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The US government benefits from inflation for two main reasons: 1. It lowers their debt. 2. It collects more taxes from capital gains. The average tax payer is

The US government benefits from inflation for two main reasons: 1. It lowers their debt. 2. It collects more taxes from capital gains. The average tax payer is burdened from inflation because their salaries do not keep up with inflation.

mywittyname 6y ago
Don't forget that people use wage & asset prices increases as a barometer for economic performance. People love to see their 401ks and houses increase in price every year. And they definitely love the news reports of wage increases happening at the fastest rates in decades. If welded correctly, inflation can make an administration look like economic wizards.
- Leader2light 6y ago
  Yeah I'm sure the government knows what they are doing.
Retric 6y ago
Interest rates are pegged to inflation so at a steady rate it’s not particularly helpful for government debt unless they can run a surplus. The actual benefit from inflation is as an economic lubricant. People are less willing to sell assets at a loss, but tend to ignore low levels of inflation in their mental arithmetic. Also, holding savings as cash is now a loss which promotes either spending it or investing it. Most importantly small scale inflation reduces the risk of a deflationary spiral which quickly makes large debts impossible to pay back. Aka 0% to 2% is much better than -1% to 1%.
ed25519FUUU 6y ago
And things that can't be printed (housing, gold, bitcoin) become increasingly more expensive.
- chii 6y ago
  housing becoming more expensive is a result of bad city planning and zoning policies, rather than any other factor. Build dense, build more, and allow demand for housing to be satisfied.
- jfengel 6y ago
  But to the degree that they're just inflation hedges, they're poor investments. They would earn less than 2% per year. They may be better than holding dollars, but most people don't want to hold dollars, beyond enough to keep their finances going. To the degree that they investments, they're subject to the same factors as other investments. And money flows into and out of them according to other factors. Housing goes up and down according to geography. Gold goes up and down when people want to get out of or into stocks. Bitcoin goes up and down in a similar way, though with more attraction as new people discover the market. In all of those cases the risk is much larger than inflation. Those things can be either inflation hedges or investments but not both. They're more attractive than dollars, but dollars are neither investment nor hedge. They're a temporary store before you either buy goods or invest.

mywittyname 6y ago

Don't forget that people use wage & asset prices increases as a barometer for economic performance. People love to see their 401ks and houses increase in price every year. And they definitely love the news reports of wage increases happening at the fastest rates in decades. If welded correctly, inflation can make an administration look like economic wizards.

Leader2light 6y ago
Yeah I'm sure the government knows what they are doing.

Retric 6y ago

Interest rates are pegged to inflation so at a steady rate it’s not particularly helpful for government debt unless they can run a surplus. The actual benefit from inflation is as an economic lubricant. People are less willing to sell assets at a loss, but tend to ignore low levels of inflation in their mental arithmetic. Also, holding savings as cash is now a loss which promotes either spending it or investing it. Most importantly small scale inflation reduces the risk of a deflationary spiral which quickly makes large debts impossible to pay back. Aka 0% to 2% is much better than -1% to 1%.

ed25519FUUU 6y ago

And things that can't be printed (housing, gold, bitcoin) become increasingly more expensive.

chii 6y ago
housing becoming more expensive is a result of bad city planning and zoning policies, rather than any other factor. Build dense, build more, and allow demand for housing to be satisfied.
jfengel 6y ago
But to the degree that they're just inflation hedges, they're poor investments. They would earn less than 2% per year. They may be better than holding dollars, but most people don't want to hold dollars, beyond enough to keep their finances going. To the degree that they investments, they're subject to the same factors as other investments. And money flows into and out of them according to other factors. Housing goes up and down according to geography. Gold goes up and down when people want to get out of or into stocks. Bitcoin goes up and down in a similar way, though with more attraction as new people discover the market. In all of those cases the risk is much larger than inflation. Those things can be either inflation hedges or investments but not both. They're more attractive than dollars, but dollars are neither investment nor hedge. They're a temporary store before you either buy goods or invest.