5 ms·

Inflation isn’t a bad thing.

imNotTheProb 5y ago
To my 1 year old with $1000 it is. To a college kid with savings from teenage jobs, it is. To people who's wages didn't go up, it is.
- caycep 5y ago
  context is always important. It's bad if wages are also kept stagnant (and maybe artificially so by whoever's employing those people). For your 1 year old, it's not a problem if that $1000 is invested in say an S&P fund If you hold a mortgage, it can potentially be good...
  - BitwiseFool 5y ago
    It's not like the banks and lenders aren't wise to the idea of mortgage's getting reduced by inflation. They calculate and compensate for inflation and make offers accordingly.
    - AlexandrB 5y ago
      I think this has cause and effect somewhat backwards. Often mortgage rates are based on the interest rate set by the central bank ("prime"). So if inflation is rampant and the central bank increases the prime rate to try to reduce inflation, variable mortgage interest rates will also increase. In the US, however, it's possible to get 25 year fixed rate mortgages. With the prime rate being so low, these can be had for 2-3%. This is very low! If many on HN are to be believed regarding a coming inflationary crisis this kind of mortgage will be hugely advantageous to those that have one because the debt will be massively devalued by rampant inflation.
    - mason55 5y ago
      It's an interesting relationship. The banks take the current interest rate from the Fed into account and base the mortgage rate on that. They can try to project out and add some percentage for risk + inflation but if they add too much then there are 100 other banks ready to undercut them. So you get a fixed-rate mortgage based on the current interest rate from the central bank. And the amount of money that your mortgage covers (basically the price of your house) doesn't change. Which means that every year, as inflation causes wages to go up, you are paying for a house that cost whatever it cost when you bought it. But! Most people shop for houses based on what they can afford as an all-in payment. To put it another way, people can afford $x/month on housing, and it doesn't matter to them really how much is going to the price of the house and how much is going to interest. If interest rates rise (which happens along with inflation) then that means the percentage of someone's monthly payment that goes to the price of the house goes down, which has a depressing effect on housing prices. So your house payment becomes more affordable but the amount you can expect to get when you sell your house goes down (or rises more slowly).
  - syshum 5y ago
    wages rarely keep up with inflation, real inflation, most companies are till running on 1-2% COLA annually, that is far far lower than actual inflation was, and much lower than inflation is now This is on the back of many companies having a wage freeze in 2020 due to the pandemic This is also why you will see alot of companies having a turn over crisis as switching employers will not be more profitable for employee's than every before. I see every limited signs that the HR dept's at most companies even recognize this problem currently, and the few that due are powerless to stop it because it seems many companies just refuse to give large annual raises to current staff but will happily replace them at high rates. This is with out even getting started on the Time bomb of SocSec, as they also have not kept payments up to meet inflation largely because they can not. there is no money to fund it. So if your retired depending on SocSec income for your survival you are screwed, better hope you have family you can live with >If you hold a mortgage, it can potentially be good... Hold debt is only good if you wages go up more than inflation. While sure you may pay less for the home itself, you repair and maintenance expenses are going up... Right now, some repair and maintenance cost for home ownership are leading inflation by ALOT
  - WillPostForFood 5y ago
    For your 1 year old, it's not a problem if that $1000 is invested in say an S&P fund In the 1970's when the US had stagflation, S&P inflation adjusted returns from ~1968 to 1982. If you bought in 1968 you wouldn't really show gains until the early 1990s. https://www.macrotrends.net/2324/sp-500-historical-chart-data https://www.macrotrends.net/2324/sp-500-historical-chart-dat...
- gred 5y ago
  Inflation is good for institutions with $27 trillion debts, like the US government.
  - infamouscow 5y ago
    The US government could tax the population at 100% of GDP and it wouldn't make a dent in the national debt. Also the US government can print it's own money.
