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Cash is just an artificially controlled commodity. The fed uses interest rates as a tool to control its scarcity. If the Fed made money more scarce that would b

Cash is just an artificially controlled commodity. The fed uses interest rates as a tool to control its scarcity. If the Fed made money more scarce that would be good news to people that own a lot of it. Low interest rates and inflation cost rich people and help poor people. If I've got $1,000,000 sitting in my bank account and interest rates are low, I'll earn a low return AND get hit by inflation. If I've got $200k in debt and interest rates are low. I pay less to finance that debt, and inflation means the dollars I pay back are worth less than the dollars I borrowed. But things that help 'poor', and hurt 'rich' aren't always good. Low rates do encourage reckless speculation, additionally inflation can drive value out of investment in anything backed by the dollar. Ideally inflation keeps pace with the growth of the economy.

sbov 16y ago
> If I've got $1,000,000 sitting in my bank account and interest rates are low, I'll earn a low return AND get hit by inflation. Maybe its an anomaly, but the rich people I know don't have all, much less the majority, of their cash sitting in bank accounts. They leverage their money to get more money. Oftentimes through loans. > If I've got $200k in debt and interest rates are low. I doubt an actual poor person could get a loan for $200k. Maybe a payday loan. But we probably have differing ideas of what poor is.
- lkrubner 16y ago
  A poor person might be someone who had a steady job from 1995 to 2008, and, circa 2005, got a $200,000k loan to buy a house, then lost their job, and is now struggling to make payments on the loan, perhaps scraping together cash through odds and ends. If you assume the largest expense they now face is dealing with that debt, then a wave of inflation would normally help them, so long as their was some relationship between the inflation and their wages. And please note, that relationship would not have to be very tight.
- johngalt 16y ago
  I've worked as a banker and both my parents were bankers as well, so I guess if we want to compare anecdotes about rich people we can do that all day. At the end of that day you'd be suprised how many rich people will keep a large portion of their money in FDIC backed accounts, such as time deposits (CDs), or money markets. Many rich people are older and more concerned about asset protection vs. asset appreciation. It doesn't matter though, because inflation takes a bite out of ALL investments. Even if a person is at 0 debt they lose little compared the person that is losing thousands due to inflation. Perhaps it would be better if we argued the converse. In a deflationary scenario money is consistently worth more and more. People that have a lot just get inherently richer even if it's sitting under their mattress. Credit of any kind is harder to obtain, and costs more. What does the "generically poor" person gain in this scenario?

sbov 16y ago

> If I've got $1,000,000 sitting in my bank account and interest rates are low, I'll earn a low return AND get hit by inflation. Maybe its an anomaly, but the rich people I know don't have all, much less the majority, of their cash sitting in bank accounts. They leverage their money to get more money. Oftentimes through loans. > If I've got $200k in debt and interest rates are low. I doubt an actual poor person could get a loan for $200k. Maybe a payday loan. But we probably have differing ideas of what poor is.

lkrubner 16y ago
A poor person might be someone who had a steady job from 1995 to 2008, and, circa 2005, got a $200,000k loan to buy a house, then lost their job, and is now struggling to make payments on the loan, perhaps scraping together cash through odds and ends. If you assume the largest expense they now face is dealing with that debt, then a wave of inflation would normally help them, so long as their was some relationship between the inflation and their wages. And please note, that relationship would not have to be very tight.
johngalt 16y ago
I've worked as a banker and both my parents were bankers as well, so I guess if we want to compare anecdotes about rich people we can do that all day. At the end of that day you'd be suprised how many rich people will keep a large portion of their money in FDIC backed accounts, such as time deposits (CDs), or money markets. Many rich people are older and more concerned about asset protection vs. asset appreciation. It doesn't matter though, because inflation takes a bite out of ALL investments. Even if a person is at 0 debt they lose little compared the person that is losing thousands due to inflation. Perhaps it would be better if we argued the converse. In a deflationary scenario money is consistently worth more and more. People that have a lot just get inherently richer even if it's sitting under their mattress. Credit of any kind is harder to obtain, and costs more. What does the "generically poor" person gain in this scenario?