7 ms·

reminding all: inflation is large and great tax on each person. wealth tax by other name. but worse for the poorer, the persons who have no money manager and in

reminding all: inflation is large and great tax on each person. wealth tax by other name. but worse for the poorer, the persons who have no money manager and investing wisdom for the avoidance of inflation effects. inflation from monetary policy like the fed currently is a bad thing.

pfraze 5y ago
Inflation also decreases the value of debts, doesn’t it?
- csunbird 5y ago
  Debts always have greater interest rates than the inflation.
  - tmountain 5y ago
    Your statement doesn't apply to long-term debt like mortgages with fixed interest rates.
  - SantalBlush 5y ago
    That doesn't matter. No matter what the nominal rate of interest is, higher inflation will result in a lower real interest rate. Edit: This is regarding debt that already exists, not newly issued debt.
  - ethbr0 5y ago
    Even the US government's?
  - dukeyukey 5y ago
    This isn't true. For example, current UK government bonds (denominated in £) have a yield of 0.674%, but inflation even before the post-covid increase was around 1.8%.
  - zie 5y ago
    While in theory what you say is mostly true, it's not really true in reality. The EU govt issued bonds that produce negative real interest rates in 2020. The US Govt let their treasuries hit 0% interest. bond/debt interest rates are usually fixed at the time of purchase. When you buy debt you know exactly what you will get at the end(provided the person/entity in debt doesn't default). You don't know what the inflation rate will be at the end of the bond when you get the principal back. You can make a pretty good guess, but you can't know. It typically doesn't ever change, so if you bought a 4% yielding bond, then inflation hits at 5%, then you WILL lose money on your bond. This is normal in a rising rates/inflationary environment. Bonds are "safe"(for some definition of safe), and you have to pay for safety. US Treasuries pay next to nothing(and generally always have) because they are the reserve asset, everyone in the world considers them safe debt. FDIC insured bank accounts similarly get away with paying basically no interest on the deposited money. Safety costs you. Holding cash means you are generally going to lose to inflation. The only exception really are TIPS, I-Bonds and other inflation protected bonds. But that's only if you how they define inflation is also how you define inflation. Right now Inflation is like 5%, but a lot of that inflation is from things like buying cars, or in the recent past lumber. If you aren't currently buying those things, then those inflationary pieces don't really apply to you. So your personal inflation rate might be 2% or .5%, it just depends on what you are buying. Anyways, bonds are complicated, and debt even more so. At the moment you can get 30yr mortgages(debt) under the current 5% inflation rate.. does that mean owning a house with inflation is a good deal.. MAYBE.
  - woofie11 5y ago
    (1) Mortgages currently have LOWER interest rates than inflation. Right now inflation is above 5%, and I know people who refinanced below 3%. (2) It doesn't matter too much in either case. If I took on a debt 5 years ago, and I'm paying $500 per month, if we see inflation will mean I'm paying half of that. Inflation is really good for people (and governments) with excessive debt. If your net worth is negative, inflation is a tax on your debtors, not on you.
  - deleted 5y ago
    [deleted]
- da_big_ghey 5y ago
  This is depending on terms of a loan, most loans trying to price in inflation costs with higher interest rate. Maybe with surprise inflation on fixed terms loan?
- tastyfreeze 5y ago
  Inflation does decrease the value of debts. That only matters if the borrower has a non-inflated asset to pay off their debt. Most people earn in dollars which will decrease in value at the same rate as their debt. Earning the same amount of dollars with inflation means more of earnings go to paying for life and less to go towards debts. Now, lets say you have a gold bracelet and inflation only cuts the value of the dollar in half one time. The gold bracelet can be sold for twice as many dollars that can be used to pay off debt. One halving is a mild inflation scenario. Romania in the 90s went through 14 halvings.
jdavis703 5y ago
They’re letting inflation run hot so workers in sectors hit hardest by the lockdown can recover. These are generally blue collar / service jobs more likely to be held by women and POC.
- da_big_ghey 5y ago
  Already we have more $$$/liquidity than is usable for economy, see storage way up in overnight reverse repo, see investing more in junk debt... no places for to put these $$$, more $$$ no solution. > These are generally blue collar / service jobs more likely to be held by women and POC I am not understanding salience of this part?
  - jdavis703 5y ago
    Women and POC tend to be poorer on average.
    - shiftpgdn 5y ago
