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The investor class doesn't benefit from inflation, it's the banker class that benefits. Here's how it works: The banks have a balance sheet of debts owed to th

by jamoes 14y ago

The investor class doesn't benefit from inflation, it's the banker class that benefits. Here's how it works: The banks have a balance sheet of debts owed to them. Some of the debts come from companies like General Motors and United Airlines. If one of those companies threatens to go bankrupt, then the bankers simply lobby the congress to "bail out" the troubled company. This allows the banks to keep the troubled asset on their balance sheet, and continue making an ongoing revenue stream. Of course, the "bail out" results in an increase in the money supply, which means every single holder of USD pays through a decrease in spending power of their dollars.

leot 14y ago
That's awfully convoluted. You're asserting that this Glenn-Beck's-whiteboard-esque arrangement holds more sway on banker's behavior than the effects of inflation on bankers' own personal wealth holdings. Do banks want to be bailed out? Sure. Who doesn't. Do rich bankers benefit more than the working class from higher inflation? Certainly not.
- brc 14y ago
  >Do rich bankers benefit more than the working class from higher inflation? Certainly not. Yes, they do, because they are the first to get to spend the inflated money. If you go back to a point in time when the royal mint could produce an inflated currency by diluting the metal content in coins, then they were the beneficiary of the inflated money by getting to spend it at the current price levels. By the time that money filters through the system to the poor, the prices have risen and the currency is worth less. The same happens now when the central bank provides newly-minted funds to banks. The banks get first use of the money and get to use it at current price levels, before the flow-on effect of the increased supply takes hold. In a hyperinflationary environment, here's how a million bucks in new money plays out: In week one, it buys you a new house In week two, it buys you a new car In week three, it buys you a new friday In week four, it buys you a restaurant meal In week five, it buys you a newspaper That is a necessarily exaggerated example, but the beneficiaries of newly inflated money are those that first get to use it. And that is the banks. This is all entirely by design; the true purpose of having a central bank and a fiat currency.

by jamoes 14y ago

leot 14y ago

That's awfully convoluted. You're asserting that this Glenn-Beck's-whiteboard-esque arrangement holds more sway on banker's behavior than the effects of inflation on bankers' own personal wealth holdings. Do banks want to be bailed out? Sure. Who doesn't. Do rich bankers benefit more than the working class from higher inflation? Certainly not.

brc 14y ago
>Do rich bankers benefit more than the working class from higher inflation? Certainly not. Yes, they do, because they are the first to get to spend the inflated money. If you go back to a point in time when the royal mint could produce an inflated currency by diluting the metal content in coins, then they were the beneficiary of the inflated money by getting to spend it at the current price levels. By the time that money filters through the system to the poor, the prices have risen and the currency is worth less. The same happens now when the central bank provides newly-minted funds to banks. The banks get first use of the money and get to use it at current price levels, before the flow-on effect of the increased supply takes hold. In a hyperinflationary environment, here's how a million bucks in new money plays out: In week one, it buys you a new house In week two, it buys you a new car In week three, it buys you a new friday In week four, it buys you a restaurant meal In week five, it buys you a newspaper That is a necessarily exaggerated example, but the beneficiaries of newly inflated money are those that first get to use it. And that is the banks. This is all entirely by design; the true purpose of having a central bank and a fiat currency.