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I don't have it literally backwards, because that's not what happens. You do have your Hitler argument completely backward though. Weimar Germany was undergoing

I don't have it literally backwards, because that's not what happens. You do have your Hitler argument completely backward though. Weimar Germany was undergoing runaway _hyper-inflation_, not deflation. Interest rates move in the same direction as inflation with some lag, so the idea that poor people benefit due to reduction in debt is weak at best, but given that the rich rely on debt so heavily themselves, any positive effect on the poor would be even greater for the rich barring some special reason I can't think of. As for rich people being the ones affected by inflation, it does in fact change their incentives dramatically, so that's true as far as that goes, however it doesn't actually result in loss of wealth for them as again, they are the ones with the capacity to invest it in assets to protect or grow its value, and the ability to use leverage to use money now that they don't even have yet, in exchange for devalued money in the future. It might have some effect of weeding out the truly incompetently or indigently rich, but of that group the ones who don't have smarter family around to save them from themselves will be those who probably come from lower class backgrounds anyway.

nrdvana 2y ago
Its true that rich people often (always?) "have debts", but not true that they are "in debt" overall, otherwise they wouldn't really be rich anymore. Poor and middle-class people are often in debt in the sense that they have borrowed against their future earnings. For things like a house, borrowed over 30 years, the inflation on that amount really does benefit them. By the end of the loan, people who stayed in one house barely notice the cost of the mortgage, and if the intrest rate is low enough they may choose to deliberately not pay it off as they invest their current cash elsewhere. For things like a credit card, no the inflation doesn't really help anyhing. If deflation were expected, rich people really would just leave money in a bank account (as long as investing gave smaller returns, or seemed too risky.) The inflation is an incentive for cash-rich people to put that cash to use instead of sitting on it. This can be a huge driver for the economy.
- SuperNinKenDo 2y ago
  I didn't say that rich people are "in debt", I said they rely on debt and leverage. A mortgage on a single home seems kind of like a special case, they tend to have unusual rules that insulate borrowers from the effect of interest rates to a certain extent, which otherwise work to cancel out the time-preference effect on money. Otherwise the working classes have their wealth tied to the sale of their labor, something (wages) which is notoriously sticky, hence a greater effect on them. I don't disagree that the macroeconomic argument does incentivise rich people to use their wealth productively, but it is precisely this argument that relies on the idea that the wealthy have means available to them to protect the value of their wealth. You can't have the former and not the latter.
cyberax 2y ago
> I don't have it literally backwards, because that's not what happens. You do have your Hitler argument completely backward though. Weimar Germany was undergoing runaway _hyper-inflation_, not deflation. That's a common misconception, propagated by people who want the economy to stagnate (goldbugs earlier, crypto bros now). Germany experienced actual _deflation_ in 1929-1932 as a result of the governmental austerity. It's exactly what put Hitler in power. Deflation rose up to 12% in 1932! Here's the table: https://www.gabriel-zucman.eu/files/capitalisback/T271 https://www.gabriel-zucman.eu/files/capitalisback/T271 (sidenote, seeing scientific notation on the CPI chart is scary). Hitler then immediately started an expansionist fiscal policy, using state funds to build up the infrastructure and military. This immediately resulted in the GDP growth. > but given that the rich rely on debt so heavily themselves Rich people are not in debt. Their net worth is not negative. That's not the case for poor people. Unlike microeconomics, macroeconomics is pretty simple. The total amount of debt held equals to the total amount of debt owned.
- SuperNinKenDo 2y ago
  I don't think minor deflation after a period of hyper-inflation is much of an argument that deflation was the cause of Germany's woes. I never said rich people are "in debt", I said that they use and rely on debt. In the sense meant in the argument about why inflation helps the poor, the advantage also comes to the rich, if I even concede that it's true, which I do not, because rising interest exists specifically to counteract the long term effect of inflation. Rich people's wealth is protected from inflation, while the working classes' wealth is not, that is the key difference. That is precisely inflation's alleged reason detre, that it incentivises people, in effect, those with more wealth, to use their money in ways that protect its value. You can't have the macroeconomic argument for inflation driving growth and then simultaneously allege that rich people are just as affected by inflation as wage earners, the former relies on the idea that there is a way to use excess wealth through investment that will protect its value. You can claim that wages should grow with inflation, but not only is that self-evidently not what happens when you look around, but the stickiness of wages is so well recognised that it's treated as almost apriori in macroeconomics, which is why I take it to be a either a feature or accepted consequence of inflation that it is regressive, depending on the specific policymaker.