      Indian and Filipinos Americans earn significantly more than “white” Americans on average.
- ethbr0 5y ago
  "Let's print more money so that more people have money." The Fed is absolutely doing this for poor workers, and not to enable sustainable deficit funding without raising taxes. /s
  - jdavis703 5y ago
    The Fed doesn’t control taxes, Biden has stated he won’t raise taxes on people making less than $400k, and the GOP has indicated that raising corporate income taxes are a no-go. Realistically what other options are there?
    - ethbr0 5y ago
tpolzer 5y ago
On the contrary: a large number of the "poor" have ~zero or negative net worth, so inflation (unless extreme) doesn't affect them negatively.
- dominotw 5y ago
  > so inflation (unless extreme) doesn't affect them negatively. Don't see how rising prices doesn't affect them. My MIL is on fixed income and she says she is spending a lot more now on necessities than last year. Unless wages were adjusted for inflation( which they aren't) they will bear the brunt of inflation. Most ppl here dont' even notice grocery bills going up.
- throwaway0a5e 5y ago
  This is a BS talking point. Inflation screws people who's money comes from wages and who's wages are inflated slower than inflation increases costs (which is always how it goes down) and living paycheck to paycheck turns into having to choose what bills to pay. Your ability to buy assets (which increase with inflation) is also depreciated so there's little hope of weathering it unscathed. The people helped by inflation are the people with marketable skills and the opportunity to job hop who also happen to be using debt to live right up to the limit of their means and who can afford to buy assets (stocks, a home, etc). Statistically these people are highly over-represented on HN vs the population as a whole.
- engineer_22 5y ago
  Inflation affects the poor much more than it does the rich. Rich people just spend more on their necessities, their living standard doesn't change, since they have assets to dip into. OTOH poor people have to make tough choices with limited income, and meager savings. Sometimes this means paying rent instead of buying food. Fix the car to get to work, instead of buying school clothes for their children. You should really examine your framing of the situation.
- wing-_-nuts 5y ago
  It does hurt the poor. The poor pay more for goods and services, and they don't have much cushion to begin with. Inflation definitely helps those in debt, as you're now paying down your mortgage or car loan with dollars that are worth less. People with lots of debt are not necessarily 'poor'. They use debt as leverage. Either directly or indirectly.
pharmakom 5y ago
Indeed. Inflation hits those who live on wages the hardest, since wage increases lag inflation. Asset wealth does not have such a lag.
jcoq 5y ago
I hate these oversimplifications of monetary policy. Yes, inflation can be terrible, contributing measurably to quality of life decreases. But the alternative could potentially setoff another decade of sluggish growth, or worse yet, trigger a full fledged recession. Further, much of current inflation is being driven by goods that are highly sensitive to pandemic shortages and we expect this to be transitory. Like most things, there's no clear path. Anyone who tells you different wants you to vote a certain way.
- dominotw 5y ago
  > Like most things, there's no clear path. Anyone who tells you different wants you to vote a certain way. Then why does the govt say that there is a clear path of huge spending, low interest rates ect.
  - jcoq 5y ago
    They don't. If you paid any attention to the Fed whatsoever, then you can see they're watching the situation very closely and signalling to markets that they'll take action when needed. Monetary policy isn't some secret. It's pretty easy to follow.
    - dominotw 5y ago
      > they'll take action when needed > It's pretty easy to follow. > Monetary policy isn't some secret. What is the decision tree for 'take action'? Why do we need to use "when needed" if its so clear and straightforward .
      - jcoq 5y ago
        > > they'll take action when needed > > It's pretty easy to follow. > > Monetary policy isn't some secret. > What is the decision tree for 'take action'? Why do we need to use "when needed" if its so clear and straightforward . Because I'm summarizing. Go pick up a Financial Times.
Vaslo 5y ago
Some of this should be taught in public schools then - unfortunately we are spending more time teaching "woke" concepts in math these days. Maybe we should return Home Economics without the "women in the kitchen" aspect.
- xerosis 5y ago
  What are these concepts?
  - hairofadog 5y ago
    I would also like to know what "woke concepts" the parent commenter thinks are being taught in mathematics classes. After googling it quickly I found a lot of hysteria about it from right wing media outlets, but the actual documentation seems only to propose less rote learning and more application.

