.  

The Great Inflation: 1965-1982

The Great Inflation was the defining macroeconomic event of the second half of the twentieth century. Over the nearly two decades it lasted, the global monetary system established during World War II was abandoned, there were four economic recessions, two severe energy shortages, and the unprecedented peacetime implementation of wage and price controls. It was, according to Jeremy J. Siegel, a prominent economist, “the greatest failure of American macroeconomic policy in the postwar period.”   
 

But that failure also brought a transformative change in macroeconomic theory and, ultimately, the rules that today guide the monetary policies of the Federal Reserve and other central banks around the world. If the Great Inflation was a consequence of a great failure of American macroeconomic policy, its conquest should be counted as a triumph.

Inflation Rates 2016-2045

YEAR	AMOUNT	INFLATION %	ACTUAL VALUE
2016	100,000	2.0	102,000
2017	102,000	2.1	102,304
2018	102,304	2.2	104,555
2019	104,555	2.3	106,960
2020	106,960	2.4	109,530
2021	109,530	2.52	112,290
2022	112,290	2.63	115,243
2023	115,243	2.75	118,412
2024	118,412	2.89	121,834
2025	121,834	3.0	125,489
2026	125,489	3.1	129,379
2027	129,379	3.22	133,545
2028	133,545	3.33	137,992
2029	137,992	3.35	142,615
2030	142,615	3.37	147,421
2031	147,421	3.5	153,171
2032	153,171	3.5	158,532
2033	158,532	3.5	164,080
2034	164,080	3.5	169,823
2035	169,823	3.5	175,767
2036	175,767	3.5	181,919
2037	181,919	3.5	188,286
2038	188,286	3.5	194,876
2039	194,876	3.5	201,697
2040	201,697	3.5	208,756
2041	208,756	3.5	216,063
2042	216,063	3.5	223,625
2043	223,625	3.5	231,452
2044	231,452	3.5	239,553
2045	239,553	3.5	247,937

Historical data on Inflation from 1914 till today is freely available.

Ten Reasons Why Modi is Disliked

 WHY SHOULD MODI COMMAND RESPECT AND ADMIRATION?

Modi became Prime Minister in May 2014. During his 18 months in office, he has earned the displeasure of many segments of the society. Here are ten reasons why he is disliked. 

 

1.       Modi is a ‘usurper of power’. He is trying to replicate the reign of the Slave Dynasty of the thirteenth century by seizing Delhi Sultanate, an inheritance of the Gandhi-Nehru dynasty. How dare a petty tea-vendor have the audacity to gatecrash into the hallowed portals of Lutyens’ Delhi? Howsoever ill-equipped, inept and unqualified the dynasty may be, Delhi throne is its family heritage. In any case, no competence is required to plunder India. As in the past, the country can be easily ruled through a network of sycophants, stooges and dummies. It is just a question of fine-tuning the remote controls.

2.       Modi is a ‘sadist’. How dare he discard the long practiced tenet of ‘khao aur khane do’? His mantra of ‘naa khaunga, naa khane dunga’ is symptomatic of his aversion for the well-being of the ruling elite. It smacks of jealousy for the privileged.  Remember how smoothly the previous coalitions functioned. Different ministries were dished out to the partners as fiefdoms. It was left to their ingenuity to garner funds. No one interfered in Raja’s spectrum loot or in Praful Patel’s aircraft purchases. Modi must not forget that leaders and bureaucrats have families. They have to amass enough to secure the future of their progeny.

3.       Modi is a ‘workaholic’. Worse, he expects others to work equally hard. Introduction of biometric system to mark presence in government offices has been terribly painful. Earlier employees could walk in leisurely at any time and leave whenever they felt homesick. Many did private side-business during office hours.  Movement of files was never monitored. Offices were meant for rest and recreation. Long gossip sessions with colleagues in the canteen were intellectually stimulating. Group cohesion was developed during long hours spent under winter sun in the office lawns and sharing pea-nuts. All the charm of government service has disappeared. One is expected to work now. Even senior bureaucrats have been deprived of their life-style of yore – golf in the morning, relaxed hours in the office and evenings in the Gymkhana. Modi has ruined the happiness of all government employees.

4.    Modi is ‘anti-media’. Eighteen months in power and not a single scandal or scam. Just not done. Media cannot be starved. Editors have no issues to embellish their headlines with. TV anchors have no hot topics for conducting high-decibel debates. They have to convert innocuous statements by some fringe elements into national controversies. No wonder media is unhappy with the present dispensation and is nostalgic about those good old days of scam-a-day. It did not have to look for topics for breaking news and evening debates. Media’s discomfort can be gauged from the fact that it has to stoop down to faulting Modi for not issuing statement on every single occurrence in the country. By depriving media of sensationalism, Modi is deliberately asphyxiating it.

