12 ms·

Inflation is a stealth tax, imposed via central banks.

neffy 5y ago
Not really. It has three different causes: 1) Excessive lending and consequent increases in the money supply by commercial banks. 2) Governments printing money without any regulatory compensation to prevent 1 3) Shortages in goods and supplied measured by the CPI, such as food. Right now we have 2 and 3, and some countries will probably have 1 as well..
- hitovst 5y ago
  The debasing of fiat currency is a "stealth" redistribution of wealth, regardless of the pretenses for it.
  - howinteresting 5y ago
    Redistribution from creditors to debtors is good. And it's not that stealth given we're talking about it.
  - smt88 5y ago
    By that definition, every price change is a redistribution of wealth (which is technically true). The question is whether it's intentional, and it's impossible to imagine the people in charge of every world government would be enraging their citizens by creating inflation. Simpler: people saved money during the pandemic at the same time as supply chains were disrupted, leading to high prices. Every government in the world has the same problem.
  - davnn 5y ago
    It doesn‘t look like it as it appears that inflation is contributing to wealth inequality. Do you have any sources for your claims?
    - macinjosh 5y ago
      Inflation makes saving money a losing proposition because it literally rots away in your bank account. How is some one supposed to save for college, a house or to start a business if they are constantly losing money? Meanwhile rich people don't care because their immense wealth lets them ride out inflation easily. In fact, in some situations it may be to their advantage because the value of other assets they hold (real estate, metals, art, etc) often increase in value during inflation.
      - sokoloff 5y ago
        You save for things that are 5+ years away by investing at least a portion of it in equities. Investments for goals that are 20+ years away should be over 80% in equities, IMO.
        epicureanideal 5y ago
        In other words, the only remaining way to “save money” is to buy assets largely owned by the rich and further drive up the inflated values of those assets.
        sokoloff 5y ago
        Said differently: investing in ways similar to how the rich invest seems like a generally sound strategy, all else being equal. (They don't keep much money in passbook savings accounts.)
        epicureanideal 5y ago
        Sure, but really the reason we should invest like the rich isn’t that it’s sound for rational economic reasons, but that the rich will use their influence on politics to ensure their investments do not decline as much as they would without interventions.
        xyzzyz 5y ago
        Equities are not largely owned by the rich. They are mostly owned by pension funds. The "rich" do not own majority of the assets (though, of course, they own very disproportionate amounts of them, relative to their numbers, as that's what the word "rich" means).
  - HWR_14 5y ago
    How is it redistributing wealth? From who to who?
    - Geee 5y ago
      Simply put, from the poor to the rich. It's a major cause of wealth centralization.
    - kevin_thibedeau 5y ago
      To those controlling interest rates from those who don't have any access to low risk investments.
      - JumpCrisscross 5y ago
        > from those who don't have any access to low risk investments Treasuries, the lowest-risk dollar investment, are the first to lose value with inflation. And everyone has access to Series I bonds.
    - cloutchaser 5y ago
      From whoever is furthest to money creation to whoever is closest. Ever wonder why record stock buybacks and record ceo pay are happening right when QE is happening? Why stock markets and PE ratios are at record highs? Why there are record amounts being invested by VCs? Why commodity prices have been rising? It’s not because of evil capitalism. It’s because those people are closest to where money creation happens. The 1% aren’t getting richer because of the exploitative nature of capitalism, but because they have access to new money.
      - _0ffh 5y ago
        >From whoever is furthest to money creation to whoever is closest. Precisely! You might also want to mention that there's a name for that, the Cantillon Effect. [Ed. Fixed spelling according to sparkie's correction.]
        5y ago
  - throw0101a 5y ago
    > The debasing of fiat currency is a "stealth" redistribution of wealth, regardless of the pretenses for it. The "debasing of fiat currency" reduces debt burdens, and I would think that middle- and low-income folks are probably more likely to have debt (student loans, mortgages). A low-inflation or even deflationary environment is probably a worse thing for the non-rich.
    - WalterBright 5y ago
      > reduces debt burdens Not really, because inflation causes interest rates to go up correspondingly.