pfraze 5y ago

Inflation also decreases the value of debts, doesn’t it?

csunbird 5y ago
Debts always have greater interest rates than the inflation.
- tmountain 5y ago
  Your statement doesn't apply to long-term debt like mortgages with fixed interest rates.
- SantalBlush 5y ago
  That doesn't matter. No matter what the nominal rate of interest is, higher inflation will result in a lower real interest rate. Edit: This is regarding debt that already exists, not newly issued debt.
- ethbr0 5y ago
  Even the US government's?
- dukeyukey 5y ago
  This isn't true. For example, current UK government bonds (denominated in £) have a yield of 0.674%, but inflation even before the post-covid increase was around 1.8%.
- zie 5y ago
  While in theory what you say is mostly true, it's not really true in reality. The EU govt issued bonds that produce negative real interest rates in 2020. The US Govt let their treasuries hit 0% interest. bond/debt interest rates are usually fixed at the time of purchase. When you buy debt you know exactly what you will get at the end(provided the person/entity in debt doesn't default). You don't know what the inflation rate will be at the end of the bond when you get the principal back. You can make a pretty good guess, but you can't know. It typically doesn't ever change, so if you bought a 4% yielding bond, then inflation hits at 5%, then you WILL lose money on your bond. This is normal in a rising rates/inflationary environment. Bonds are "safe"(for some definition of safe), and you have to pay for safety. US Treasuries pay next to nothing(and generally always have) because they are the reserve asset, everyone in the world considers them safe debt. FDIC insured bank accounts similarly get away with paying basically no interest on the deposited money. Safety costs you. Holding cash means you are generally going to lose to inflation. The only exception really are TIPS, I-Bonds and other inflation protected bonds. But that's only if you how they define inflation is also how you define inflation. Right now Inflation is like 5%, but a lot of that inflation is from things like buying cars, or in the recent past lumber. If you aren't currently buying those things, then those inflationary pieces don't really apply to you. So your personal inflation rate might be 2% or .5%, it just depends on what you are buying. Anyways, bonds are complicated, and debt even more so. At the moment you can get 30yr mortgages(debt) under the current 5% inflation rate.. does that mean owning a house with inflation is a good deal.. MAYBE.
- woofie11 5y ago
  (1) Mortgages currently have LOWER interest rates than inflation. Right now inflation is above 5%, and I know people who refinanced below 3%. (2) It doesn't matter too much in either case. If I took on a debt 5 years ago, and I'm paying $500 per month, if we see inflation will mean I'm paying half of that. Inflation is really good for people (and governments) with excessive debt. If your net worth is negative, inflation is a tax on your debtors, not on you.
- deleted 5y ago
  [deleted]
da_big_ghey 5y ago
This is depending on terms of a loan, most loans trying to price in inflation costs with higher interest rate. Maybe with surprise inflation on fixed terms loan?
tastyfreeze 5y ago
Inflation does decrease the value of debts. That only matters if the borrower has a non-inflated asset to pay off their debt. Most people earn in dollars which will decrease in value at the same rate as their debt. Earning the same amount of dollars with inflation means more of earnings go to paying for life and less to go towards debts. Now, lets say you have a gold bracelet and inflation only cuts the value of the dollar in half one time. The gold bracelet can be sold for twice as many dollars that can be used to pay off debt. One halving is a mild inflation scenario. Romania in the 90s went through 14 halvings.

jdavis703 5y ago

They’re letting inflation run hot so workers in sectors hit hardest by the lockdown can recover. These are generally blue collar / service jobs more likely to be held by women and POC.

