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If anything it increases inequality. It hurts the poor the most. The wealthy are more immune because they will have their wealth in things that go up with infla

If anything it increases inequality. It hurts the poor the most. The wealthy are more immune because they will have their wealth in things that go up with inflation. When it is caused by the government spending more than it takes in, it is effectively a hidden tax. NONE of these things are new concepts. Even the belief that the inflation won't hurt is new. Many other societies have blindly thought they were immune until they were not.

efdee 5y ago
When you say the wealthy are immune because their wealth is in things that go up with inflation, what exactly are you thinking about? Not stocks for sure. Maybe those who have money invested in property for hire, but even then whether your income goes up with inflation strongly depends on where you are location. Interesting to know: in some countries (eg. Belgium) wages are automatically adapted to inflation, so "the poor" aren't hurt at all.
- usefulcat 5y ago
  Why would you not expect stocks to increase with inflation? Most of the time, stocks have far outpaced inflation for several decades now.
  - efdee 5y ago
    If they increase, it's despite of inflation - not with inflation. Simplified example: the value of most stock companies depends on their projected gains in the next few years. A projected gain of $X in 5 years will devaluate over time as inflation increases, simply because $X in 5 years time will be worth considerably less than $X today. As inflation rises above a healthy 2-3%, it hurts the actual gains and thus the connected stock. You can counter such things by keeping interests low (as they've been doing for a while now) but that party has to end someday.
- TacticalCoder 5y ago
  > ... in some countries (eg. Belgium) wages are automatically adapted to inflation Only certain wages. Like public servant wages. Private companies paying normal people regular wages aren't forced to give them a raise. The minimal wage may inflate but if you're paid above minimal wage, there's no guarantee you'll see a raise.
  - efdee 5y ago
    No, not just minimal wage - that's my point. Almost all companies (that are big enough to have a union, or be part of a joint committee) are forced to give raises.
- imtringued 5y ago
  Inflation is actually terrible for stocks because inflation has to be earned via revenue which only applies to quality stocks. It's not the same as a bull market where everything goes up.
  - efdee 5y ago
    Indeed.
TameAntelope 5y ago
The article's point is that it doesn't hurt the poor as much, because more poor people can find jobs, pay off their loans more easily, and they do make more money. Not to mention that the price of everything isn't going up a single number -- poor people can adjust their spending to account for the items that reflect the highest inflation, and focus on the goods that are least effected. The article isn't suggesting there are no downsides to inflation, it's suggesting that there are substantial upsides that directly address some systemic inequality in global society.
- AnimalMuppet 5y ago
  But the article is wrong - it does hurt the poor. The reason is timing. Prices go up. Then, later, wages go up. That time gap is hard on poor people. The poorer they are, the harder it is.
  - TameAntelope 5y ago
    Wages going up is not what the article is talking about, wages becoming available is what the article is talking about, as seen by our extremely robust jobs numbers.
    - WillPostForFood 5y ago
      But we are already at low unemployment before COVID and all the spending; we don't need inflation to drive jobs growth. It would be worth debating the tradeoffs if we were sitting at 10%+ unemployment with no path for improvement, but if anything, it is the job market starved for labor, not the other way around.
      - TameAntelope 5y ago
        We may need inflation to drive job growth now, and we've definitely needed inflation to drive better job growth. An office job being created because a paper company can support an additional employee due to inflation is a better situation than continuing to work in a warehouse job. Inflation will eventually recede, but that new job will give opportunity to the worker. Scale that up by a factor of millions across the country, and you've closed the income gap. That's the power of inflation.
whakim 5y ago
This lacks nuance. Who inequality "hurts most" depends on a huge number of factors. As I previously mentioned, there have been numerous historical instances in which inflation contributed to dramatic decreases in inequality. The fact is, though, inflation's relationship to inequality isn't simple, hence my characterization of inflation as a "blunt-force instrument."
jljljl 5y ago
This is partly true, but lower income individuals also tend to have a higher % of their net worth eaten up by debt (via credit cards, loans, mortgages, medical debt, etc). The burden of this debt decreases with inflation, since wages can grow to match inflation but past debt + fixed rates do not. Combatting inflation by raising rates can also lead to more inequality -- wealthy investors can get higher return on "risk-free" products like treasuries and savings, which leads to lower investment in the economy, slower growth, and fewer jobs.
- cjbgkagh 5y ago
  The proportion of the risk premium paid by poor people to the total total interest rate decreases with higher risk free interest rates.
  - jljljl 5y ago
    True, but I don’t see why that matters? They will still be paying higher rates, with likely lower incomes, and a principle whose real value does not diminish over time (since debts are held in nominal terms). If their debts were issued with fixed rates, then inflation would eventually reduce the Real cost of their interest as well.