5.    Modi is ‘anti-employment’. All his promises of generating jobs through economic growth are phony. In fact, he has been busy shutting down existence business. Look what he has done to the patronage industry. It had taken India decades to evolve such a fool-proof and credible patronage regime: far more reliable than the much-hyped match-fixing in cricket. Every appointment, license and contract was available for a price. Every appointment was for sale and had its MRP: it could be governorship of a state or directorship of a government bank/company or even chairmanship of the Railway Board. One could obtain a chit from PMO office and get a coal block. Full satisfaction was granted to all applicants, bureaucrats and ministers. Most unfairly, Modi has put an end to such a thriving business, thus rendering numerous people jobless.

6.       Modi is a ‘pseudo-secularist’. Although he had been demonised by the self-proclaimed secularists as a communal menace for decades, Modi remains unscathed. Most worrisomely, even negative campaigns like phoney anti-Christian allegations during Delhi elections and spiteful intolerance crusade during Bihar elections have not provoked him. He is letting all the doomsday-prophets down with his inclusive policies which are well received by all sections of the society. He has said or done nothing to favour any community. If Modi is allowed to establish his credentials as a secular leader, it will be difficult to dislodge him. That cannot be permitted. Therefore, renewed attacks through cooked-up issues must be launched to dent his image. Secularism is the sole prerogative of the opposition leaders.

7.       Modi is highly ‘pretentious’. He has made a mess of India’s foreign policy. Instead of following the established diplomatic protocol, he has started establishing personal rapport with the world leaders. More shockingly, he has adopted yoga and hugs as instruments of his foreign policy. With his spontaneously warm embraces, he has befriended all world leaders. They admire him for his sincerity of purpose, clear vision and inexhaustible energy. Obama surprised all by agreeing to be the chief guest at the Republic Day Parade. Chinese Premier Li Keqiang had a selfie with Modi. Japanese Prime Minister Shinzo Abe attended prayers at Varanasi. By trying to practice diplomacy through hugs and yoga, he is deliberately trashing the very foundation of India’s foreign policy of laid-back indifference.

8.       Modi is ‘intolerant’. How can a Prime Minister talk of cleanliness and toilets from the ramparts of the Red Fort? Who is Modi to deprive the public of the pleasure of defecating in an open and green environment? Height of intolerance to old Indian practices. If India could live with filth for so long, who is Modi to question? It is rightly said that ‘filth is in the eyes of the beholder’ and the dynasty never saw any. Similarly, it is for the parents to decide the future of their daughters. Why is Modi forcing them to educate girls? Intolerance once again. Modi has been elected to govern the country and not to don the mantle of a social reformist. He should not exceed his brief.

9.    Modi is ‘misusing his oratory skills’. Not only has he been able to inspire the Indian Diaspora, but has also infused euphoric enthusiasm in India’s psyche. Pessimism and negativity have been replaced by optimism and positivity. He is deliberately resorting to erudite talks in Hindi and English to show Pappu and other caste leaders in poor light. It is most unsportsmanlike. While Modi impresses the people with his vision of a developed and prosperous India; Pappu can only talk of ‘suit-boot sarkar’ or target RSS. Worse, in comparison to Modi, Pappu looks like a cry-baby who had been deprived of his favourite toy. Modi must stop displaying wisdom and vision. He is giving an inferiority complex to the opposition leaders.

10.   Modi is an ‘economic maverick’. Through his missionary zeal for economic growth, Modi has been upsetting many who were benefitting from India’s poverty. Modi’s success in attracting investment in the infra-structure and industrial growth through ‘Make in India’ campaign will improve the lot of the impoverished. That is also the main worry of the caste-leaders. Economic betterment brings awareness. An aware voter is a discerning voter. He sees through the facade of secularism to fool the people. He does not get carried away by rhetoric of caste loyalties. He demands results. No wonder that all opposition leaders view economic reforms as a threat to their political relevance. Modi appears to be hell-bent on upsetting the applecart.

