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It doesn‘t look like it as it appears that inflation is contributing to wealth inequality. Do you have any sources for your claims?

by davnn 5y ago

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.
      - epicureanideal 5y ago
        Hmm, this article seems to say they are. "The wealthiest 10% of Americans own a record 89% of all U.S. stocks" https://www.cnbc.com/2021/10/18/the-wealthiest-10percent-of-americans-own-a-record-89percent-of-all-us-stocks.html https://www.cnbc.com/2021/10/18/the-wealthiest-10percent-of-... Somewhere I read that the top 1% owns about 50% of stocks.
  - sparkie 5y ago
    Those who can afford to put 80% of their savings away for 20 years are those who are least vulnerable to the effects of inflation. The people most affected are those who have most of their assets in cash or cash equivalents. The low and minimum wage earners who can't afford to invest in stocks. Those who are attempting to enter the property ladder who need to save a deposit for a mortgage and see that their savings are declining by 7.5%/year. At an inflation rate of 7.8%, it takes only 9 years for the price of everything to double. That minimum wage earner now has had half of his hard work amount to nothing, but the house he wanted to buy is now twice as expensive.
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.

It doesn‘t look like it as it appears that inflation is contributing to wealth inequality. Do you have any sources for your claims?

by 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.
    - epicureanideal 5y ago
      Hmm, this article seems to say they are. "The wealthiest 10% of Americans own a record 89% of all U.S. stocks" https://www.cnbc.com/2021/10/18/the-wealthiest-10percent-of-americans-own-a-record-89percent-of-all-us-stocks.html https://www.cnbc.com/2021/10/18/the-wealthiest-10percent-of-... Somewhere I read that the top 1% owns about 50% of stocks.
- sparkie 5y ago
  Those who can afford to put 80% of their savings away for 20 years are those who are least vulnerable to the effects of inflation. The people most affected are those who have most of their assets in cash or cash equivalents. The low and minimum wage earners who can't afford to invest in stocks. Those who are attempting to enter the property ladder who need to save a deposit for a mortgage and see that their savings are declining by 7.5%/year. At an inflation rate of 7.8%, it takes only 9 years for the price of everything to double. That minimum wage earner now has had half of his hard work amount to nothing, but the house he wanted to buy is now twice as expensive.

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.