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Let's use an example that might look familiar. If inflation robs the poor person of the $500 and helps the middle class person with a mortgage.... all other th

Let's use an example that might look familiar. If inflation robs the poor person of the $500 and helps the middle class person with a mortgage.... all other things being equal, we transferred wealth from the poor person to the middle class person. yay, with me so far? By the same account, if the middle class person is helped a little bit by inflation, (but also has some cash) the rich person who is leveraged many times over into 10 properties, and has most of their wealth in equities (which themselves are leveraged because of corporate debt) is going to be even better off after the increase in money supply. Their share of the pie grew and the middle class persons maybe grew, but not relative to the rich person. Therefore, that is wealth transfer. The majority of US equities is held by the upper class and corporate debt dwarfs consumer debt (including mortgages).

Spooky23 5y ago
All things are not equal. I know someone who was the CEO of a small hospital network. When he retired, his compensation was greater than the sum of salary for the entire company. The company paid for his Tesla lease, but orderlies making $12/hr had a uniform deposit deducted from their first few checks.
- lotsofpulp 5y ago
  I would need a source to believe this. The hospital would have had to not have any doctors on staff to come close.
  - auntienomen 5y ago
    That can happen. Doctors are employed by physician practices which work as contractors at the hospital.
Manuel_D 5y ago
But you're missing the bigger picture: the rich who issues mortgages (or more likely, has stake in a real estate company) is having their wealth transferred to the lender. Most wealthy people loan more than they owe. If you owe more than to loan out then by definitely you're not wealthy, your net worth is negative. Similarly, a poor person who owes $20,000 on an auto loan, whose car is now worth $25,000 just saw a significant gain. Inflation helps people who owe more than they lend out (most poor and middle class people). People who lend out more than they owe, directly or indirectly through stake in companies that do lending, are the ones experiencing less profit because of inflation.
- VirusNewbie 5y ago
  You're right that the banking system is a little more complicated than I made it out to be, but let's ignore that for now. You agree that the majority of the fortune 50 is holds more debt than credit, right? We don't have to speculate about how much debt rich people have, you can look at what % of equities is owned by the upper class and you can go compare consumer debt to corporate debt. Now as to the banking system, there's a little bit of a feedback loop here because they're really the ones creating money, so no they're not really a net creditor either. I owe my bank 700k on my house, but that's new money being created in some respects.
  - Manuel_D 5y ago
    > You agree that the majority of the fortune 50 is holds more debt than credit, right? No. Not at all. Apple, #3 on the list for example, has hundreds of billions its loaning out because it has nothing better to do with its excess cash [1]. Almost every company on that list has positive total equity, some on them on the orders of hundreds of billions of dollars. > We don't have to speculate about how much debt rich people have, you can look at what % of equities is owned by the upper class and you can go compare consumer debt to corporate debt. I'm really baffled at what you mean by this? Yes, the rich own most equity. But how do you interpret this has having more debt? Equity isn't debt, it's ownership in a company. > Now as to the banking system, there's a little bit of a feedback loop here because they're really the ones creating money, so no they're not really a net creditor either. I owe my bank 