3 ms·

Why does inflation help? Since it devalues debt, it also devalues savings and earnings. I’m definitely misunderstanding something.

ThorsBane 4y ago
Because wages will increase more to account for higher productivity and booming business across the board. America's fundamentals are rock solid still. We are poised for considerable growth. Inflation would cheapen debt. Since wages have not caught up to productivity yet, we can see increased wages alongside the inflation which makes the real amount of consumer debt lower than it seems. It works out in the long run because we're behind on productivity gains affecting wages in many sectors, but that has been improving especially since 2020.
- jjtheblunt 4y ago
  What if wages don't increase?
  - pg938hkd 4y ago
    They will lag so people will be poorer
  - ThorsBane 4y ago
    They have to because otherwise there's no more fuel for the ground floor of critical operations in every org. There have to be reliable people on the ground floor or all the profit gets lost. Most orgs hold debt, too. A rising tide would lift all boats in this case.
    - jjtheblunt 4y ago
      Why do you say most orgs hold debt? Apple and other big tech firms have tons of savings invested. And regarding people, in the US anyway, many hold debt, but many hold savings. If i'm understanding your description, it incentivizes holding debt?
flangola7 4y ago
Earnings can adjust fast to compensate for hyperinflation meanwhile the fraction of the population that have worthwhile savings has been steadily declining for a long time. For a massive amount of Americans significant devaluing of debt would be life changing in a positive way. Little to lose and lots to gain.
- jjtheblunt 4y ago
  > Earnings can adjust fast to compensate for hyperinflation how?
  - pg938hkd 4y ago
    No they can’t otherwise wages would have been up 30% in the last 5 years
    - blagie 4y ago
      Wages, globally, are up at least that. Right now, wages in the US are much higher than most other parts of the world, but the fundamentals behind that are quickly disappearing. If I can hire equivalent talent in the US for $100k, EU for $50K, and Asia for $10k, that's a market friction. It's slowly levelling out. As that's happening, and cheap goods / services from outside the US are no longer cheap, our purchasing power goes down.
  - flangola7 4y ago
    How what? Salaries have been adjusted as frequently as hourly in places that experienced hyperinflation.
Retric 4y ago
Moderate inflation doesn’t devalue savings only liquidity. Coca-Cola doesn’t care about 5% inflation long term, they are going to sell for whatever inflation adjusted prices work. It’s always worth remembering that future cash flows aren’t guaranteed. The idea you can leverage fractions of a percent returns between loans and cash flows creates a great deal of fictional wealth that’s going to collapse at some point. Adding some real volatility to the financial system is critical for long term stability just as testing backup systems when you aren’t in a middle of a crisis.
throwawayinfra 4y ago
It helps debtors and America is a nation of debtors so. Definitely it pushes other countries to dump USD reserves faster I don't think they are gonna like to fund American infra with their money
deleted 4y ago
[deleted]

ThorsBane 4y ago

Because wages will increase more to account for higher productivity and booming business across the board. America's fundamentals are rock solid still. We are poised for considerable growth. Inflation would cheapen debt. Since wages have not caught up to productivity yet, we can see increased wages alongside the inflation which makes the real amount of consumer debt lower than it seems. It works out in the long run because we're behind on productivity gains affecting wages in many sectors, but that has been improving especially since 2020.

jjtheblunt 4y ago
What if wages don't increase?
- pg938hkd 4y ago
  They will lag so people will be poorer
- ThorsBane 4y ago
  They have to because otherwise there's no more fuel for the ground floor of critical operations in every org. There have to be reliable people on the ground floor or all the profit gets lost. Most orgs hold debt, too. A rising tide would lift all boats in this case.
  - jjtheblunt 4y ago
    Why do you say most orgs hold debt? Apple and other big tech firms have tons of savings invested. And regarding people, in the US anyway, many hold debt, but many hold savings. If i'm understanding your description, it incentivizes holding debt?

flangola7 4y ago

Earnings can adjust fast to compensate for hyperinflation meanwhile the fraction of the population that have worthwhile savings has been steadily declining for a long time. For a massive amount of Americans significant devaluing of debt would be life changing in a positive way. Little to lose and lots to gain.

jjtheblunt 4y ago
> Earnings can adjust fast to compensate for hyperinflation how?
- pg938hkd 4y ago
  No they can’t otherwise wages would have been up 30% in the last 5 years
  - blagie 4y ago
    Wages, globally, are up at least that. Right now, wages in the US are much higher than most other parts of the world, but the fundamentals behind that are quickly disappearing. If I can hire equivalent talent in the US for $100k, EU for $50K, and Asia for $10k, that's a market friction. It's slowly levelling out. As that's happening, and cheap goods / services from outside the US are no longer cheap, our purchasing power goes down.
- flangola7 4y ago
  How what? Salaries have been adjusted as frequently as hourly in places that experienced hyperinflation.

Retric 4y ago

Moderate inflation doesn’t devalue savings only liquidity. Coca-Cola doesn’t care about 5% inflation long term, they are going to sell for whatever inflation adjusted prices work. It’s always worth remembering that future cash flows aren’t guaranteed. The idea you can leverage fractions of a percent returns between loans and cash flows creates a great deal of fictional wealth that’s going to collapse at some point. Adding some real volatility to the financial system is critical for long term stability just as testing backup systems when you aren’t in a middle of a crisis.

throwawayinfra 4y ago

It helps debtors and America is a nation of debtors so. Definitely it pushes other countries to dump USD reserves faster I don't think they are gonna like to fund American infra with their money

deleted 4y ago

[deleted]