      - gizmo686 5y ago
        Which is not relevant to most consumer debt, where the interest rate is set at the start and locked in for the life of the loan.
        WalterBright 5y ago
        Fixed rate debts interest are set to accommodate the current inflation rate plus higher values to accommodate the risk of inflation increasing. Lenders are not fools when it comes to inflation.
        loeg 5y ago
        Quite a lot of consumer debt is variable rate (credit cards, ARMs, ...), or nominally fixed rate, but rolls over somewhat frequently (car loans, mortgages as people move or refinance, pay later spending, etc).
    - gruez 5y ago
      >and low-income folks are probably more likely to have debt (student loans, mortgages). Source? For student loans at least, the amount of debt held is positively correlated with household income, not negatively like you suggest. https://www.urban.org/sites/default/files/styles/optimized_default/public/2019-05/eddebtcolumn_revised.jpg?itok=xqPlrb5W https://www.urban.org/sites/default/files/styles/optimized_d...
larrydag 5y ago
"The real tax on the American people is what government spends" -M. Friedman
- sfe22 5y ago
  And the hurdles it creates. The government may spend $100k on a bureaucrat that causes individuals and companies to spend millions to overcome.
  - xyzzyz 5y ago
    Indeed. The real tax is not just what government spends, but also the deadweight loss of forced reallocation.
moltke 5y ago
Right. Inflation makes your rent go up which for most working people is already significantly higher than their taxes.
kaashif 5y ago
Stimulating aggregate demand past output with monetary policy is one way inflation can happen, and central banks do have control over that. That can be considered a stealth tax by central banks. But sometimes output actually does decrease and that isn't due to central banks. The price of gas in Europe, for example, increased because there was a cold winter, a lack of wind, a recent issue with the supply due to Russia's attack on Ukraine. Not all increases in demand are due to central banks, and not all inflation is due to changes in demand.
lamontcg 5y ago
Inflation is stealth debt relief.
- int_19h 5y ago
  It is, but that largely benefits the middle class (which has much better access to debt), not people living paycheck-to-paycheck.
  - lamontcg 5y ago
    People living paycheck-to-paycheck get larger paychecks out of an actual wage-price spiral so they're ultimately no worse off or better off. It is almost right there in the name. What doesn't work for them is when there's massive asset bubbles like we've had for 30 years, but their wages are held flat.
gwmnxnp_516a 5y ago
The definition of what is inflation depends on the economic school of thought. In the case of the Austrian and Chicago economic school of thought inflation is the increase of money supply caused by the central bank that allegedly results in systematic and non temporary increase of CPI consumer price index and money loss of value. There are school of economics, such as Keynesian that argues that a limited and controlled inflation is a good thing for increasing market liquidity, avoiding deflation and promoting a full employment policy. On the other hand some economists believe that some inflation is also good for weakening the currency, boosting the exports and reducing the imports. Inflation becomes problematic when it is used for financing uncontrolled government spending like in Argentina, Turkey and Lebanon as making money out of thin air is the easiest way to a government to raise money since raising taxes can result in massive opposition; taking loans denominated in foreign currency may requires good credit rating and reasonable credibility; austerity measures, such as cutting government spending, unreasonable subsidies or unreasonable government employees wages may also result in political clashes. The raise of money supply is not be the only cause of CPI and raise of cost of living as supply and demand problems around the world may also increase the CPI. For instance, we also should remember that we have faced several unexpected black swans, such as the pandemic; supply chain shutdown around the world, specially in Asia, that the West has become too dependent on; massive flooding in China what prompted the country to hoard grains; massive droughts in USA (California) and south of Brazil, both countries accounts for great deal of the world's food production; and finally the current war in Europe reduced the amount of natural gas, crude oil supply, fertilizers and wheat in the global market. Both countries involved in the current war accounts for about 1/3 of the world wheat production. Too much foreign dependency can also affect the CPI, since any currency devaluation against the dollar increases the price of everything if the country does not produces enough food to cover its needs like Lebanon.