efdee 5y ago

When you say the wealthy are immune because their wealth is in things that go up with inflation, what exactly are you thinking about? Not stocks for sure. Maybe those who have money invested in property for hire, but even then whether your income goes up with inflation strongly depends on where you are location. Interesting to know: in some countries (eg. Belgium) wages are automatically adapted to inflation, so "the poor" aren't hurt at all.

usefulcat 5y ago
Why would you not expect stocks to increase with inflation? Most of the time, stocks have far outpaced inflation for several decades now.
- efdee 5y ago
  If they increase, it's despite of inflation - not with inflation. Simplified example: the value of most stock companies depends on their projected gains in the next few years. A projected gain of $X in 5 years will devaluate over time as inflation increases, simply because $X in 5 years time will be worth considerably less than $X today. As inflation rises above a healthy 2-3%, it hurts the actual gains and thus the connected stock. You can counter such things by keeping interests low (as they've been doing for a while now) but that party has to end someday.
TacticalCoder 5y ago
> ... in some countries (eg. Belgium) wages are automatically adapted to inflation Only certain wages. Like public servant wages. Private companies paying normal people regular wages aren't forced to give them a raise. The minimal wage may inflate but if you're paid above minimal wage, there's no guarantee you'll see a raise.
- efdee 5y ago
  No, not just minimal wage - that's my point. Almost all companies (that are big enough to have a union, or be part of a joint committee) are forced to give raises.
imtringued 5y ago
Inflation is actually terrible for stocks because inflation has to be earned via revenue which only applies to quality stocks. It's not the same as a bull market where everything goes up.
- efdee 5y ago
  Indeed.

TameAntelope 5y ago

The article's point is that it doesn't hurt the poor as much, because more poor people can find jobs, pay off their loans more easily, and they do make more money. Not to mention that the price of everything isn't going up a single number -- poor people can adjust their spending to account for the items that reflect the highest inflation, and focus on the goods that are least effected. The article isn't suggesting there are no downsides to inflation, it's suggesting that there are substantial upsides that directly address some systemic inequality in global society.

AnimalMuppet 5y ago
But the article is wrong - it does hurt the poor. The reason is timing. Prices go up. Then, later, wages go up. That time gap is hard on poor people. The poorer they are, the harder it is.
- TameAntelope 5y ago
  Wages going up is not what the article is talking about, wages becoming available is what the article is talking about, as seen by our extremely robust jobs numbers.
  - WillPostForFood 5y ago
    But we are already at low unemployment before COVID and all the spending; we don't need inflation to drive jobs growth. It would be worth debating the tradeoffs if we were sitting at 10%+ unemployment with no path for improvement, but if anything, it is the job market starved for labor, not the other way around.
    - TameAntelope 5y ago
      We may need inflation to drive job growth now, and we've definitely needed inflation to drive better job growth. An office job being created because a paper company can support an additional employee due to inflation is a better situation than continuing to work in a warehouse job. Inflation will eventually recede, but that new job will give opportunity to the worker. Scale that up by a factor of millions across the country, and you've closed the income gap. That's the power of inflation.

whakim 5y ago

This lacks nuance. Who inequality "hurts most" depends on a huge number of factors. As I previously mentioned, there have been numerous historical instances in which inflation contributed to dramatic decreases in inequality. The fact is, though, inflation's relationship to inequality isn't simple, hence my characterization of inflation as a "blunt-force instrument."

jljljl 5y ago

This is partly true, but lower income individuals also tend to have a higher % of their net worth eaten up by debt (via credit cards, loans, mortgages, medical debt, etc). The burden of this debt decreases with inflation, since wages can grow to match inflation but past debt + fixed rates do not. Combatting inflation by raising rates can also lead to more inequality -- wealthy investors can get higher return on "risk-free" products like treasuries and savings, which leads to lower investment in the economy, slower growth, and fewer jobs.

cjbgkagh 5y ago
The proportion of the risk premium paid by poor people to the total total interest rate decreases with higher risk free interest rates.
- jljljl 5y ago
  True, but I don’t see why that matters? They will still be paying higher rates, with likely lower incomes, and a principle whose real value does not diminish over time (since debts are held in nominal terms). If their debts were issued with fixed rates, then inflation would eventually reduce the Real cost of their interest as well.