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Have we been thinking about inflation all wrong?

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Re: Have we been thinking about inflation all wrong?

#111

Post by cableshaft »

namdnay wrote: post #108
uticus wrote: post #106

> If inflation were allowed to run a bit higher, it could deliver a long-overdue win for young people who have had to face a combination of stagnant wages and rising housing costs. My understanding is that inflation hurts fixed income, especially the elderly who don't have the advantage of young people where they can change jobs or absorb risk as readily. If that's true, then the "wrongness" of inflation has been pin…

> it's ethically wrong to financially hurt our elderly. Why would it be more wrong to hurt the elderly than the young? The elderly are far wealthier

Youth don't have as much (or any) savings to lose and can switch jobs / demand a raise to make a higher wage. Anything they do have saved is probably invested and increasing in value along with inflation.

Elderly just have less money to eke a living on, and can no longer get a job (most likely).

Everyone gets hurt by inflation (well, maybe not if you have a ton of debt), but the elderly are stuck and can't do anything about it.

Re: Have we been thinking about inflation all wrong?

#112

Post by TheGigaChad »

WillPostForFood wrote: post #77
opportune wrote: post #68

Earlier quoted context omitted.

Poor people can benefit from inflation in the sense of it wiping out debt or spurning wage inflation/decreasing wealth inequality

Rich people are more likely have debt like fixed rate mortgages that inflation can wipe out. Poor people are more likely to have interest indexed debt like credit cards or variable rate loans that will crush them when inflation rises. Inflation is terrible for the poor. We can already see wages lagging behind inflation.

No post body was provided.

Re: Have we been thinking about inflation all wrong?

#113

Post by soVeryTired »

mdavis6890 wrote: post #12

The 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 shri…

In economics, this viewpoint is known as the "classical dichotomy" [0]. IMO it's a bit of a dangerous way of seeing things since it blinds you to some important aspects of the economy. Inflation is particularly hard on people who don't have negotiating power, and in general those people aren't doing great to begin with.

While the size of the pie is important, so is the means of distributing the pie and the assurance that pie will be served tomorrow.

[0] https://en.wikipedia.org/wiki/Classical_dichotomy

Re: Have we been thinking about inflation all wrong?

#114

Post by uticus »

namdnay wrote: post #108
uticus wrote: post #106

> If inflation were allowed to run a bit higher, it could deliver a long-overdue win for young people who have had to face a combination of stagnant wages and rising housing costs. My understanding is that inflation hurts fixed income, especially the elderly who don't have the advantage of young people where they can change jobs or absorb risk as readily. If that's true, then the "wrongness" of inflation has been pin…

> it's ethically wrong to financially hurt our elderly. Why would it be more wrong to hurt the elderly than the young? The elderly are far wealthier

> The elderly are far wealthier

Ignoring the stats, please think long term about your implications.

Let's imagine you are a young person. Your wage increase means you have $20 to save for retirement, vs $10. However, if inflation remains average overall, by the time you get to retirement, your $10 buys $5 worth of stuff. On top of that, you are now old. A young person decides you are able to pay more because you've saved more (having had more time to save). Your $10 in retirement is reduced to $8, to buy $5 worth of stuff.

Re: Have we been thinking about inflation all wrong?

#115

Post by 01100011 »

jaymicha wrote: post #102
trhway wrote: post #80

Earlier quoted context omitted.

> 7% is higher than we would like, but if the alternative is to have shrinking GDP and massive unemployment, I would rather have some inflation. The alternative is to have typical 2-3% of inflation and correspondingly the typical 2-3% of GDP growth with healthy labor market. The 7% inflation does get you that 7% GDP growth we're seeing and red hot labor market, yet it is just a temporary effect, like a shot of stimul…

I'm not sure this is true - the base case seems to be the Eurozone, the countries of which intervened in their economies enough to forestall a depression, but not to the extent that the US did. Eurozone inflation is just a notch above 5%, unemployment rate right about 7%. In the US it's 7% and 4% respectively. In effect, the US traded a ~2% rise in yearly inflation for a ~3% reduction in unemployment. Reasonable peop…

Is there a reason you think US money printing, which increases the supply of the world's main currency, is not the cause of at least some non-US inflation?

The suppression of interest rates in the US means it is cheaper to borrow loans in USD right? Those loans are available to foreigners as well. The asset price bubble is international at this point, and with it, the wealth effect leading to sustained levels of demand which would be absent if adequate pricing signals were still allowed to be effective.

Re: Have we been thinking about inflation all wrong?

#116

Post by valcron1000 »

TremendousJudge wrote: post #64
ccuqui wrote: post #58

Inflation is the direct result of governments printing money like crazy to hide why they spend money like crazy and continue to be extremely inefficient and corrupt instead of cutting expenses and becoming more efficient and leaner. And it mainly affects the poorest in society. How can that be good?! Don't take my word for it: see what is happening in Argentina, Venezuela, Brazil, etc and then decide for yourself how…

Brazil has had its inflation under control (for Latin American standards, anyway) since the 90s, after the Plan Real. Also, Latin American runaway inflation is something that has been happening since the 60s, every measure under the sun has been tried to fix it, with only limited success in some cases. Anyway, it's a bit more complicated than "spending money like crazy and being corrupt".

In Argentina the cause is plain and simply "spending money like crazy and being corrupt". Source: I've been living here for my whole life.

Re: Have we been thinking about inflation all wrong?

#117

Post by reedjosh »

WillPostForFood wrote: post #72
djrogers wrote: post #5

It's telling that the vast majority of the pushback on the 'inflation is bad' viewpoint comes from well-off academics, tech folks, and just generally people who are hurt the least by inflation.

Data does not support that. People with lower wages suffer the most with inflation. It's like a regressive tax. A $2 increase in the price of a gallon of gas takes a much bigger percentage chunk out of the disposable income of a minimum wage employee than tech folks. https://fivethirtyeight.com/features/most-americans-are-afra...

I think you misread the parent comment here.

Your arguments seem to agree with it.

Re: Have we been thinking about inflation all wrong?

#118

Post by tinalumfoil »

WillPostForFood wrote: post #72
djrogers wrote: post #5

It's telling that the vast majority of the pushback on the 'inflation is bad' viewpoint comes from well-off academics, tech folks, and just generally people who are hurt the least by inflation.

Data does not support that. People with lower wages suffer the most with inflation. It's like a regressive tax. A $2 increase in the price of a gallon of gas takes a much bigger percentage chunk out of the disposable income of a minimum wage employee than tech folks. https://fivethirtyeight.com/features/most-americans-are-afra...

I think you and parent are in agreement. The wealthier can also afford to put more money in riskier but inflation resistant assets like stocks, so it goes beyond gas prices.

Re: Have we been thinking about inflation all wrong?

#120

Post by dnautics »

> If inflation were allowed to run a bit higher, it could deliver a long-overdue win for young people who have had to face a combination of stagnant wages and rising housing costs

what the hell? Inflation exists as a policy to stiff wage-earners. This is arguably more likely to go exactly the other way than the author expects. Take it from a nobel laureate:

https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...

> it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts [...but when you have inflation, their wages get cut without anyone being the wiser!!].

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