    - imtringued 5y ago
      >The US government could tax the population at 100% of GDP and it wouldn't make a dent in the national debt. Actually, it would cause the debt to GDP ratio to go up as taxable income shrinks. See Greece. Paying off debt while everyone and their dog is saving money like crazy is foolish.
  - AlexandrB 5y ago
    Inflation is good for anyone with debt, which includes most of the US population. (Assuming that wages rise to match inflation, of course)
- xapata 5y ago
  Wages are part of inflation. That's why the same CEO's complaining about inflation are complaining that they "can't" hire staff.
- WillPostForFood 5y ago
  To my 1 year old with $1000 it is. Inflation is going to make that $1000 worth less unless your 1 yr old is a great investor. If they have any tips, pass them on. I some cash and no freaking idea how to protect the value. To a college kid with savings from teenage jobs, it is. See above inflation is tough on savings. Might be good for a young adult with college debt that can be paid back with inflated dollars. To people who's wages didn't go up, it is. Only if wages rise faster than prices. Wages often trail prices in high inflation environments. In extreme scenarios, prices can go up in restaurants and stores every day, but wages may only go up after a pay period, or after yearly review.
doggosphere 5y ago
Inflation is absolutely a "bad" thing in the same way that gaining weight from eating ice cream is "bad". It is the consequence of indulgence. An increase in the cost of living is generally never a "good" thing. The question is if it is controlled and the tradeoffs worthwhile.
- xapata 5y ago
  No, inflation is more like the weight gain of a child growing to an adult. The metaphor breaks down at adulthood. > An increase in the cost of living is generally never a "good" thing. Inflation is only an increase in nominal, not real cost. If I give you a dollar more and charge you a dollar extra, then you haven't lost any purchasing power.
  - doggosphere 5y ago
    Except real wages aren't actually increasing for most people. https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us... https://www.marketwatch.com/story/despite-wage-growth-the-average-american-suffers-as-cost-of-living-rises-at-a-faster-pace-2019-01-10 https://www.marketwatch.com/story/despite-wage-growth-the-av... https://www.forbes.com/sites/patrickwwatson/2018/09/25/real-wage-growth-is-actually-falling/?sh=4ff61767284f https://www.forbes.com/sites/patrickwwatson/2018/09/25/real-... https://ca.finance.yahoo.com/news/aftertax-income-is-barely-budging-and-not-keeping-up-with-the-cost-of-living-180913250.html https://ca.finance.yahoo.com/news/aftertax-income-is-barely-...
    - xapata 5y ago
      That's been true since the 70s, but it's not an intrinsic feature of inflation. In fact, this time it may be different, and that's what all the CEOs are complaining about.
  - cheeseomlit 5y ago
    But I'm not getting a dollar more, I'm just getting charged a dollar extra. Wages will never actually keep up with inflation, they certainly haven't thus far. In part because government inflation statistics are not trustworthy
infamouscow 5y ago
The price of groceries going up is a good thing?
- BitwiseFool 5y ago
  There's this weird dichotomy in Economics where what's good for "The Economy" is often bad for you, the individual. And vice versa. This isn't true for everything, of course, but I've definitely noticed it whenever you hear stories about inflation, the price of gas, wages going up, the dollar being 'strong', etc.
- NikolaeVarius 5y ago
  The value of debts also go down.
- shakezula 5y ago
  Yes, economically it likely is. Its your stagnating wages that are a bad thing. If wages had increased like they should've, then a few dollar increase in your groceries wouldn't be the issue that it is.
- mullingitover 5y ago
  Inflation means that wages go up along with the prices of groceries, so it's a wash. The only thing that suffers with inflation is a big pile of cash, which poor people don't have (they generally owe a big pile of cash, which inflation shrinks for them). The people trying to scare everyone about inflation are the ones who the poor people owe the big pile of cash, and they have a very large megaphone.
  - mindslight 5y ago
    Poor people don't have standing debts but rather revolving ones, and so their debt scales with inflation. The rich don't have piles of cash, they buy assets instead. Inflation hoses the middle class who wants to save in cash, which is part of why the middle class is vanishing - extreme monetary inflation to counteract the ever-growing deflation inherent to technological progress.

