Inverted Thinking for a Deflationary World

You know it when you try and open your eyes underwater. The first thing you notice is that you can't breathe, and that gives you limited staying power. Even if you can still think clearly (for example, if you are attached to an oxygen tank), you can't see straight because the refraction of light in water distorts your vision. Living in a deflationary world (or, in the case of India, a disinflationary world) is rather like waking up underwater. For starters, you have to adjust your inflationary expectations. At 25 years of age (and almost all the time thereafter), we look forward to 'higher earnings'. Almost my entire working life, wage inflation has stayed above 10 per cent, and higher salaries have paid off debt burdens. What we thought was higher earnings was really nothing but wage inflation. Our sense of 'performance', where we got used to getting a higher pay for a 'redesignation' (which we called a promotion), was measured by the size of our pay hikes. All this will change to a more 'truthful' world, which will demand higher levels of (economic) intelligence from the ordinary citizen. Many of our old filters will fall away as we move to a different world. Some of them I will recount below: We will get one-three promotions and real salary growth (of >50 per cent cumulatively) in an entire career. Mostly, we will get annual hikes of

This article was originally published on May 01, 2015.