5 ms·

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).
        int_19h 5y ago
        And then whenever any policy that would reduce the profits from stock trading is floated, it's shouted down on the basis that "it'll hurt your retirement". A very cunning trap.
        epicureanideal 5y ago
        Exactly. It’s how any corrupt system is maintained. A dictator puts some inner circle of favored people under him, and then a larger layer but still small as a percentage beneath that, and so on all the way down, so that every layer has an incentive to support him and suppress the layers beneath. Add to that disproportionate influence through control of the military, police, and or media and even a 1/5 or less population can suppress the rest. Obviously our economy isn’t run that way but the same principle applies. We align the incentives of each person to act or vote in ways that benefit the already rich.
- sparkie 5y ago
  That's precisely it. Inflation distributes wealth from those who have cash-backed savings, earn fixed wages, or have property leased under fixed rents, to the privileged who gain earliest access to the newly produced money. When the stock of money is increased, it gets to be spent at face value that the money has at that time by those who are first to receive it. As the new money works its way through the economy, prices rise in response to the increased availability of this 'easy money'. The end result is that the people who are last to receive the new money get to spend it after the price of everything has already increased. If they already had savings prior to the increase in the supply, their savings now buy less than they would have prior to the supply increase. Since in most cases, people laboured to obtain this money, their time of labour is effectively being pilfered by those who have the ability to produce new money. It is known as the Cantillon Effect, after Richard Cantillon described it in his Essay on economic theory[1]. Although it was known long prior to Cantillon's explanation, his is the earliest work which explains the process by which this happens. Where Cantillon says "Mr. Locke lays it down as a fundamental maxim that the quantity of goods in proportion to the quantity of money is a regulator of market prices," I believe he is referring to 'Further considerations concerning raising the value of money,' a letter by John Locke[2]. [1]:https://mises.org/library/essay-economic-theory-0 https://mises.org/library/essay-economic-theory-0 [Part 2, Chapter 6]. [2]:https://avalon.law.yale.edu/17th_century/locke01.asp https://avalon.law.yale.edu/17th_century/locke01.asp
  - Spooky23 5y ago
    Most people have none of these things. The core argument of a reactionary anti-inflation position always pretends that money doesn’t matter in real terms. “Your debt is worth less, but…” So when a few years of 7% inflation doesn’t trigger hyperinflation, but does reduce the real value of my debt by 40%, that’s good for the debtor, bad for the creditor. We’ve seen the results of decades of monetary policy that ignored factors like unemployment and soley focused on inflation. That is, a plutocracy where almost a third of GDP is medical care, transportation, and military spending. Time for something else.
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...

Redistribution from creditors to debtors is good. And it's not that stealth given we're talking about it.

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).
      - int_19h 5y ago
        And then whenever any policy that would reduce the profits from stock trading is floated, it's shouted down on the basis that "it'll hurt your retirement". A very cunning trap.
        epicureanideal 5y ago
        Exactly. It’s how any corrupt system is maintained. A dictator puts some inner circle of favored people under him, and then a larger layer but still small as a percentage beneath that, and so on all the way down, so that every layer has an incentive to support him and suppress the layers beneath. Add to that disproportionate influence through control of the military, police, and or media and even a 1/5 or less population can suppress the rest. Obviously our economy isn’t run that way but the same principle applies. We align the incentives of each person to act or vote in ways that benefit the already rich.
sparkie 5y ago
That's precisely it. Inflation distributes wealth from those who have cash-backed savings, earn fixed wages, or have property leased under fixed rents, to the privileged who gain earliest access to the newly produced money. When the stock of money is increased, it gets to be spent at face value that the money has at that time by those who are first to receive it. As the new money works its way through the economy, prices rise in response to the increased availability of this 'easy money'. The end result is that the people who are last to receive the new money get to spend it after the price of everything has already increased. If they already had savings prior to the increase in the supply, their savings now buy less than they would have prior to the supply increase. Since in most cases, people laboured to obtain this money, their time of labour is effectively being pilfered by those who have the ability to produce new money. It is known as the Cantillon Effect, after Richard Cantillon described it in his Essay on economic theory[1]. Although it was known long prior to Cantillon's explanation, his is the earliest work which explains the process by which this happens. Where Cantillon says "Mr. Locke lays it down as a fundamental maxim that the quantity of goods in proportion to the quantity of money is a regulator of market prices," I believe he is referring to 'Further considerations concerning raising the value of money,' a letter by John Locke[2]. [1]:https://mises.org/library/essay-economic-theory-0 https://mises.org/library/essay-economic-theory-0 [Part 2, Chapter 6]. [2]:https://avalon.law.yale.edu/17th_century/locke01.asp https://avalon.law.yale.edu/17th_century/locke01.asp
- Spooky23 5y ago
  Most people have none of these things. The core argument of a reactionary anti-inflation position always pretends that money doesn’t matter in real terms. “Your debt is worth less, but…” So when a few years of 7% inflation doesn’t trigger hyperinflation, but does reduce the real value of my debt by 40%, that’s good for the debtor, bad for the creditor. We’ve seen the results of decades of monetary policy that ignored factors like unemployment and soley focused on inflation. That is, a plutocracy where almost a third of GDP is medical care, transportation, and military spending. Time for something else.

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...