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Inflation actually hurts the middle class. The poor are much more likely to be in debt, which actually means debt becomes less of a problem as inflation occurs

Inflation actually hurts the middle class. The poor are much more likely to be in debt, which actually means debt becomes less of a problem as inflation occurs. The rich tend to have diversified non-cash assets (investments, property, etc) that are immune to inflation. The middle class -- Joe and Sally with a savings account -- actually have a significant amount of their net worth in cash and that's who suffers.

johbjo 6y ago
The reason it hurts the middle class is that the size of their mortgages are the first to be affected by inflation, whereas their wages are among the last. Mortgage holders are stakeholders in inflation, hoping for appreciating property prices.
- thehappypm 6y ago
  This makes no sense. Mortgages give you a fixed monthly price locked in at closing time. With inflation this payment has less and less real cost, and your home value goes up.
  - dnautics 6y ago
    Not necessarily true. If you have a fixed mortgage you might be privileged.
    - thehappypm 6y ago
      Even adjustable rate mortgages do not change the value of the principal.
  - johbjo 6y ago
    Asset inflation is not the same as wage inflation. Consider the relative size of new mortgages to wages. Since asset prices are typically leveraged on wages (through mortgages), assets will inflate faster than wages (unless the interest rate is set to counteract this.) But inflation is only beneficial to /new/ buyers if wages inflate faster than assets. Otherwise the relative debt of all mortgage holders increases over time. Whether asset inflation is beneficial to a home owner is debatable, since all properties appreciate at the same rate. "Moving up" still means increasing the relative size of the mortgage.
imtringued 6y ago
>The rich tend to have diversified non-cash assets (investments, property, etc) that are immune to inflation. This is not strictly true. It's a matter of how money enters the economy. Right now money enters the economy on the supply side through assets which means assets experience inflation. If that money was actually entering through jobs programs or some other demand side mechanism then inflation would happen at the demand side first and on the supply side later.

johbjo 6y ago

The reason it hurts the middle class is that the size of their mortgages are the first to be affected by inflation, whereas their wages are among the last. Mortgage holders are stakeholders in inflation, hoping for appreciating property prices.

thehappypm 6y ago
This makes no sense. Mortgages give you a fixed monthly price locked in at closing time. With inflation this payment has less and less real cost, and your home value goes up.
- dnautics 6y ago
  Not necessarily true. If you have a fixed mortgage you might be privileged.
  - thehappypm 6y ago
    Even adjustable rate mortgages do not change the value of the principal.
- johbjo 6y ago
  Asset inflation is not the same as wage inflation. Consider the relative size of new mortgages to wages. Since asset prices are typically leveraged on wages (through mortgages), assets will inflate faster than wages (unless the interest rate is set to counteract this.) But inflation is only beneficial to /new/ buyers if wages inflate faster than assets. Otherwise the relative debt of all mortgage holders increases over time. Whether asset inflation is beneficial to a home owner is debatable, since all properties appreciate at the same rate. "Moving up" still means increasing the relative size of the mortgage.

imtringued 6y ago

>The rich tend to have diversified non-cash assets (investments, property, etc) that are immune to inflation. This is not strictly true. It's a matter of how money enters the economy. Right now money enters the economy on the supply side through assets which means assets experience inflation. If that money was actually entering through jobs programs or some other demand side mechanism then inflation would happen at the demand side first and on the supply side later.