Finally, a footnote of caution: Modi may not be perfect, nobody is. But he is the best bet for India. Should Modi fail to deliver or is prevented from fulfilling his promises by the anti-national elements that are stalling growth, India’s future will be bleak. We will have Pappu, Mulayam Singh, Lalu Yadav or Kejriwal at the helm of affairs. Does it not send shivers down our spine? 

http://mrinalsuman.blogspot.in/2015/12/ten-reasons-why-modi-is-disliked.html

   

GIVE YOUR KIDS A WEDDING GIFT

LEGAL BUT LITTLE KNOWN WAYS TO SAVE TAX

LET YOUR MARRIED CHILDREN BENEFIT

In 1985, I was advised by a sage to save money legally through the Post Office (PO), using what is called the POMIS-PORD Scheme. Like most of us, bar some, I did not have the money to invest, but I managed Rs. 21,000. The scheme was simple: Invest up to Rs. 1,06,000 in the Post Office Monthly Interest Scheme, or POMIS. This was a 6-year scheme, with 15% interest. On investment, you got a legal kickback of 01% of the sum invested, the ubiquitous tout took 01% and the PO Manager 0.5%. On maturity, you got a 20% bonus of the sum invested. 

PORD stands for PO Recurring Deposit, a 5-year scheme. You had to open an RD Account with that Post Office and none other. Obviously, this would be at least ONE DAY prior to your depositing the POMIS corpus. At the 5-yr stage, you needed a one year extension. Interest rate on PORD was 13.5%. ROI was a staggering 23 % pa. Thankfully, both are 5 year schemes today.

On the POMIS form, you issued a standing instruction to transfer the monthly amount into your PORD account. 59½ months later, you increased PORD tenure by one year. The good thing was that these accounts were transferable from place to place.  

Things have changed. Interest rates have almost halved, Post Offices have access to the Internet, etc. Sec 80 of the ITA ‘61 allows you non-taxable interest of Rs.7,000 if from a joint account and Rs. 3,500 if solo in the Post Office. This means that you can invest only Rs. 82,000 in the POMIS as interest rate is 8.5% (Rs. 6,970 pa or Rs. 580 pm).  PORD offers 8.4% compounded quarterly, unlike PPF which is a yearly interest rate set up. 82K is not a major sum in itself, but ROI exceeds 10.5%. This is the HIGHEST ROI in a Govt agency, beating PPF, even though the tout has been banished and the 20% bonus dropped. The PORD income i.e., Profit is taxable and should be reinvested in another POMIS-PORD or ELSS Mutual Fund like Franklin Templeton Taxgain, or an MF of your choice. There is NO TDS on the PO schemes, so maximise utilisation of this rare facility. Have a dekko at the numbers below.

My suggestion is that you should open the POMIS-PORD or the PORD account in the names of your newlywed kids, which is the phase we are transiting inst. This would be in the nature of a gift, which is non-taxable in the donee’s hands vide Section 56(2) ITA 61 as modified in Oct 2009, and also on weddings. 

Numbers:

POMIS Investment: Rs. 82,000

Monthly transfer to PORD: Rs. 580

PORD final return = Rs. 43,300.

Overall return = Rs. 125,300.

 

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WHY GLOBAL WARMING TALKS WILL FAIL IN PARIS THIS YEAR

Compromises Make Global Climate Deal More Possible

New draft shows breakthrough on emissions cuts, but developing countries remain at odds with major powers on other issues

A key disagreement involves the overall target of the deal: keep warming to below 1.5 degrees Celsius. Above: People at a demonstration inside the World Climate Change Conference in France on Wednesday. Photo: Reuters

Nations moved closer to a global climate deal that has eluded them for more than 20 years, as compromise emerged on some of the most controversial issues facing negotiators at a summit here, even as other problems remain unresolved.

A new draft unveiled on Thursday showed that an agreement is in sight, after 11 days of talks did little to bridge differences that have bedeviled negotiators since nations first agreed to pursue an international climate-change deal in 1992.

“They are obviously much closer to the finishing line,” said Alden Meyer of the Union of Concerned Scientists, an environmental group.

On Friday morning, French Foreign Minister Laurent Fabius confirmed what many had long expected: The climate conference will be extended beyond its planned Friday ending, with the final text of the agreement now expected on Saturday morning. Translation and legal verification of that text it necessary before it can be approved by the 195 nations participating in the Paris talks.

Perhaps the biggest breakthrough came in the overall target guiding the cuts in carbon dioxide and other greenhouse gases that nations would enact under the proposed agreement. The draft says nations will limit the increase in average surface temperatures to “well below” two degrees Celsius (3.6 degrees Fahrenheit) since the dawn of the industrial era, and “pursue efforts” to limit warming to 1.5 degrees.

