4 ms·
> This constant inflation helps to explain much of the rising inequality in the United States, as well as the rising costs for interest-rate-sensitive assets li
by plaidfuji 7y ago
> This constant inflation helps to explain much of the rising inequality in the United States, as well as the rising costs for interest-rate-sensitive assets like education and housing.
This goes against my current understanding of inflation. I thought that high inflation benefits _borrowers_ (ie not the upper class) because it reduces the effective interest rate of loans. Is this taking that a step further and saying that the reduced cost of borrowing money actually increases asset prices because of inflated demand, resulting in increased wealth for asset-holders and unobtainable prices for asset-purchasers?
- pram 7y agoIt only benefits borrowers with outstanding loans, created prior to the inflationary period. Most of what would be considered the millennial generation most likely didn’t buy houses and such prior to the recession and the start of quantitative easing etc.
- wahern 7y agos/housing/college/ Millennials would benefit from higher inflation, so long as that inflation was reflected in wages.
- blevo 7y agowages seem to be the last thing that rise with general inflation, and as such don't rise as much as other prices, especially the ones mentioned: housing, schooling. I think the data bears this out, looking at 'real wages' vs inflation-adjusted cost of housing/schooling. I could see how other sorts of stimulus would be preferable in this case though. All depends on who gets the benefit of spending new money on old prices. Going back a comment, it depends on if you got into the loan (school, house) before the inflation. Or locked in a low rate. Always nice to pay back money that's worth much less.
- imtringued 7y agoWhen I went to the bank to get a small loan for home remodeling I got an offer with a 10% interest rate. The idea that low 0% interest rates actually influence consumer behaviour feels like a joke to me now.