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Or for young wage earners who have significant student debt. Pretty much anybody who has more current liabilities than current assets can expect to benefit fro

by giaour 5y ago

Or for young wage earners who have significant student debt. Pretty much anybody who has more current liabilities than current assets can expect to benefit from some degree of inflation

tharne 5y ago
> Pretty much anybody who has more current liabilities than current assets can expect to benefit from some degree of inflation Except for the fact that they're getting a pay cut year after year. This is why the general public gets so mad about inflation. Like another commenter mentioned, inflation screws over anyone who works for a wage.
- dragonwriter 5y ago
  > Like another commenter mentioned, inflation screws over anyone who works for a wage. At worst, anyone who works for a fixed wage (and even then, the demand dynamics that create a fixed wage with inflation mean instead people just lose their jobs without inflation, because of the stickiness of nominal wages.)
  - giaour 5y ago
    > anyone who works for a fixed wage This includes anyone who works for minimum wage (assuming it's not indexed to inflation), and they are not likely to be able to handle a cut in real pay as easily as, say, middle class homeowners.
    - dragonwriter 5y ago
      > This includes anyone who works for minimum wage No, it doesn't, unless they have a contract fixing their pay at minimum wage; being currently paid minimum wage doesn't mean you don't get raises.
      - giaour 5y ago
        That's true; "anyone" was a bit too strong of a word. All things being equal, someone making minimum wage is less likely to get a raise than someone making more, since there's a possibility that the wage represented a statutory minimum and not the employee's "true value" to the employer.
  - dnautics 5y ago
    > people just lose their jobs without inflation, because of the stickiness of nominal wages Does deflation mean suddenly that once people "lose their jobs" they will never find another one?
- giaour 5y ago
  > inflation screws over anyone who works for a wage It can, but inflation affects current assets and liabilities immediately and only depresses wages over time. If inflation was 7% over the course of the year, you now owe 7% less on your outstanding loans (in real terms), while any real wage decrease would be amortized over the course of the year. Assuming inflation occurred at a fixed rate and that your nominal wage didn't change at all, you only actually lost 3.5% of your real wage. You're also now a worker in a "hot" economy, so you can look for a new job with a higher wage (or ask for a raise, citing inflation) and limit your real wage loss to 3.5% of one year's earnings. > This is why the general public gets so mad about inflation. I know this is uncharitable of me, but I think the general public gets so mad about inflation because people with large capital holdings try to get the public riled up, and then the average person just doesn't sit down and do the math for their own situation. The median member of the general public is a debtor, not a creditor, so modest inflation (or high inflation over a short period) is usually good for them, financially speaking. Deflation, on the other hand, could destroy them. For the bottom and top of the economic ladder, though, inflation is usually a bad deal, since minimum wages and safety net programs aren't normally indexed to inflation, and inflation erodes the value of savings and other current assets. Elevating the middle class at the expense of the poor is morally questionable, even if the rich get soaked along the way, too.
  - dnautics 5y ago
    > the average person just doesn't sit down and do the math for their own situation > Do the math. Suppose you are poor and are spending 90% of your income on day-to-day expenses. We get 5% inflation and now you are spending 94% of your income on day-to-day expenses. That is a 40% loss of survival margin. Suppose you're really poor, and you are spending 96% of your income on day-to-day expenses. Under 5% inflation, you are now underwater. Suppose you are rich and are spending 20% of your income on day-to-day expenses. With 5% inflation, you are lose ~8% of your survival margin. > The median member of the general public is a debtor Yes, but the poorest don't even have access to credit at all. The guy hanging out in the TL is not in debt. Plus median member of society isn't getting an ultra-low interest rate that is covered by inflation. That is the domain of financialized assets (like forex etc) which mostly benefits the wealthy > so modest inflation (or high inflation over a short period) is usually good for them IF their wages catch up. If their wages don't, do the math. > Deflation, on the other hand, could destroy them. Why? Because they will have a wider margin of survival? Do the math.