Still, other issues remain, such as financing for the developing world and how the burden of fighting climate change should be divided between rich and poor nations, with little time left in the talks to find solutions. Hopes now rest on whether Europe, the U.S. and some of the world’s poorest nations can compromise with a group of developing countries that are resisting calls to shoulder more of the burden in the fight to limit global warming.

The developing-nation group, known as Like-Minded Developing Countries, represents the hard core of opposition to the U.S., the EU and other developed nations. It includes developing-nation giants such as China and India, oil-producing states such as Saudi Arabia and staunch critics of the West such as Iran, Venezuela and Bolivia. 

Members of the Like-Minded group didn’t comment on the new draft as talks moved behind closed doors on Thursday evening.

European officials voiced cautious praise of the new text. The new draft is “looking better, bolder,” said one official, but cautioning that more work needed to be done on ensuring all governments accurately measure and report their emissions.

Countries most vulnerable to climate change insist on the 1.5-degree target, arguing that any more warming would result in catastrophic damage from rising sea levels and increased storm intensity. The United Nations says the globe has warmed about 0.9 degree since the late 19th century.

Tony La Vina, a senior negotiator for the Philippines, which represents a group of countries most at risk from climate change, said the proposed language on 1.5 degrees appears broadly acceptable.“We will still seek to strengthen it, but it is within the range of acceptable language,” Mr. La Vina said.

Mr Fabius, who is leading the negotiations, and other French officials put together the draft based on hours of nonstop negotiations among the 195 nations gathered at the Paris climate summit. It is still uncertain if the compromises drafted by Mr. Fabius will be acceptable.

Thursday’s draft also sets greenhouse-gas neutrality as a goal for the second half of this century. That means nations have agreed to commit to cut their fossil-fuel emissions to such a low level that the Earth’s natural mechanisms for absorbing these gases—through plants and other means—can offset man-made emissions.

While the EU and the U.S. have narrowed differences with some of the poorest nations in recent days, much of the Like-Minded group opposes committing to more ambitious emissions-reduction targets or to provide financing for poor nations to respond to climate change. Their priority must remain fighting poverty within their own borders, they say, not cutting their greenhouse-gas emissions.

Thursday’s draft wouldn’t require developing countries to provide financing for climate-change projects in the poorest nations, a provision that may draw objections from developed nations, the U.S. in particular. This is what actually happened in early June this year.

Mr. Fabius gave ministers 2½ hours to examine the text before deciding whether the French proposals are acceptable, but talks were expected to continue long into the night.

Both the developed countries and the Like-Minded group criticized a draft agreement released by France on Wednesday afternoon; “Perhaps your text is indeed balanced—everybody seems unhappy,” Gurdial Singh Nijar, the lead climate negotiator for Malaysia and spokesman for the Like-Minded Group, told Mr. Fabius on Wednesday evening.


The Paris summit represents the best chance to reach a global agreement to limit climate change since nations began negotiating more than two decades ago. The divide between developed and developing nations has always been the main obstacle to reaching an accord.

The EU and the U.S. have has been working to break up a larger group of more than 100 developing countries, called the Group of 77, by offering money and concessions to small island states and some of the least-developed countries. Miguel Arias Canete, the EU’s climate-change commissioner, said the alliance between wealthiest and poorest is holding for now, despite public statements made by the poorest nations in support of the Group of 77.

“The speeches in [public] are one thing, and when you go to the negotiating table it’s another,” Mr. Canete said.

The Like-Minded group includes some of the most outspoken climate negotiators, such as Claudia Salerno, the Venezuelan ambassador to the EU. In a famous incident at climate talks in Copenhagen in 2009, Ms. Salerno held up her bloodied hand, which she claimed had been cut after slamming it on the table to object to the proceedings, and said: “This hand, which is bleeding now, wants to speak, and it has the same right of any of those which you call a representative group of leaders.”

On Wednesday evening, Ms. Salerno criticised the text, adding at the end: “I want to go home, look my daughters in the eye and tell them, ‘You are going to be fine, it’s going to be fine.’

Donald Trump withdrew the US from the Paris climate change agreement. The decision was condemned immediately by environmental campaigners and by the president’s political opponents who said it heralded the death of America’s position as a global leader. However, Trump held out the hope of a compromise saying he would immediately start a process to develop a fairer deal that would protect American workers.

Environmental campaigners said US absence will make it considerable harder for the remaining 190 or so countries to reach their agreed goals, given that the US is responsible for about 15 percent of global emissions of carbon and promised $3 billion to help other nations.

What Trump conveniently forgets is that global warming was caused in the first place by the rapacious US companies. Having raped the world, he now leaves scraps for others to fight over.