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> Do they? Generally inflation benefits debtors and not lenders, because debts are denominated in dollars in the year of issue, and repaid in future dollars, wh

> Do they? Generally inflation benefits debtors and not lenders, because debts are denominated in dollars in the year of issue, and repaid in future dollars, which are worth 2% less per year. Yes, exactly. This allows wealthy people to borrow money and pay it back with less value. > Overwhelmingly poor and middle class folks are debtors (think mortgages). Poor people often don’t have access to these extremely low interest rates because of structural inequalities and credit requirements (and exceptions tend to leave them worse off as well, see the subprime fiasco). Meanwhile the cheap credit bids up the prices of those assets, benefitting the people who have them (wealthy) as opposed to the people buying them (upwardly mobile or aspirational). > Mortgages have become more and more affordable each year. This means folks can afford more and more house for the same money, after all the bulk of the payment of a 30 year fixed is interest for the first 10+ years. Not in aggregate, because the cost of a house increases as people bid for houses with the cheap credit. > Yeah but at the end of that day that's irrelevant. The only thing that matters is what those units represent. If I gave you 5 today and 3 tomorrow does that mean anything? Or course not. 5 what and 3 what? That's what we're talking about Right, and at the end of the day those units represent less value because of the actions of the central bank. Furthermore those actions were intended to have that exact effect. So how are you claiming that business owners are supposed to work in opposition to central bank policy? Clearly if the central bank wants wages to decrease in real terms, and business owners increase them nominally to make them neutral in real terms, this frustrates central bank policy and they will logically just print more money. > It's your responsibility in a capitalist society to allocate capital most productively and so if this particular allocation isn't the most productive, your job is to go find it. The problem is the distorting effect of low interest rates means that what is productive in terms of nominal r.o.i. is not what is productive in real terms, but the market distortions are so pervasive and persistent that people have to chase the nominal returns. This is incredibly destructive to value, society, and community.

