4 ms·

It depends on a person's financial situation, from my understanding: if you have a lot of debt(which the average USA household does), you benefit greatly the mo

by mym1990 4y ago

It depends on a person's financial situation, from my understanding: if you have a lot of debt(which the average USA household does), you benefit greatly the more inflation goes up. If you have money sitting in the bank, you're basically getting eaten alive. If you have assets, they typically should be tracking inflation somewhat(real estate, some stock categories, TIPS, etc...). People will be in between any of the above situation simultaneously, but between having to get fired and seeing costs go up a little at a time, I imagine most people will defer the gut punch and take the erosion of spending power.

ethbr0 4y ago
There's also one big winner in an inflationary environment: the US federal government, who happens to owe a LOT of debt. Inflation shrinks the present value of that debt, without requiring the government to cut spending to pay it down, which would have serious economic consequences (see: austerity).
tempsy 4y ago
how is a saver getting eaten alive when high yield savings accounts and short term t-bills are paying 5% holding cash is paying something for the first time in more than a decade
- positr0n 4y ago
  Because you don't care about the number in your bank account, you care about what you can buy with that number. Park your cash in a 5% instrument for a year and you can still afford 3-4% less stuff than you could at the beginning of the year. That's fine for me with a mortgage, but less retirement headroom for many older people.
- roflyear 4y ago
  Cash was paying out plenty a few years ago.
- mym1990 4y ago
  Because inflation was still anywhere from 6-9% on average, but was higher than that for things like housing, healthcare, education, food, and transportation. Holding cash is not "paying" anything, even though you can't see it happen, the purchase power of that cash has deteriorated massively in the past 3 years. I personally have a hard time going out to a restaurant and getting a 2 person meal for less than say 30-40$. Car market is absolutely through the roof. Housing market, although cooling slightly, is still through the roof. Our base rent went up 15% last year. Gas is now double in my area.

ethbr0 4y ago

There's also one big winner in an inflationary environment: the US federal government, who happens to owe a LOT of debt. Inflation shrinks the present value of that debt, without requiring the government to cut spending to pay it down, which would have serious economic consequences (see: austerity).

tempsy 4y ago

how is a saver getting eaten alive when high yield savings accounts and short term t-bills are paying 5% holding cash is paying something for the first time in more than a decade

positr0n 4y ago
Because you don't care about the number in your bank account, you care about what you can buy with that number. Park your cash in a 5% instrument for a year and you can still afford 3-4% less stuff than you could at the beginning of the year. That's fine for me with a mortgage, but less retirement headroom for many older people.
roflyear 4y ago
Cash was paying out plenty a few years ago.
mym1990 4y ago
Because inflation was still anywhere from 6-9% on average, but was higher than that for things like housing, healthcare, education, food, and transportation. Holding cash is not "paying" anything, even though you can't see it happen, the purchase power of that cash has deteriorated massively in the past 3 years. I personally have a hard time going out to a restaurant and getting a 2 person meal for less than say 30-40$. Car market is absolutely through the roof. Housing market, although cooling slightly, is still through the roof. Our base rent went up 15% last year. Gas is now double in my area.