4 ms·

Inflation caused by currency debasement is a flat tax, which is comparatively regressive. It raises the prices of all items faster than wages, and everyone has

Inflation caused by currency debasement is a flat tax, which is comparatively regressive. It raises the prices of all items faster than wages, and everyone has to buy food, buy electricity, etc. Someone will have to pay.

ketzo 6y ago
Inflation is not a given, though. Governments issuing stimulus payments != inflation, at least not necessarily.
scrollbar 6y ago
Hm no; monetary inflation is reducing the value of each dollar so disproportionately affects those with more dollars, making it progressive.
- jackcosgrove 6y ago
  Most wealth is tied up in assets that are shielded from inflation.
  - ivalm 6y ago
    Poor people generally have high debt to asset and debt to income. Inflation helps them.
    - bryan_w 6y ago
      Sure it helps with the debt, but they will still need to buy the $200 bag of milk
lefrenchy 6y ago
I agree with the premise, but printing currency in the midst of a large economic crisis to keep consumers afloat is not guaranteed to result in inflation though, is it?
- jackcosgrove 6y ago
  Supply chains were already starting to fray. There's a diner near me with a sign up front apologizing for raising their prices because of a beef shortage. Borrowing money to fund consumption now won't result in long-term inflation if we consume less in the future to account for the pulled-forward demand. I doubt that will happen.
  - lefrenchy 6y ago
    Fair enough. Isn’t that just a result of supply chains being hurt as a result of COVID? Those prices aren’t raising as a result of stimulus or wage growth, and should normalize as we return toward some sense of normalcy.
    - OkGoDoIt 6y ago
      When was the last time you ever saw a restaurant lower their prices, regardless of the reason? Price increases have a tendency to stick.
PeterisP 6y ago
Inflation caused by currency debasement is very much not a flat tax - the major effect of it is not on the prices (though some inertia and 'stickiness' of e.g. wages definitely applies as you note) but on all cash-denominated assets and contracts, especially lending. In particular, it's a tax on all savings in cash and bonds (but not on investments in stocks), and it's a boon to all debt. For example, the total housing mortgage volume is huge - so if currency debasement causes any significant, rapid, unexpected inflation (expected inflation is priced in the interest rates) then it's a significant shift of wealth from the lenders (and, correspondingly, to all people and businesses holding money in banks) to the mortagage borrowers.

ketzo 6y ago

Inflation is not a given, though. Governments issuing stimulus payments != inflation, at least not necessarily.

scrollbar 6y ago

Hm no; monetary inflation is reducing the value of each dollar so disproportionately affects those with more dollars, making it progressive.

jackcosgrove 6y ago
Most wealth is tied up in assets that are shielded from inflation.
- ivalm 6y ago
  Poor people generally have high debt to asset and debt to income. Inflation helps them.
  - bryan_w 6y ago
    Sure it helps with the debt, but they will still need to buy the $200 bag of milk

lefrenchy 6y ago

I agree with the premise, but printing currency in the midst of a large economic crisis to keep consumers afloat is not guaranteed to result in inflation though, is it?

jackcosgrove 6y ago
Supply chains were already starting to fray. There's a diner near me with a sign up front apologizing for raising their prices because of a beef shortage. Borrowing money to fund consumption now won't result in long-term inflation if we consume less in the future to account for the pulled-forward demand. I doubt that will happen.
- lefrenchy 6y ago
  Fair enough. Isn’t that just a result of supply chains being hurt as a result of COVID? Those prices aren’t raising as a result of stimulus or wage growth, and should normalize as we return toward some sense of normalcy.
  - OkGoDoIt 6y ago
    When was the last time you ever saw a restaurant lower their prices, regardless of the reason? Price increases have a tendency to stick.

PeterisP 6y ago

Inflation caused by currency debasement is very much not a flat tax - the major effect of it is not on the prices (though some inertia and 'stickiness' of e.g. wages definitely applies as you note) but on all cash-denominated assets and contracts, especially lending. In particular, it's a tax on all savings in cash and bonds (but not on investments in stocks), and it's a boon to all debt. For example, the total housing mortgage volume is huge - so if currency debasement causes any significant, rapid, unexpected inflation (expected inflation is priced in the interest rates) then it's a significant shift of wealth from the lenders (and, correspondingly, to all people and businesses holding money in banks) to the mortagage borrowers.