arcticbull 6y ago
You've stated a bunch of stuff as fact without sources. > Yes, exactly. This allows wealthy people to borrow money and pay it back with less value. It lets everyone do so, and as a fraction of net worth, the poor are way disproportionately exposed, and hence benefit. A billionaire with $1B in net worth isn't leveraged to 10B in real estate. Someone worth $10K may easily have $100K in mortgage debt, however. Why do you say people who have both debt and assets benefit more than those who have just debts? They strictly dont because those assets have to outperform inflation. Debts do not. > Poor people often don’t have access to these extremely low interest rates because of structural inequalities and credit requirements (and exceptions tend to leave them worse off as well, see the subprime fiasco). Meanwhile the cheap credit bids up the prices of those assets, benefitting the people who have them (wealthy) as opposed to the people buying them (upwardly mobile or aspirational). That's irrelevant - that is to say, a separate problem - because inflation affects everyone regardless of interest rate equally. Interest rates are set based on likelihood of default. > Not in aggregate, because the cost of a house increases as people bid for houses with the cheap credit. Yes, in aggregate, no the cost of houses hasn't increased on an inflation adjusted dollars per square foot basis since the 1970s [1]. Where it has increased on a unit basis it's due to zoning regulation and not inflation. > Right, and at the end of the day those units represent less value because of the actions of the central bank. Furthermore those actions were intended to have that exact effect. So how are you claiming that business owners are supposed to work in opposition to central bank policy? Clearly if the central bank wants wages to decrease in real terms, and business owners increase them nominally to make them neutral in real terms, this frustrates central bank policy and they will logically just print more money. No, this is a fundamental misunderstanding. All businesses see their expenses and revenues rise with inflation. If they choose not to adjust their salaries commensurately, they've made a conscious decision to reduce pay a fraction of income. > The problem is the distorting effect of low interest rates means that what is productive in terms of nominal r.o.i. is not what is productive in real terms, but the market distortions are so pervasive and persistent that people have to chase the nominal returns. This is incredibly destructive to value, society, and community. [citation needed] [1] https://fee.org/articles/new-homes-today-have-twice-the-square-feet-per-person-as-in-1973/ https://fee.org/articles/new-homes-today-have-twice-the-squa...
- chordalkeyboard 6y ago
  > It lets everyone do so Citation for your claim that everyone has access to cheap credit. Are you aware of payday loans? [0] > and as a fraction of net worth, the poor are way disproportionately exposed, and hence benefit. Citation needed for your claim that the poor can access these low interest rates. > A billionaire with $1B in net worth isn't leveraged to 10B in real estate. Citation needed. Why do you think a person with $11B in assets wouldn’t borrow $10B? > Someone worth $10K may easily have $100K in mortgage debt, however. Citation needed. Do you mean someone worth $110k has a $100k mortgage? Or do you mean someone worth -$90k has $10k in assets and liabilities totalling $100k? > Why do you say people who have both debt and assets benefit more than those who have just debts? Because inflation causes assets to appreciate in nominal terms (assuming constant real value) and debt to depreciate in real terms. > They strictly dont because those assets have to outperform inflation. Debts do not. I’m not sure what you mean by “outperform inflation” > That's irrelevant - that is to say, a separate problem It means your theory about poor people benefitting from low interest rates is not true. > because inflation affects everyone regardless of interest rate equally. Citation needed. > Interest rates are set based on likelihood of default. You know this and yet you continue to assert that poor people benefit as much or more than the wealthy? I guess you think a person with a minimum wage job and no assets is just as likely to default as a billionaire? > Yes, in aggregate, no the cost of houses hasn't increased on an inflation adjusted dollars per square foot basis since the 1970s Right, when you adjust for the inflation, it hasn’t increased at all. Which is basically the point. The prices go up because of inflation, people who hold assets sell them for more money, people who earn paychecks get the same amount of dollars but can buy less for it, etc. None of this is controversial except when saying it around the proles who might take offense at the efforts of oligarchs to eat the bottoms out of their paychecks and savings. > No, this is a fundamental misunderstanding. All businesses see their expenses and revenues rise with inflation. But not at the same time or at the same rate. After all, if all prices relected inflation at the same time, there would be no point. > If they choose not to adjust their salaries commensurately, they've made a conscious decision to reduce pay a fraction of income. No, the bankers are the ones who made the conscious decision. Good rhetorical judo tho. > [citation needed] > You've stated a bunch of stuff as fact without sources. Some of it is basically common knowledge, like poor people not having the collaterall, credit history, or social value required to access the same loans as billionaires. Some of it just seems like fundamental misunderstanding on your part, like your belief that all prices inflate at the same rate. [0] https://www.cnbc.com/2021/02/16/map-shows-typical-payday-loan-rate-in-each-state.html https://www.cnbc.com/2021/02/16/map-shows-typical-payday-loa...

