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"Inflation punishes people who keep their money under the mattress instead of consuming it or investing it." This is absolutely false. Inflation primarily puni
by uvdiv 14y ago
"Inflation punishes people who keep their money under the mattress instead of consuming it or investing it."
This is absolutely false. Inflation primarily punishes investors -- those who made fixed-income, dollar-denominated investments. People who bought corporate bonds, government/municipal bonds, banks who sold homeowner or businesses loans -- they all have fixed-income returns, and they all get a haircut. The longer-term the investment, the more it hurts them, and the less likely they could have predicted (hence priced in) inflation.
This isn't ideological or arguable; it's basic economics. Inflation punishes creditors.
https://en.wikipedia.org/wiki/Inflation#Effects https://en.wikipedia.org/wiki/Inflation#Effects
- meric 14y agoUnless they are interest rate-linked (inflation-linked by proxy) bonds...
- DasIch 14y agoThat is only true for long term investments if the rates are fixed and the inflation is higher than those rates.
- confluence 14y agoThen maybe those creditors shouldn't be lending and should instead be investing. Bond holders should be punished for taking money out of circulation and instead of investing or consuming them at good yields they invest in bad yields. Inflation is just the kicker to get them to suck it up and help fund the next Google.
- uvdiv 14y agoBonds are an investment (?) Do you have some sort of ideological position on debt vs. equity, I didn't know that was even an issue. Bond holders should be punished for taking money out of circulation The money goes to the company or government that's borrowing it, quite likely because they want to build something or expand. It's not out of circulation, it's changed hands.
- confluence 14y agoBonds have low roi for a reason - they aren't taking on nearly as much risk in developing new products as their equity counterparts. However we want to encourage new products. Hence we punish those who don't want to take risks. When one pulls low yields one shouldn't complain about the government, one should find higher yields.
- uvdiv 14y agoHence we punish those who don't want to take risks. They already get lower yields in proportion to their risk. Why punish them further by fiddling with yield curves, forcing the spread to be artificially larger? When one pulls low yields one shouldn't complain about the government, one should find higher yields. If you want government to purposefully manipulate yields, than of course that would become a political complaint.