The Apple Men

I caught the second run of The Pillowman by the Singapore Repertory Theatre at the DBS Arts Centre last night and it was LE-GEN-DA-RY! Here's a piece of advice of all of you, anywhere in the world, if The Pillowman is playing at your local theatre, catch it! If you do not enjoy it, you will never ever get a full refund from me but you can always come back here and vent your anger on me =)

The Apple Men is one of the many short stories told in the play (I will not reveal its content here, watch the play yourself!) and the story reminded me of how my economics professor loved to use apples for his economic analogies. He used apples to explain most macroeconomic theories and predictably used apples in his assignments as well. As one of his apple-fied students, I will apply my apples to illustrate the omni-present Inflation.
It goes by more names than one (or two). Some call it the 'time value of money', others call it 'erosion of savings' or just how 'things get more and more expensive as the days go by' (that makes it three and a really long third name).

The recent price hikes of oil, gold and rice have kept inflation in the news for a prolonged period and yet some people still do not adequately grasp the essence of it. Allow me to take you to Apple World to stare inflation in the eye and walk away the winner.

Imagine a world without money and people buy and sell with apples (red or green doesn't matter but if you insist, I would prefer you to imagine pink apples). Suppose you earned 1 apple today and decided to save it instead of buying a jug of Beer (which costs 1 apple).

Come next year, you lose your job and you take out your apple to drink your blues away. However, by this time your apple is half rotten and a jug of Beer costs 2 apples now.

Back in our world (where apples become half rotten in less than a week and beer costs more than any number of apples), our money 'rots' and the amount of Beer each dollar can purchase gets lesser and lesser. Not to mention the fact that prices will go up (this is worthy of another lengthy discussion but a slight increase of prices is actually healthy for the economy). Now I am not encouraging you to spend all your money before it 'rots' but to take into account which investments can give you a return that is over and above the prevailing 'rotting' rate or more commonly known as the inflation rate.

This would differ from country to country but here in Singapore, any return less than 3-4% is definitely below the inflation rate. That is to say that your money will rot faster than your investment earns. The lesson to learn from this is to pick the right investments to let your money work harder instead of letting it rot away.

For fresh graduates who are still amassing your savings, use the money to watch The Pillowman before it rots away.

Read more:
Third Party Ink
Inflation and interest rates
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