arcticbull 6y ago

You've stated a bunch of stuff as fact without sources. > Yes, exactly. This allows wealthy people to borrow money and pay it back with less value. It lets everyone do so, and as a fraction of net worth, the poor are way disproportionately exposed, and hence benefit. A billionaire with $1B in net worth isn't leveraged to 10B in real estate. Someone worth $10K may easily have $100K in mortgage debt, however. Why do you say people who have both debt and assets benefit more than those who have just debts? They strictly dont because those assets have to outperform inflation. Debts do not. > Poor people often don’t have access to these extremely low interest rates because of structural inequalities and credit requirements (and exceptions tend to leave them worse off as well, see the subprime fiasco). Meanwhile the cheap credit bids up the prices of those assets, benefitting the people who have them (wealthy) as opposed to the people buying them (upwardly mobile or aspirational). That's irrelevant - that is to say, a separate problem - because inflation affects everyone regardless of interest rate equally. Interest rates are set based on likelihood of default. > Not in aggregate, because the cost of a house increases as people bid for houses with the cheap credit. Yes, in aggregate, no the cost of houses hasn't increased on an inflation adjusted dollars per square foot basis since the 1970s [1]. Where it has increased on a unit basis it's due to zoning regulation and not inflation. > Right, and at the end of the day those units represent less value because of the actions of the central bank. Furthermore those actions were intended to have that exact effect. So how are you claiming that business owners are supposed to work in opposition to central bank policy? Clearly if the central bank wants wages to decrease in real terms, and business owners increase them nominally to make them neutral in real terms, this frustrates central bank policy and they will logically just print more money. No, this is a fundamental misunderstanding. All businesses see their expenses and revenues rise with inflation. If they choose not to adjust their salaries commensurately, they've made a conscious decision to reduce pay a fraction of income. > The problem is the distorting effect of low interest rates means that what is productive in terms of nominal r.o.i. is not what is productive in real terms, but the market distortions are so pervasive and persistent that people have to chase the nominal returns. This is incredibly destructive to value, society, and community. [citation needed] [1] https://fee.org/articles/new-homes-today-have-twice-the-square-feet-per-person-as-in-1973/ https://fee.org/articles/new-homes-today-have-twice-the-squa...

chordalkeyboard 6y ago
> It lets everyone do so Citation for your claim that everyone has access to cheap credit. Are you aware of payday loans? [0] > and as a fraction of net worth, the poor are way disproportionately exposed, and hence benefit. Citation needed for your claim that the poor can access these low interest rates. > A billionaire with $1B in net worth isn't leveraged to 10B in real estate. Citation needed. Why do you think a person with $11B in assets wouldn’t borrow $10B? > Someone worth $10K may easily have $100K in mortgage debt, however. Citation needed. Do you mean someone worth $110k has a $100k mortgage? Or do you mean someone worth -$90k has $10k in assets and liabilities totalling $100k? > Why do you say people who have both debt and assets benefit more than those who have just debts? Because inflation causes assets to appreciate in nominal terms (assuming constant real value) and debt to depreciate in real terms. > They strictly dont because those assets have to outperform inflation. Debts do not. I’m not sure what you mean by “outperform inflation” > That's irrelevant - that is to say, a separate problem It means your theory about poor people benefitting from low interest rates is not true. > because inflation affects everyone regardless of interest rate equally. Citation needed. > Interest rates are set based on likelihood of default. You know this and yet you continue to assert that poor people benefit as much or more than the wealthy? I guess you think a person with a minimum wage job and no assets is just as likely to default as a billionaire? > Yes, in aggregate, no the cost of houses hasn't increased on an inflation adjusted dollars per square foot basis since the 1970s Right, when you adjust for the inflation, it hasn’t increased at all. Which is basically the point. The prices go up because of inflation, people who hold assets sell them for more money, people who earn paychecks get the same amount of dollars but can buy less for it, etc. None of this is controversial except when saying it around the proles who might take offense at the efforts of oligarchs to eat the bottoms out of their paychecks and savings. > No, this is a fundamental misunderstanding. All businesses see their expenses and revenues rise with inflation. But not at the same time or at the same rate. After all, if all prices relected inflation at the same time, there would be no point. > If they choose not to adjust their salaries commensurately, they've made a conscious decision to reduce pay a fraction of income. No, the bankers are the ones who made the conscious decision. Good rhetorical judo tho. > [citation needed] > You've stated a bunch of stuff as fact without sources. Some of it is basically common knowledge, like poor people not having the collaterall, credit history, or social value required to access the same loans as billionaires. Some of it just seems like fundamental misunderstanding on your part, like your belief that all prices inflate at the same rate. [0] https://www.cnbc.com/2021/02/16/map-shows-typical-payday-loan-rate-in-each-state.html https://www.cnbc.com/2021/02/16/map-shows-typical-payday-loa...