Not really. It has three different causes: 1) Excessive lending and consequent increases in the money supply by commercial banks. 2) Governments printing money without any regulatory compensation to prevent 1 3) Shortages in goods and supplied measured by the CPI, such as food. Right now we have 2 and 3, and some countries will probably have 1 as well..

hitovst 5y ago
The debasing of fiat currency is a "stealth" redistribution of wealth, regardless of the pretenses for it.
- howinteresting 5y ago
  Redistribution from creditors to debtors is good. And it's not that stealth given we're talking about it.
- smt88 5y ago
  By that definition, every price change is a redistribution of wealth (which is technically true). The question is whether it's intentional, and it's impossible to imagine the people in charge of every world government would be enraging their citizens by creating inflation. Simpler: people saved money during the pandemic at the same time as supply chains were disrupted, leading to high prices. Every government in the world has the same problem.
- davnn 5y ago
  It doesn‘t look like it as it appears that inflation is contributing to wealth inequality. Do you have any sources for your claims?
  - macinjosh 5y ago
    Inflation makes saving money a losing proposition because it literally rots away in your bank account. How is some one supposed to save for college, a house or to start a business if they are constantly losing money? Meanwhile rich people don't care because their immense wealth lets them ride out inflation easily. In fact, in some situations it may be to their advantage because the value of other assets they hold (real estate, metals, art, etc) often increase in value during inflation.
    - sokoloff 5y ago
      You save for things that are 5+ years away by investing at least a portion of it in equities. Investments for goals that are 20+ years away should be over 80% in equities, IMO.
      - epicureanideal 5y ago
        In other words, the only remaining way to “save money” is to buy assets largely owned by the rich and further drive up the inflated values of those assets.
        sokoloff 5y ago
        Said differently: investing in ways similar to how the rich invest seems like a generally sound strategy, all else being equal. (They don't keep much money in passbook savings accounts.)
        epicureanideal 5y ago
        Sure, but really the reason we should invest like the rich isn’t that it’s sound for rational economic reasons, but that the rich will use their influence on politics to ensure their investments do not decline as much as they would without interventions.
        xyzzyz 5y ago
        Equities are not largely owned by the rich. They are mostly owned by pension funds. The "rich" do not own majority of the assets (though, of course, they own very disproportionate amounts of them, relative to their numbers, as that's what the word "rich" means).
- HWR_14 5y ago
  How is it redistributing wealth? From who to who?
  - Geee 5y ago
    Simply put, from the poor to the rich. It's a major cause of wealth centralization.
  - kevin_thibedeau 5y ago
    To those controlling interest rates from those who don't have any access to low risk investments.
    - JumpCrisscross 5y ago
      > from those who don't have any access to low risk investments Treasuries, the lowest-risk dollar investment, are the first to lose value with inflation. And everyone has access to Series I bonds.
  - cloutchaser 5y ago
    From whoever is furthest to money creation to whoever is closest. Ever wonder why record stock buybacks and record ceo pay are happening right when QE is happening? Why stock markets and PE ratios are at record highs? Why there are record amounts being invested by VCs? Why commodity prices have been rising? It’s not because of evil capitalism. It’s because those people are closest to where money creation happens. The 1% aren’t getting richer because of the exploitative nature of capitalism, but because they have access to new money.
    - _0ffh 5y ago
      >From whoever is furthest to money creation to whoever is closest. Precisely! You might also want to mention that there's a name for that, the Cantillon Effect. [Ed. Fixed spelling according to sparkie's correction.]
      - 5y ago
- throw0101a 5y ago
  > The debasing of fiat currency is a "stealth" redistribution of wealth, regardless of the pretenses for it. The "debasing of fiat currency" reduces debt burdens, and I would think that middle- and low-income folks are probably more likely to have debt (student loans, mortgages). A low-inflation or even deflationary environment is probably a worse thing for the non-rich.
  - WalterBright 5y ago
    > reduces debt burdens Not really, because inflation causes interest rates to go up correspondingly.
    - gizmo686 5y ago
      Which is not relevant to most consumer debt, where the interest rate is set at the start and locked in for the life of the loan.
      - WalterBright 5y ago
        Fixed rate debts interest are set to accommodate the current inflation rate plus higher values to accommodate the risk of inflation increasing. Lenders are not fools when it comes to inflation.
      - loeg 5y ago
        Quite a lot of consumer debt is variable rate (credit cards, ARMs, ...), or nominally fixed rate, but rolls over somewhat frequently (car loans, mortgages as people move or refinance, pay later spending, etc).
  - gruez 5y ago
    >and low-income folks are probably more likely to have debt (student loans, mortgages). Source? For student loans at least, the amount of debt held is positively correlated with household income, not negatively like you suggest. https://www.urban.org/sites/default/files/styles/optimized_default/public/2019-05/eddebtcolumn_revised.jpg?itok=xqPlrb5W https://www.urban.org/sites/default/files/styles/optimized_d...

