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Very broadly speaking, inflation is a spiral of wages and prices that devalues money itself while leaving the relative value of labor and goods equivalent. In t

Very broadly speaking, inflation is a spiral of wages and prices that devalues money itself while leaving the relative value of labor and goods equivalent. In this sort of inflation, the value of saving and the cost of debt are reduced. Many economists view this as encouraging investment and as an overall public good provided the rate is slow enough to inflate everything more or less evenly. Minimum wage is by definition not a market rate, therefore when wages and prices inflate, minimum wage and other fixed benefits are left behind. This is not so much inflation hurting the poor but rather the government choosing to help them less, in a nicely passive "don't blame me" sort of way.

dnautics 11y ago
that's not correct. Government is not a passive actor in the inflation game, it is not true that simply through inaction does less to help out the poor. Government takes an active role in creating inflation for several social engineering reasons. The fiscal reason is to pay for government spending above what it takes in in income taxes. The monetary reasons are to lower the strength of the dollar and create competitiveness in international trade and to modulate employment, and the investment reason you state (basically that's a writ large transfer of wealth to the rich). There's also a third reason in that if it doesn't, the current system of fractional reserve lending will collapse catastrophically (but that's complicated) http://krugman.blogs.nytimes.com/2010/02/13/the-case-for-higher-inflation/ http://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hig... "It’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis." Parse that really carefully and read between the lines. The policy reason for inflation is to cheat wage earners and laborers out of the real value of their earning (out the gate, not as saved in a bank) in order to bolster employment numbers.

dnautics 11y ago

that's not correct. Government is not a passive actor in the inflation game, it is not true that simply through inaction does less to help out the poor. Government takes an active role in creating inflation for several social engineering reasons. The fiscal reason is to pay for government spending above what it takes in in income taxes. The monetary reasons are to lower the strength of the dollar and create competitiveness in international trade and to modulate employment, and the investment reason you state (basically that's a writ large transfer of wealth to the rich). There's also a third reason in that if it doesn't, the current system of fractional reserve lending will collapse catastrophically (but that's complicated) http://krugman.blogs.nytimes.com/2010/02/13/the-case-for-higher-inflation/ http://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hig... "It’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis." Parse that really carefully and read between the lines. The policy reason for inflation is to cheat wage earners and laborers out of the real value of their earning (out the gate, not as saved in a bank) in order to bolster employment numbers.