by giaour 5y ago

Or for young wage earners who have significant student debt. Pretty much anybody who has more current liabilities than current assets can expect to benefit from some degree of inflation

tharne 5y ago

> Pretty much anybody who has more current liabilities than current assets can expect to benefit from some degree of inflation Except for the fact that they're getting a pay cut year after year. This is why the general public gets so mad about inflation. Like another commenter mentioned, inflation screws over anyone who works for a wage.

dragonwriter 5y ago
> Like another commenter mentioned, inflation screws over anyone who works for a wage. At worst, anyone who works for a fixed wage (and even then, the demand dynamics that create a fixed wage with inflation mean instead people just lose their jobs without inflation, because of the stickiness of nominal wages.)
- giaour 5y ago
  > anyone who works for a fixed wage This includes anyone who works for minimum wage (assuming it's not indexed to inflation), and they are not likely to be able to handle a cut in real pay as easily as, say, middle class homeowners.
  - dragonwriter 5y ago
    > This includes anyone who works for minimum wage No, it doesn't, unless they have a contract fixing their pay at minimum wage; being currently paid minimum wage doesn't mean you don't get raises.
    - giaour 5y ago
      That's true; "anyone" was a bit too strong of a word. All things being equal, someone making minimum wage is less likely to get a raise than someone making more, since there's a possibility that the wage represented a statutory minimum and not the employee's "true value" to the employer.
- dnautics 5y ago
  > people just lose their jobs without inflation, because of the stickiness of nominal wages Does deflation mean suddenly that once people "lose their jobs" they will never find another one?
giaour 5y ago
> inflation screws over anyone who works for a wage It can, but inflation affects current assets and liabilities immediately and only depresses wages over time. If inflation was 7% over the course of the year, you now owe 7% less on your outstanding loans (in real terms), while any real wage decrease would be amortized over the course of the year. Assuming inflation occurred at a fixed rate and that your nominal wage didn't change at all, you only actually lost 3.5% of your real wage. You're also now a worker in a "hot" economy, so you can look for a new job with a higher wage (or ask for a raise, citing inflation) and limit your real wage loss to 3.5% of one year's earnings. > This is why the general public gets so mad about inflation. I know this is uncharitable of me, but I think the general public gets so mad about inflation because people with large capital holdings try to get the public riled up, and then the average person just doesn't sit down and do the math for their own situation. The median member of the general public is a debtor, not a creditor, so modest inflation (or high inflation over a short period) is usually good for them, financially speaking. Deflation, on the other hand, could destroy them. For the bottom and top of the economic ladder, though, inflation is usually a bad deal, since minimum wages and safety net programs aren't normally indexed to inflation, and inflation erodes the value of savings and other current assets. Elevating the middle class at the expense of the poor is morally questionable, even if the rich get soaked along the way, too.
- dnautics 5y ago
  > the average person just doesn't sit down and do the math for their own situation > Do the math. Suppose you are poor and are spending 90% of your income on day-to-day expenses. We get 5% inflation and now you are spending 94% of your income on day-to-day expenses. That is a 40% loss of survival margin. Suppose you're really poor, and you are spending 96% of your income on day-to-day expenses. Under 5% inflation, you are now underwater. Suppose you are rich and are spending 20% of your income on day-to-day expenses. With 5% inflation, you are lose ~8% of your survival margin. > The median member of the general public is a debtor Yes, but the poorest don't even have access to credit at all. The guy hanging out in the TL is not in debt. Plus median member of society isn't getting an ultra-low interest rate that is covered by inflation. That is the domain of financialized assets (like forex etc) which mostly benefits the wealthy > so modest inflation (or high inflation over a short period) is usually good for them IF their wages catch up. If their wages don't, do the math. > Deflation, on the other hand, could destroy them. Why? Because they will have a wider margin of survival? Do the math.