| |
Hidden Discount on FingerTec Products
Stemming from Inflation |
| |
| |
Inflation is an economic factor that is very close to each individual since almost everyone is affected by it. Other economic factors are less noticed by average people, like the unemployment rate (unless you or your family member is not the one who looses the job), an increase in GDP (since the benefits are not shared equally) or changes in the Balance of Payment (which has completely nothing to do with individual person). An increase in inflation should however worry everyone since inflation is like someone is stealing from your pocket and yet you cannot blame anyone. |
| |
|
When inflation is low, the effect of inflation is largely ignored. However, if the inflation, say 10%, like in many less developed countries today, your savings of 100,000 in the beginning of the year will be equal to only 90,000 in terms of purchasing power at the end of the year (loss of 10,000, although in nominal terms you still have that 100,000). Those who deposit can get interest which is often less than the loss due to inflation. Returns from investment can be higher than the loss from inflation, but investment is at the same time they are riskier and if not selected carefully, can lead to even bigger losses.
Those who have a fixed payment obligation can benefit from inflation. For example, if you are paying a fixed amount of installments on your loan, what you pay will be less and less in real terms throughout the repayment period by the rate of the ongoing inflation. This is because the value of installment sum in terms of what it can buy is getting less and less due to increase in general price level. For those, however, whose income does not grow at least at the rate of inflation, the burden of installment will not be eased. Governments also gain from inflation by borrowing at low interest rates (government bonds usually pay the lowest interest in the bond market) and paying back with cheaper money. |
|
| |
| This is partially the reason why US Government runs at huge budget deficit whereby it gains by borrowing internationally (largest lender being Japan) at the current dollar value and pay back with cheaper dollars in the future. However, not all the governments are able to borrow internationally at low interest rate like US does because, historically, UD dollar became an international currency, while its economy is considered strong enough to back its money supply (in contrast, prior to 1971, US currency was backed by gold, while today the currency of each country is backed by the economy and the belief that its value will not disappear). When we talk about inflation in the economy, we refer not to a particular product, but to the general price level measured by index called Consumer Price Index (CPI). CPI is calculated by gathering price information of sample goods and |
|
|
| services in the economy and taking their weighted average using estimates of the shares of the different types of expenditure as fractions of the total expenditure covered by the index. |
| |
| Since CPI represents average prices, it is possible that during inflation, even if the prices of majority goods are going up, some products maybe actually having constant or even falling prices. FingerTec products are in this category with constant or falling prices. For example, AC900 models was selling at $ 310 two years ago, compared to the current price of $ 240. Similarly, the nominal prices of other FingerTec models are also lower compared to the prices in 2007. |
| |
| In addition to the normal discount, FingerTec products have a “hidden discount” which is due to inflation. Just like the fixed payments in earlier example were becoming less and less burden in real terms, the products of FingerTec are also becoming cheaper in real terms due to continuous inflation. Even if the currency keeps depreciating, FingerTec is able to sustain low prices by continuously improving efficiency of its operations that reduces cost and by improving its products and after sale support that allows expanding market and gaining on economies of scale. |
| |
|
|