700k on my house, but that's new money being created in some respects. Sort of? Banks don't get to regulate currency supply, the Fed does. It's true that banks leverage more than they have in their reserve, but that doesn't necessarily increase the money supply. And my point is if you owe 700k on your house and inflation doubles (all prices go up 2x, but so do all wages) then this is very good for you. You effectively got a house for half the price. If you are a multi-millionaire real estate mogul who's writing mortage loans, then this not good for you. That money invested in the home loan isn't even going to keep up with inflation. 1. https://en.wikipedia.org/wiki/Braeburn_Capital https://en.wikipedia.org/wiki/Braeburn_Capital
    - 5y ago
vkou 5y ago
> If inflation robs the poor person of the $500 and helps the middle class person with a mortgage.... all other things being equal, we transferred wealth from the poor person to the middle class person. yay, with me so far? No, I'm not with you, because it's not the poor person who is fronting a million bucks in cash that the middle class person borrows, in order to buy the house. For the obvious reason that he doesn't have a million dollars to lend out. FYI, corporate debt is ~60% of household debt in the United States. (~10T vs 15T). Corporate cash balances are ~4T, and household cash balances are ~5T. [1] Net corporate debt is ~6T, and net household debt is ~10T. You look at these numbers, and you tell me - who benefits more from having debt inflated away? [1] https://www.valuepenguin.com/banking/average-savings-account-balance https://www.valuepenguin.com/banking/average-savings-account...
- VirusNewbie 5y ago
  You need to stop viewing money in amounts and start viewing it as % of total available money in existence. In our contrived example, now the middle class person owns a bigger slice of the pie after the pie doubled in size due to their leverage.
  - vkou 5y ago
    Your contrived example very conveniently excludes what inflation buys (Infrastructure, public spending)[1], and also who pays for the majority of it (The lender - who happens to be neither of the two people in your example.) So yes, if we have an incorrect contrived example that doesn't even attempt to serve as a proxy the ground facts, and we ignore half the consequences of it, yes, of course, we can draw whatever conclusion you want. Still not with you. [1] Yes, obviously, its possible for a government to spend that money on stupid shit. It's a good incentive to elect ones that spend it on useful things.
    - VirusNewbie 5y ago
      >our contrived example very conveniently excludes what inflation buys Yes I did this on purpose because you seemed to misunderstand some very basics of economics. That poor folks holding cash has wealth indirectly transferred to debtors who are leveraged into assets is not a controversial economic theory. It's fucking basic math. So once the contrived example made sense to you your first response is to move the goalpost completely and talk about something unrelated? We're not talking about the necessities of monetary policy we're talking about the effects, please focus on the relevant parts of a debate instead of jumping around to avoid conceding a (very basic) issue. As an aside, you picked infrastructure as your main deflection point? Do you have any idea what % of US revenue is spent on infrastructure compared to everything else? You also seem to misunderstand per capita vs. aggregate. Do you think if poor people have as much money in aggregate as one rich person that means they're rich? In the same way, comparing all outstanding consumer debt (of which the vast majority of mortgages) is not helping your argument, you'll have to show me a breakdown that shows on average a poor person is more often a net debtor. You also need to distinguish debt into assets vs. depreciating assets. Using leverage on stock is not the same as buying nikes with a high interest credit card.

