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> It hurts people who already have accumulated capital in the form of bonds and stocks. The Fed acts to protect the interests of the very rich, at the expense o

> It hurts people who already have accumulated capital in the form of bonds and stocks. The Fed acts to protect the interests of the very rich, at the expense of the lower and middle class. You're forgetting the primary asset of the middle class: Housing. People purchase housing with mortgages. Inflation raises the price of their home and diminishes the impact of their mortgage debt. Inflation also helps people with a lot of college loan debt, which has furthermore been paused for many people. You'd rather pay of a hypothetical $50K of student loans after inflation (including wages) has made that $50K worth less. I often think about the few people whose late 20s coincided with record low interest rates, the COVID pause on student loan debt, the extreme job boom where a little LeetCode would hand you a high-paying tech job, and the small window where home prices hadn't yet shot up. Anyone who lucked into the right combination of these factors would have set themselves up for a financial future that I could have only dreamed of in my mid-20s. It's not a large number of people, but I am jealous. This isn't meant to be an "inflation is good" post, because out of control inflation is definitely not. However, it's not so simple as to say that only the wealthy see any benefit from inflation.

dougmwne 4y ago
Exactly! Hyperinflation is terrible and economy destroying. But I think a good argument can be made that moderate inflation, much higher than the typical 3% target is very good for most people.
actually_a_dog 4y ago
You seem to be making a number of assumptions here that don't necessarily hold. For instance, yes, a house is often a middle class family's biggest asset. But, there's no way to directly tap into that asset without selling or taking out some kind of loan against it (second mortgage, HELOC, even a reverse mortgage if they're old enough). All of those things have, let's say, significant costs and disadvantages. Yes, "imputed rent" is a thing, but that doesn't generally appear on a household balance sheet. You're assuming people with student debt are actually able to get jobs that can service that debt. That's not the case for 4/10 with student loans [0]. I'd even dispute that inflation is good for most Americans, given that just over 50% can't cover a $1000 emergency expense from savings[1], and nearly 2/3 are living paycheck to paycheck [2]. Nearly 3/4 of middle class Americans say their earnings are falling behind their cost of living [3]. I know you specifically weren't trying to paint inflation as an unvarnished good for middle class people, but other people commenting are making these points, and I just don't feel like making multiple comments to pick at those arguments. --- [0]: https://money.usnews.com/loans/student-loans/articles/survey-almost-four-in-10-cant-afford-their-student-loan-payments https://money.usnews.com/loans/student-loans/articles/survey... [1]: https://www.cnbc.com/2022/01/19/56percent-of-americans-cant-cover-a-1000-emergency-expense-with-savings.html https://www.cnbc.com/2022/01/19/56percent-of-americans-cant-... [2]: https://www.cnbc.com/2022/12/15/amid-high-inflation-63percent-of-americans-are-living-paycheck-to-paycheck.html https://www.cnbc.com/2022/12/15/amid-high-inflation-63percen... [3]: https://www.cnbc.com/2023/01/18/amid-inflation-more-middle-class-americans-struggle-to-make-ends-meet.html https://www.cnbc.com/2023/01/18/amid-inflation-more-middle-c...
- PragmaticPulp 4y ago
  > For instance, yes, a house is often a middle class family's biggest asset. But, there's no way to directly tap into that asset without selling or taking out some kind of loan against it (second mortgage, HELOC, even a reverse mortgage if they're old enough). All of those things have, let's say, significant costs and disadvantages. You're missing the biggest advantage: They bought the house with a fixed mortgage payment (assuming US and 30-year mortgages). Their monthly housing payments stays the same in absolute dollar numbers, but it's constantly going down in inflation-adjusted numbers. Meanwhile rents are going up for everyone who rents. It's not hard to get a HELOC if necessary for expenses, but the real benefit is in forced retirement savings into house equity. > given that just over 50% can't cover a $1000 emergency expense from savings[1], Nope, this is clickbait financial pseudo-journalism. The headline is a lie. Scroll down and look at the chart and the questions they asked. They did a telephone survey (which has massive selection bias. Would you answer an unknown number and spend time taking a survey? Or would you be busy doing your job and living your life?) and asked people how they would pay an emergency $1000 bill. They didn't ask if they could pay from savings, they asked how they would pay the bill. If the person responded, for example, that they'd "pay the bill and cut other expenses" then they were counted as being unable to handle the emergency expense. Ignore the clickbait finance headlines. They're deliberately misleading and designed to make you think the economy is on fire and everyone's drowning. Read the fine print on these surveys. The questions are also deliberately slanted, and the survey respondents are always biased toward specific groups (e.g. people who are bored enough to answer random phone numbers and take a phone survey from a stranger). These are not representative of the U.S. population as whole. Do you know anyone who would answer random phone numbers and take a phone survey, for example?
  - soderfoo 4y ago
    > Would you answer an unknown number and spend time taking a survey? > ...the survey respondents are always biased toward specific groups This could cut both ways, I think. Anecdotally, I grew up poor and we let all unknown numbers go to voicemail. No one was calling to give us a million dollars, we just presumed it was a bill collector.
  - 4y ago

