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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

by 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.

by efdee 5y ago

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.