larrydag 5y ago

"The real tax on the American people is what government spends" -M. Friedman

sfe22 5y ago
And the hurdles it creates. The government may spend $100k on a bureaucrat that causes individuals and companies to spend millions to overcome.
- xyzzyz 5y ago
  Indeed. The real tax is not just what government spends, but also the deadweight loss of forced reallocation.

moltke 5y ago

Right. Inflation makes your rent go up which for most working people is already significantly higher than their taxes.

kaashif 5y ago

Stimulating aggregate demand past output with monetary policy is one way inflation can happen, and central banks do have control over that. That can be considered a stealth tax by central banks. But sometimes output actually does decrease and that isn't due to central banks. The price of gas in Europe, for example, increased because there was a cold winter, a lack of wind, a recent issue with the supply due to Russia's attack on Ukraine. Not all increases in demand are due to central banks, and not all inflation is due to changes in demand.

lamontcg 5y ago

Inflation is stealth debt relief.

int_19h 5y ago
It is, but that largely benefits the middle class (which has much better access to debt), not people living paycheck-to-paycheck.
- lamontcg 5y ago
  People living paycheck-to-paycheck get larger paychecks out of an actual wage-price spiral so they're ultimately no worse off or better off. It is almost right there in the name. What doesn't work for them is when there's massive asset bubbles like we've had for 30 years, but their wages are held flat.

gwmnxnp_516a 5y ago

The definition of what is inflation depends on the economic school of thought. In the case of the Austrian and Chicago economic school of thought inflation is the increase of money supply caused by the central bank that allegedly results in systematic and non temporary increase of CPI consumer price index and money loss of value. There are school of economics, such as Keynesian that argues that a limited and controlled inflation is a good thing for increasing market liquidity, avoiding deflation and promoting a full employment policy. On the other hand some economists believe that some inflation is also good for weakening the currency, boosting the exports and reducing the imports. Inflation becomes problematic when it is used for financing uncontrolled government spending like in Argentina, Turkey and Lebanon as making money out of thin air is the easiest way to a government to raise money since raising taxes can result in massive opposition; taking loans denominated in foreign currency may requires good credit rating and reasonable credibility; austerity measures, such as cutting government spending, unreasonable subsidies or unreasonable government employees wages may also result in political clashes. The raise of money supply is not be the only cause of CPI and raise of cost of living as supply and demand problems around the world may also increase the CPI. For instance, we also should remember that we have faced several unexpected black swans, such as the pandemic; supply chain shutdown around the world, specially in Asia, that the West has become too dependent on; massive flooding in China what prompted the country to hoard grains; massive droughts in USA (California) and south of Brazil, both countries accounts for great deal of the world's food production; and finally the current war in Europe reduced the amount of natural gas, crude oil supply, fertilizers and wheat in the global market. Both countries involved in the current war accounts for about 1/3 of the world wheat production. Too much foreign dependency can also affect the CPI, since any currency devaluation against the dollar increases the price of everything if the country does not produces enough food to cover its needs like Lebanon.