dougmwne 4y ago

Exactly! Hyperinflation is terrible and economy destroying. But I think a good argument can be made that moderate inflation, much higher than the typical 3% target is very good for most people.

actually_a_dog 4y ago

You seem to be making a number of assumptions here that don't necessarily hold. For instance, yes, a house is often a middle class family's biggest asset. But, there's no way to directly tap into that asset without selling or taking out some kind of loan against it (second mortgage, HELOC, even a reverse mortgage if they're old enough). All of those things have, let's say, significant costs and disadvantages. Yes, "imputed rent" is a thing, but that doesn't generally appear on a household balance sheet. You're assuming people with student debt are actually able to get jobs that can service that debt. That's not the case for 4/10 with student loans [0]. I'd even dispute that inflation is good for most Americans, given that just over 50% can't cover a $1000 emergency expense from savings[1], and nearly 2/3 are living paycheck to paycheck [2]. Nearly 3/4 of middle class Americans say their earnings are falling behind their cost of living [3]. I know you specifically weren't trying to paint inflation as an unvarnished good for middle class people, but other people commenting are making these points, and I just don't feel like making multiple comments to pick at those arguments. --- [0]: https://money.usnews.com/loans/student-loans/articles/survey-almost-four-in-10-cant-afford-their-student-loan-payments https://money.usnews.com/loans/student-loans/articles/survey... [1]: https://www.cnbc.com/2022/01/19/56percent-of-americans-cant-cover-a-1000-emergency-expense-with-savings.html https://www.cnbc.com/2022/01/19/56percent-of-americans-cant-... [2]: https://www.cnbc.com/2022/12/15/amid-high-inflation-63percent-of-americans-are-living-paycheck-to-paycheck.html https://www.cnbc.com/2022/12/15/amid-high-inflation-63percen... [3]: https://www.cnbc.com/2023/01/18/amid-inflation-more-middle-class-americans-struggle-to-make-ends-meet.html https://www.cnbc.com/2023/01/18/amid-inflation-more-middle-c...

PragmaticPulp 4y ago
> For instance, yes, a house is often a middle class family's biggest asset. But, there's no way to directly tap into that asset without selling or taking out some kind of loan against it (second mortgage, HELOC, even a reverse mortgage if they're old enough). All of those things have, let's say, significant costs and disadvantages. You're missing the biggest advantage: They bought the house with a fixed mortgage payment (assuming US and 30-year mortgages). Their monthly housing payments stays the same in absolute dollar numbers, but it's constantly going down in inflation-adjusted numbers. Meanwhile rents are going up for everyone who rents. It's not hard to get a HELOC if necessary for expenses, but the real benefit is in forced retirement savings into house equity. > given that just over 50% can't cover a $1000 emergency expense from savings[1], Nope, this is clickbait financial pseudo-journalism. The headline is a lie. Scroll down and look at the chart and the questions they asked. They did a telephone survey (which has massive selection bias. Would you answer an unknown number and spend time taking a survey? Or would you be busy doing your job and living your life?) and asked people how they would pay an emergency $1000 bill. They didn't ask if they could pay from savings, they asked how they would pay the bill. If the person responded, for example, that they'd "pay the bill and cut other expenses" then they were counted as being unable to handle the emergency expense. Ignore the clickbait finance headlines. They're deliberately misleading and designed to make you think the economy is on fire and everyone's drowning. Read the fine print on these surveys. The questions are also deliberately slanted, and the survey respondents are always biased toward specific groups (e.g. people who are bored enough to answer random phone numbers and take a phone survey from a stranger). These are not representative of the U.S. population as whole. Do you know anyone who would answer random phone numbers and take a phone survey, for example?
- soderfoo 4y ago
  > Would you answer an unknown number and spend time taking a survey? > ...the survey respondents are always biased toward specific groups This could cut both ways, I think. Anecdotally, I grew up poor and we let all unknown numbers go to voicemail. No one was calling to give us a million dollars, we just presumed it was a bill collector.
- 4y ago