To my 1 year old with $1000 it is. To a college kid with savings from teenage jobs, it is. To people who's wages didn't go up, it is.

caycep 5y ago
context is always important. It's bad if wages are also kept stagnant (and maybe artificially so by whoever's employing those people). For your 1 year old, it's not a problem if that $1000 is invested in say an S&P fund If you hold a mortgage, it can potentially be good...
- BitwiseFool 5y ago
  It's not like the banks and lenders aren't wise to the idea of mortgage's getting reduced by inflation. They calculate and compensate for inflation and make offers accordingly.
  - AlexandrB 5y ago
    I think this has cause and effect somewhat backwards. Often mortgage rates are based on the interest rate set by the central bank ("prime"). So if inflation is rampant and the central bank increases the prime rate to try to reduce inflation, variable mortgage interest rates will also increase. In the US, however, it's possible to get 25 year fixed rate mortgages. With the prime rate being so low, these can be had for 2-3%. This is very low! If many on HN are to be believed regarding a coming inflationary crisis this kind of mortgage will be hugely advantageous to those that have one because the debt will be massively devalued by rampant inflation.
  - mason55 5y ago
    It's an interesting relationship. The banks take the current interest rate from the Fed into account and base the mortgage rate on that. They can try to project out and add some percentage for risk + inflation but if they add too much then there are 100 other banks ready to undercut them. So you get a fixed-rate mortgage based on the current interest rate from the central bank. And the amount of money that your mortgage covers (basically the price of your house) doesn't change. Which means that every year, as inflation causes wages to go up, you are paying for a house that cost whatever it cost when you bought it. But! Most people shop for houses based on what they can afford as an all-in payment. To put it another way, people can afford $x/month on housing, and it doesn't matter to them really how much is going to the price of the house and how much is going to interest. If interest rates rise (which happens along with inflation) then that means the percentage of someone's monthly payment that goes to the price of the house goes down, which has a depressing effect on housing prices. So your house payment becomes more affordable but the amount you can expect to get when you sell your house goes down (or rises more slowly).
- syshum 5y ago
  wages rarely keep up with inflation, real inflation, most companies are till running on 1-2% COLA annually, that is far far lower than actual inflation was, and much lower than inflation is now This is on the back of many companies having a wage freeze in 2020 due to the pandemic This is also why you will see alot of companies having a turn over crisis as switching employers will not be more profitable for employee's than every before. I see every limited signs that the HR dept's at most companies even recognize this problem currently, and the few that due are powerless to stop it because it seems many companies just refuse to give large annual raises to current staff but will happily replace them at high rates. This is with out even getting started on the Time bomb of SocSec, as they also have not kept payments up to meet inflation largely because they can not. there is no money to fund it. So if your retired depending on SocSec income for your survival you are screwed, better hope you have family you can live with >If you hold a mortgage, it can potentially be good... Hold debt is only good if you wages go up more than inflation. While sure you may pay less for the home itself, you repair and maintenance expenses are going up... Right now, some repair and maintenance cost for home ownership are leading inflation by ALOT
- WillPostForFood 5y ago
  For your 1 year old, it's not a problem if that $1000 is invested in say an S&P fund In the 1970's when the US had stagflation, S&P inflation adjusted returns from ~1968 to 1982. If you bought in 1968 you wouldn't really show gains until the early 1990s. https://www.macrotrends.net/2324/sp-500-historical-chart-data https://www.macrotrends.net/2324/sp-500-historical-chart-dat...
gred 5y ago
Inflation is good for institutions with $27 trillion debts, like the US government.
- infamouscow 5y ago
  The US government could tax the population at 100% of GDP and it wouldn't make a dent in the national debt. Also the US government can print it's own money.
  - imtringued 5y ago
    >The US government could tax the population at 100% of GDP and it wouldn't make a dent in the national debt. Actually, it would cause the debt to GDP ratio to go up as taxable income shrinks. See Greece. Paying off debt while everyone and their dog is saving money like crazy is foolish.
- AlexandrB 5y ago
  Inflation is good for anyone with debt, which includes most of the US population. (Assuming that wages rise to match inflation, of course)
xapata 5y ago
Wages are part of inflation. That's why the same CEO's complaining about inflation are complaining that they "can't" hire staff.
WillPostForFood 5y ago
To my 1 year old with $1000 it is. Inflation is going to make that $1000 worth less unless your 1 yr old is a great investor. If they have any tips, pass them on. I some cash and no freaking idea how to protect the value. To a college kid with savings from teenage jobs, it is. See above inflation is tough on savings. Might be good for a young adult with college debt that can be paid back with inflated dollars. To people who's wages didn't go up, it is. Only if wages rise faster than prices. Wages often trail prices in high inflation environments. In extreme scenarios, prices can go up in restaurants and stores every day, but wages may only go up after a pay period, or after yearly review.