Spooky23 5y ago

All things are not equal. I know someone who was the CEO of a small hospital network. When he retired, his compensation was greater than the sum of salary for the entire company. The company paid for his Tesla lease, but orderlies making $12/hr had a uniform deposit deducted from their first few checks.

lotsofpulp 5y ago
I would need a source to believe this. The hospital would have had to not have any doctors on staff to come close.
- auntienomen 5y ago
  That can happen. Doctors are employed by physician practices which work as contractors at the hospital.

Manuel_D 5y ago

But you're missing the bigger picture: the rich who issues mortgages (or more likely, has stake in a real estate company) is having their wealth transferred to the lender. Most wealthy people loan more than they owe. If you owe more than to loan out then by definitely you're not wealthy, your net worth is negative. Similarly, a poor person who owes $20,000 on an auto loan, whose car is now worth $25,000 just saw a significant gain. Inflation helps people who owe more than they lend out (most poor and middle class people). People who lend out more than they owe, directly or indirectly through stake in companies that do lending, are the ones experiencing less profit because of inflation.

VirusNewbie 5y ago
You're right that the banking system is a little more complicated than I made it out to be, but let's ignore that for now. You agree that the majority of the fortune 50 is holds more debt than credit, right? We don't have to speculate about how much debt rich people have, you can look at what % of equities is owned by the upper class and you can go compare consumer debt to corporate debt. Now as to the banking system, there's a little bit of a feedback loop here because they're really the ones creating money, so no they're not really a net creditor either. I owe my bank 700k on my house, but that's new money being created in some respects.
- Manuel_D 5y ago
  > You agree that the majority of the fortune 50 is holds more debt than credit, right? No. Not at all. Apple, #3 on the list for example, has hundreds of billions its loaning out because it has nothing better to do with its excess cash [1]. Almost every company on that list has positive total equity, some on them on the orders of hundreds of billions of dollars. > We don't have to speculate about how much debt rich people have, you can look at what % of equities is owned by the upper class and you can go compare consumer debt to corporate debt. I'm really baffled at what you mean by this? Yes, the rich own most equity. But how do you interpret this has having more debt? Equity isn't debt, it's ownership in a company. > Now as to the banking system, there's a little bit of a feedback loop here because they're really the ones creating money, so no they're not really a net creditor either. I owe my bank 700k on my house, but that's new money being created in some respects. Sort of? Banks don't get to regulate currency supply, the Fed does. It's true that banks leverage more than they have in their reserve, but that doesn't necessarily increase the money supply. And my point is if you owe 700k on your house and inflation doubles (all prices go up 2x, but so do all wages) then this is very good for you. You effectively got a house for half the price. If you are a multi-millionaire real estate mogul who's writing mortage loans, then this not good for you. That money invested in the home loan isn't even going to keep up with inflation. 1. https://en.wikipedia.org/wiki/Braeburn_Capital https://en.wikipedia.org/wiki/Braeburn_Capital
  - 5y ago

vkou 5y ago

> If inflation robs the poor person of the $500 and helps the middle class person with a mortgage.... all other things being equal, we transferred wealth from the poor person to the middle class person. yay, with me so far? No, I'm not with you, because it's not the poor person who is fronting a million bucks in cash that the middle class person borrows, in order to buy the house. For the obvious reason that he doesn't have a million dollars to lend out. FYI, corporate debt is ~60% of household debt in the United States. (~10T vs 15T). Corporate cash balances are ~4T, and household cash balances are ~5T. [1] Net corporate debt is ~6T, and net household debt is ~10T. You look at these numbers, and you tell me - who benefits more from having debt inflated away? [1] https://www.valuepenguin.com/banking/average-savings-account-balance https://www.valuepenguin.com/banking/average-savings-account...

VirusNewbie 5y ago
You need to stop viewing money in amounts and start viewing it as % of total available money in existence. In our contrived example, now the middle class person owns a bigger slice of the pie after the pie doubled in size due to their leverage.
- vkou 5y ago
  Your contrived example very conveniently excludes what inflation buys (Infrastructure, public spending)[1], and also who pays for the majority of it (The lender - who happens to be neither of the two people in your example.) So yes, if we have an incorrect contrived example that doesn't even attempt to serve as a proxy the ground facts, and we ignore half the consequences of it, yes, of course, we can draw whatever conclusion you want. Still not with you. [1] Yes, obviously, its possible for a government to spend that money on stupid shit. It's a good incentive to elect ones that spend it on useful things.
  - VirusNewbie 5y ago
    >our contrived example very conveniently excludes what inflation buys Yes I did this on purpose because you seemed to misunderstand some very basics of economics. That poor folks holding cash has wealth indirectly transferred to debtors who are leveraged into assets is not a controversial economic theory. It's fucking basic math. So once the contrived example made sense to you your first response is to move the goalpost completely and talk about something unrelated? We're not talking about the necessities of monetary policy we're talking about the effects, please focus on the relevant parts of a debate instead of jumping around to avoid conceding a (very basic) issue. As an aside, you picked infrastructure as your main deflection point? Do you have any idea what % of US revenue is spent on infrastructure compared to everything else? You also seem to misunderstand per capita vs. aggregate. Do you think if poor people have as much money in aggregate as one rich person that means they're rich? In the same way, comparing all outstanding consumer debt (of which the vast majority of mortgages) is not helping your argument, you'll have to show me a breakdown that shows on average a poor person is more often a net debtor. You also need to distinguish debt into assets vs. depreciating assets. Using leverage on stock is not the same as buying nikes with a high interest credit card.