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Inflation hurts those, who have their resources denominated in inflated currency, so cash, bank accounts, even your wage specified in contract. If you converte

Inflation hurts those, who have their resources denominated in inflated currency, so cash, bank accounts, even your wage specified in contract. If you converted into other assets, whose price floats against the currency (stock, real estate, metals, art), the price is affected by the floating, but that floating can protect you against inflation as well. You can lose without inflation as well, the risks are different. If you have that in foreign currency, you are damaged by their inflation, but not necessarily by domestic one. And now back to your point: who do you think has the resources, that can be held in non-liquid form, convert back as/if needed? Rich or poor?

wikfwikf 4y ago
A lot of poor people, maybe most of them, have more cash-denominated debts than cash-denominated assets.
- jbay808 4y ago
  If they're poor, their debts are likely not backed by collateral - akin to credit card debt or payday loans. Those debts are at such high interest rates that inflation and rate hikes have little bearing relative to how much it already costs to sustain them. By contrast, wealthier people mostly have mortgage debt, backed by real estate as collateral. Those are at much lower interest rates and benefit from inflation.
sonotathrowaway 4y ago
> Building on the existing literature, we just published a working paper based on a sample of 10 OECD countries since 1970 that isolates the impact of inflation from other factors driving income inequality. > After accounting for the effect of other economic variables, we find a negative correlation between long term inflation and income inequality for low inflation rates. The results suggest that this link turns positive for higher inflation rates (i.e. above a threshold that we estimate at an inflation rate of 13%). These results are in line with other previous studies, which also find a U-shaped relationship between inflation and income inequality (Galli and van der Hoeven, 2001, Bulir, 2001, and Auda, 2010). However, they contradict the strong and widespread belief that inflation hurts the poor more than the rich and thus increases income inequality. https://www.cepweb.org/inflation-and-inequality/ https://www.cepweb.org/inflation-and-inequality/
- vetinari 4y ago
  > The economic channels behind the negative correlation between inflation and income inequality are still unclear. How this negative correlation turns to be positive for higher inflation rates also remains to be better understood. Until the causes of the correlation is better understood, it could as well just an error in the model.

wikfwikf 4y ago

A lot of poor people, maybe most of them, have more cash-denominated debts than cash-denominated assets.

jbay808 4y ago
If they're poor, their debts are likely not backed by collateral - akin to credit card debt or payday loans. Those debts are at such high interest rates that inflation and rate hikes have little bearing relative to how much it already costs to sustain them. By contrast, wealthier people mostly have mortgage debt, backed by real estate as collateral. Those are at much lower interest rates and benefit from inflation.

sonotathrowaway 4y ago

> Building on the existing literature, we just published a working paper based on a sample of 10 OECD countries since 1970 that isolates the impact of inflation from other factors driving income inequality. > After accounting for the effect of other economic variables, we find a negative correlation between long term inflation and income inequality for low inflation rates. The results suggest that this link turns positive for higher inflation rates (i.e. above a threshold that we estimate at an inflation rate of 13%). These results are in line with other previous studies, which also find a U-shaped relationship between inflation and income inequality (Galli and van der Hoeven, 2001, Bulir, 2001, and Auda, 2010). However, they contradict the strong and widespread belief that inflation hurts the poor more than the rich and thus increases income inequality. https://www.cepweb.org/inflation-and-inequality/ https://www.cepweb.org/inflation-and-inequality/

vetinari 4y ago
> The economic channels behind the negative correlation between inflation and income inequality are still unclear. How this negative correlation turns to be positive for higher inflation rates also remains to be better understood. Until the causes of the correlation is better understood, it could as well just an error in the model.