doggosphere 5y ago

Inflation is absolutely a "bad" thing in the same way that gaining weight from eating ice cream is "bad". It is the consequence of indulgence. An increase in the cost of living is generally never a "good" thing. The question is if it is controlled and the tradeoffs worthwhile.

xapata 5y ago
No, inflation is more like the weight gain of a child growing to an adult. The metaphor breaks down at adulthood. > An increase in the cost of living is generally never a "good" thing. Inflation is only an increase in nominal, not real cost. If I give you a dollar more and charge you a dollar extra, then you haven't lost any purchasing power.
- doggosphere 5y ago
  Except real wages aren't actually increasing for most people. https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us... https://www.marketwatch.com/story/despite-wage-growth-the-average-american-suffers-as-cost-of-living-rises-at-a-faster-pace-2019-01-10 https://www.marketwatch.com/story/despite-wage-growth-the-av... https://www.forbes.com/sites/patrickwwatson/2018/09/25/real-wage-growth-is-actually-falling/?sh=4ff61767284f https://www.forbes.com/sites/patrickwwatson/2018/09/25/real-... https://ca.finance.yahoo.com/news/aftertax-income-is-barely-budging-and-not-keeping-up-with-the-cost-of-living-180913250.html https://ca.finance.yahoo.com/news/aftertax-income-is-barely-...
  - xapata 5y ago
    That's been true since the 70s, but it's not an intrinsic feature of inflation. In fact, this time it may be different, and that's what all the CEOs are complaining about.
- cheeseomlit 5y ago
  But I'm not getting a dollar more, I'm just getting charged a dollar extra. Wages will never actually keep up with inflation, they certainly haven't thus far. In part because government inflation statistics are not trustworthy

infamouscow 5y ago

The price of groceries going up is a good thing?

BitwiseFool 5y ago
There's this weird dichotomy in Economics where what's good for "The Economy" is often bad for you, the individual. And vice versa. This isn't true for everything, of course, but I've definitely noticed it whenever you hear stories about inflation, the price of gas, wages going up, the dollar being 'strong', etc.
NikolaeVarius 5y ago
The value of debts also go down.
shakezula 5y ago
Yes, economically it likely is. Its your stagnating wages that are a bad thing. If wages had increased like they should've, then a few dollar increase in your groceries wouldn't be the issue that it is.
mullingitover 5y ago
Inflation means that wages go up along with the prices of groceries, so it's a wash. The only thing that suffers with inflation is a big pile of cash, which poor people don't have (they generally owe a big pile of cash, which inflation shrinks for them). The people trying to scare everyone about inflation are the ones who the poor people owe the big pile of cash, and they have a very large megaphone.
- mindslight 5y ago
  Poor people don't have standing debts but rather revolving ones, and so their debt scales with inflation. The rich don't have piles of cash, they buy assets instead. Inflation hoses the middle class who wants to save in cash, which is part of why the middle class is vanishing - extreme monetary inflation to counteract the ever-growing deflation inherent to technological progress.