Problem with prices rising too much

INFLATION is the decline of purchasing of a given currency over time. A quantitive estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of a basket of selected goods and services in an economy over some period of time .

Given how inflation erodes the purchasing power of our money, you may be thinking inflation is bad. Many economists, however, maintain that moderate inflation levels are good for the economy. Therefore rising prices can be considered a good thing, but prices that rise too much is a bad thing.

Inflation allows borrowers to pay lenders back with money that is worth less than it was when originally borrowed, which benefits borrowers. When inflation causes higher prices, the demand for credit increases, which benefits lenders. When inflation is too high, of course, it is not a good friend of the economy or individual.

Inflation will always reduce the value of money, unless the interest rates are higher than inflation. The higher the inflation gets, the less chance there is that savers will see any real return on their money. Traditionally savers lose from inflation. If prices rise, the value of money falls and the real value of savings declines. For example, in periods of hyperinflation people who have saved all their lives could see the value of their savings wiped out, because with higher prices their savings were worth less. Core inflation - which excludes the cost of food and energy - also goes higher every year.

The petrol price has gone up by 81 cents a litre. The prices of electricity, water and rates will obviously go up in April. The price of food has gone up during the course of the year. The taxpayers, ratepayers and especially the old-age pensioners are finding it difficult because of inflation.

The old-age pensioners only get paid R1 860 a month. This money is inadequate and they cannot live on this money. The pensioners worked tirelessly and paid their taxes and rates and built the economy of this country with their labour.

The basic salary for any worker in South Africa is R3 500 a month, which was set by our government. I suggest the minister of finance and the state president should pay all the pensioners R3 500 a month. I am also going to write to the minister of finance and the state president to consider the pensioners when they make up the budget in April this year.

BRUCE CHINNIA | Community activist