No post body was provided.
Have we been thinking about inflation all wrong?
11–20 of 518 posts
Re: Have we been thinking about inflation all wrong?
#12The thing to keep in mind is that what really matters is stuff: The goods and services that add economic value to our lives, like shoes, houses, food, sports games, accounting services, haircuts, etc. Also called the metaphorical "pie."
Inflation is bad to the extent that it causes the total stuff we produce to go down or to become more poorly distributed, and good to the extent that it does the opposite.
And a shrinking of the pie - a reduction in stuff produced - can/will cause inflation assuming people have the same or greater amount of money with which they can purchase that stuff.
The more we stay focused on the production of stuff, and less on the quantity of money or inflation, the better off we will be, and inflation will take care of itself.
Re: Have we been thinking about inflation all wrong?
#13An analogy of what I hear:
A surgeon having a nearly dismantled body in front of them, thinking "hmm maybe I should have put a hanzaplast on that poor fella, maybe would have saved him"
Surgeon being the "economists", body being the economy.
Re: Have we been thinking about inflation all wrong?
#14Sure, let's whitewash the current administration's total failure and rebrand as a success.
I think there are decades of bad policy stacked on top of each other that are responsible for the current mess.
Current administration created gazillions of dollars out of thin air, far more than previous ones. They deserve the credit.
Re: Have we been thinking about inflation all wrong?
#15The basic assumption here is that inflation reduces inequality. That's plausible (it certainly was a strong contributing factor to the great reductions in inequality that occurred between 1920 and 1950). But inflation is also an extremely blunt-force instrument: lots of people who aren't very wealthy also get hurt. I'm not sure why we'd want that in a world where fiscal policy (i.e., taxation) exists, unless we've ju…
If anything it increases inequality. It hurts the poor the most. The wealthy are more immune because they will have their wealth in things that go up with inflation. When it is caused by the government spending more than it takes in, it is effectively a hidden tax. NONE of these things are new concepts. Even the belief that the inflation won't hurt is new. Many other societies have blindly thought they were immune un…
When you say the wealthy are immune because their wealth is in things that go up with inflation, what exactly are you thinking about? Not stocks for sure. Maybe those who have money invested in property for hire, but even then whether your income goes up with inflation strongly depends on where you are location.
Interesting to know: in some countries (eg. Belgium) wages are automatically adapted to inflation, so "the poor" aren't hurt at all.
Re: Have we been thinking about inflation all wrong?
#16Earlier quoted context omitted.
I think there are decades of bad policy stacked on top of each other that are responsible for the current mess.
Current administration created gazillions of dollars out of thin air, far more than previous ones. They deserve the credit.
[citation needed]
Re: Have we been thinking about inflation all wrong?
#17The basic assumption here is that inflation reduces inequality. That's plausible (it certainly was a strong contributing factor to the great reductions in inequality that occurred between 1920 and 1950). But inflation is also an extremely blunt-force instrument: lots of people who aren't very wealthy also get hurt. I'm not sure why we'd want that in a world where fiscal policy (i.e., taxation) exists, unless we've ju…
If anything it increases inequality. It hurts the poor the most. The wealthy are more immune because they will have their wealth in things that go up with inflation. When it is caused by the government spending more than it takes in, it is effectively a hidden tax. NONE of these things are new concepts. Even the belief that the inflation won't hurt is new. Many other societies have blindly thought they were immune un…
The article's point is that it doesn't hurt the poor as much, because more poor people can find jobs, pay off their loans more easily, and they do make more money.
Not to mention that the price of everything isn't going up a single number -- poor people can adjust their spending to account for the items that reflect the highest inflation, and focus on the goods that are least effected.
The article isn't suggesting there are no downsides to inflation, it's suggesting that there are substantial upsides that directly address some systemic inequality in global society.
Re: Have we been thinking about inflation all wrong?
#18The basic assumption here is that inflation reduces inequality. That's plausible (it certainly was a strong contributing factor to the great reductions in inequality that occurred between 1920 and 1950). But inflation is also an extremely blunt-force instrument: lots of people who aren't very wealthy also get hurt. I'm not sure why we'd want that in a world where fiscal policy (i.e., taxation) exists, unless we've ju…
If anything it increases inequality. It hurts the poor the most. The wealthy are more immune because they will have their wealth in things that go up with inflation. When it is caused by the government spending more than it takes in, it is effectively a hidden tax. NONE of these things are new concepts. Even the belief that the inflation won't hurt is new. Many other societies have blindly thought they were immune un…
This lacks nuance. Who inequality "hurts most" depends on a huge number of factors. As I previously mentioned, there have been numerous historical instances in which inflation contributed to dramatic decreases in inequality. The fact is, though, inflation's relationship to inequality isn't simple, hence my characterization of inflation as a "blunt-force instrument."
Re: Have we been thinking about inflation all wrong?
#19Inflation is bad in the sense it punishes people that made the right decisions and saved money for their retirement. Inflation eats away at the savings they made in their working life and makes them a pauper in old age.
The argument that they should have been invested fully into the market is fine for educated people. But many uneducated people save cash because they do not have access to all the financial tools that educated people do.
Inflation also empowers elites who have had access to debt. Inflation reduces the value of that debt in real terms and cements their wealth ... because they use debt to acquire real assets: real estate, companies, stock, etc.
Inflation rewards the elites and punishes the working savers. It is a tool that is used to transfer wealth from the many to the few.
So I oppose these periodic debasements of currency.
Look at the examples of Venezuela and Argentina to understand the true dynamics of inflation.
Re: Have we been thinking about inflation all wrong?
#20Betteridge's Law of Headlines says: "No."