da_big_ghey 5y ago
Already we have more $$$/liquidity than is usable for economy, see storage way up in overnight reverse repo, see investing more in junk debt... no places for to put these $$$, more $$$ no solution. > These are generally blue collar / service jobs more likely to be held by women and POC I am not understanding salience of this part?
- jdavis703 5y ago
  Women and POC tend to be poorer on average.
  - shiftpgdn 5y ago
    Indian and Filipinos Americans earn significantly more than “white” Americans on average.
ethbr0 5y ago
"Let's print more money so that more people have money." The Fed is absolutely doing this for poor workers, and not to enable sustainable deficit funding without raising taxes. /s
- jdavis703 5y ago
  The Fed doesn’t control taxes, Biden has stated he won’t raise taxes on people making less than $400k, and the GOP has indicated that raising corporate income taxes are a no-go. Realistically what other options are there?
  - ethbr0 5y ago

tpolzer 5y ago

On the contrary: a large number of the "poor" have ~zero or negative net worth, so inflation (unless extreme) doesn't affect them negatively.

dominotw 5y ago
> so inflation (unless extreme) doesn't affect them negatively. Don't see how rising prices doesn't affect them. My MIL is on fixed income and she says she is spending a lot more now on necessities than last year. Unless wages were adjusted for inflation( which they aren't) they will bear the brunt of inflation. Most ppl here dont' even notice grocery bills going up.
throwaway0a5e 5y ago
This is a BS talking point. Inflation screws people who's money comes from wages and who's wages are inflated slower than inflation increases costs (which is always how it goes down) and living paycheck to paycheck turns into having to choose what bills to pay. Your ability to buy assets (which increase with inflation) is also depreciated so there's little hope of weathering it unscathed. The people helped by inflation are the people with marketable skills and the opportunity to job hop who also happen to be using debt to live right up to the limit of their means and who can afford to buy assets (stocks, a home, etc). Statistically these people are highly over-represented on HN vs the population as a whole.
engineer_22 5y ago
Inflation affects the poor much more than it does the rich. Rich people just spend more on their necessities, their living standard doesn't change, since they have assets to dip into. OTOH poor people have to make tough choices with limited income, and meager savings. Sometimes this means paying rent instead of buying food. Fix the car to get to work, instead of buying school clothes for their children. You should really examine your framing of the situation.
wing-_-nuts 5y ago
It does hurt the poor. The poor pay more for goods and services, and they don't have much cushion to begin with. Inflation definitely helps those in debt, as you're now paying down your mortgage or car loan with dollars that are worth less. People with lots of debt are not necessarily 'poor'. They use debt as leverage. Either directly or indirectly.

pharmakom 5y ago

Indeed. Inflation hits those who live on wages the hardest, since wage increases lag inflation. Asset wealth does not have such a lag.

jcoq 5y ago

I hate these oversimplifications of monetary policy. Yes, inflation can be terrible, contributing measurably to quality of life decreases. But the alternative could potentially setoff another decade of sluggish growth, or worse yet, trigger a full fledged recession. Further, much of current inflation is being driven by goods that are highly sensitive to pandemic shortages and we expect this to be transitory. Like most things, there's no clear path. Anyone who tells you different wants you to vote a certain way.

dominotw 5y ago
> Like most things, there's no clear path. Anyone who tells you different wants you to vote a certain way. Then why does the govt say that there is a clear path of huge spending, low interest rates ect.
- jcoq 5y ago
  They don't. If you paid any attention to the Fed whatsoever, then you can see they're watching the situation very closely and signalling to markets that they'll take action when needed. Monetary policy isn't some secret. It's pretty easy to follow.
  - dominotw 5y ago
    > they'll take action when needed > It's pretty easy to follow. > Monetary policy isn't some secret. What is the decision tree for 'take action'? Why do we need to use "when needed" if its so clear and straightforward .
    - jcoq 5y ago
      > > they'll take action when needed > > It's pretty easy to follow. > > Monetary policy isn't some secret. > What is the decision tree for 'take action'? Why do we need to use "when needed" if its so clear and straightforward . Because I'm summarizing. Go pick up a Financial Times.

Vaslo 5y ago

Some of this should be taught in public schools then - unfortunately we are spending more time teaching "woke" concepts in math these days. Maybe we should return Home Economics without the "women in the kitchen" aspect.

xerosis 5y ago
What are these concepts?
- hairofadog 5y ago
  I would also like to know what "woke concepts" the parent commenter thinks are being taught in mathematics classes. After googling it quickly I found a lot of hysteria about it from right wing media outlets, but the actual documentation seems only to propose less rote learning and more application.