nrdvana 2y ago

Its true that rich people often (always?) "have debts", but not true that they are "in debt" overall, otherwise they wouldn't really be rich anymore. Poor and middle-class people are often in debt in the sense that they have borrowed against their future earnings. For things like a house, borrowed over 30 years, the inflation on that amount really does benefit them. By the end of the loan, people who stayed in one house barely notice the cost of the mortgage, and if the intrest rate is low enough they may choose to deliberately not pay it off as they invest their current cash elsewhere. For things like a credit card, no the inflation doesn't really help anyhing. If deflation were expected, rich people really would just leave money in a bank account (as long as investing gave smaller returns, or seemed too risky.) The inflation is an incentive for cash-rich people to put that cash to use instead of sitting on it. This can be a huge driver for the economy.

SuperNinKenDo 2y ago
I didn't say that rich people are "in debt", I said they rely on debt and leverage. A mortgage on a single home seems kind of like a special case, they tend to have unusual rules that insulate borrowers from the effect of interest rates to a certain extent, which otherwise work to cancel out the time-preference effect on money. Otherwise the working classes have their wealth tied to the sale of their labor, something (wages) which is notoriously sticky, hence a greater effect on them. I don't disagree that the macroeconomic argument does incentivise rich people to use their wealth productively, but it is precisely this argument that relies on the idea that the wealthy have means available to them to protect the value of their wealth. You can't have the former and not the latter.

cyberax 2y ago

> I don't have it literally backwards, because that's not what happens. You do have your Hitler argument completely backward though. Weimar Germany was undergoing runaway _hyper-inflation_, not deflation. That's a common misconception, propagated by people who want the economy to stagnate (goldbugs earlier, crypto bros now). Germany experienced actual _deflation_ in 1929-1932 as a result of the governmental austerity. It's exactly what put Hitler in power. Deflation rose up to 12% in 1932! Here's the table: https://www.gabriel-zucman.eu/files/capitalisback/T271 https://www.gabriel-zucman.eu/files/capitalisback/T271 (sidenote, seeing scientific notation on the CPI chart is scary). Hitler then immediately started an expansionist fiscal policy, using state funds to build up the infrastructure and military. This immediately resulted in the GDP growth. > but given that the rich rely on debt so heavily themselves Rich people are not in debt. Their net worth is not negative. That's not the case for poor people. Unlike microeconomics, macroeconomics is pretty simple. The total amount of debt held equals to the total amount of debt owned.

SuperNinKenDo 2y ago
I don't think minor deflation after a period of hyper-inflation is much of an argument that deflation was the cause of Germany's woes. I never said rich people are "in debt", I said that they use and rely on debt. In the sense meant in the argument about why inflation helps the poor, the advantage also comes to the rich, if I even concede that it's true, which I do not, because rising interest exists specifically to counteract the long term effect of inflation. Rich people's wealth is protected from inflation, while the working classes' wealth is not, that is the key difference. That is precisely inflation's alleged reason detre, that it incentivises people, in effect, those with more wealth, to use their money in ways that protect its value. You can't have the macroeconomic argument for inflation driving growth and then simultaneously allege that rich people are just as affected by inflation as wage earners, the former relies on the idea that there is a way to use excess wealth through investment that will protect its value. You can claim that wages should grow with inflation, but not only is that self-evidently not what happens when you look around, but the stickiness of wages is so well recognised that it's treated as almost apriori in macroeconomics, which is why I take it to be a either a feature or accepted consequence of inflation that it is regressive, depending on the specific policymaker.