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The rich prodomiently hold their wealth in assets. These assets are more akin to rise in an inflationary environment (ie. Stock market.) It usually the middle

The rich prodomiently hold their wealth in assets. These assets are more akin to rise in an inflationary environment (ie. Stock market.) It usually the middle class that is desvated as most do not have any assets other than their homes and rely on a salary for the majority of their income. It is possible for inflation and deflation to co-exist. Wages could down while the cost of food, housing and energy raises.

lazylizard 11y ago
Wages could down while the cost of food, housing and energy raises. -> is inflation?
- dagw 11y ago
  Economists generally call that stagflation.
- crpatino 11y ago
  Strictly speaking, salaries lag behind prices in typical inflation scenario. It is not that your wage go down, it is that it won't go up until your performance review 3 months down the road, but in the mean time you still have to pay bigger bills at the store. Increase in prices itself is not inflation, but an lagging indicator of inflation. The prices go up because there's more money around, but the same amount of products and services. One way this can happen is when the government keeps printing money faster than the economy is growing. At the end, this is just a disguised form of taxation. The government creates extra money, but if there is not extra GNP to back it up, the extra value has to come from somewhere else. That means all the previous money get debased. Everybody pays their "fair share", even the pimps and drug dealers mentioned earlier in the comments. (This is not the only possible scenario, but it is simple and easy to understand). And the reason you do not want the government to stop printing more money at all, the way the gold bugs say things ought to be, is that if the economy grows but the money supply stay flat you get deflation. Same amount of money chasing an increasing supply of goods and services... meaning you are basically paying people to sit on their cash and wait for prices to go even further down, arresting economic growth. This is the stuff economic depressions are made off.

lazylizard 11y ago

Wages could down while the cost of food, housing and energy raises. -> is inflation?

dagw 11y ago
Economists generally call that stagflation.
crpatino 11y ago
Strictly speaking, salaries lag behind prices in typical inflation scenario. It is not that your wage go down, it is that it won't go up until your performance review 3 months down the road, but in the mean time you still have to pay bigger bills at the store. Increase in prices itself is not inflation, but an lagging indicator of inflation. The prices go up because there's more money around, but the same amount of products and services. One way this can happen is when the government keeps printing money faster than the economy is growing. At the end, this is just a disguised form of taxation. The government creates extra money, but if there is not extra GNP to back it up, the extra value has to come from somewhere else. That means all the previous money get debased. Everybody pays their "fair share", even the pimps and drug dealers mentioned earlier in the comments. (This is not the only possible scenario, but it is simple and easy to understand). And the reason you do not want the government to stop printing more money at all, the way the gold bugs say things ought to be, is that if the economy grows but the money supply stay flat you get deflation. Same amount of money chasing an increasing supply of goods and services... meaning you are basically paying people to sit on their cash and wait for prices to go even further down, arresting economic growth. This is the stuff economic depressions are made off.