Comment by neilwilson | Hacker News Reader

Comment by neilwilson | Hacker News Reader

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"It's important to remember that inflation hurts the poor most"

Actual inflation hurts those who own debt assets and nobody else. Everything else isn't inflation.

If prices go up but don't feed through to income rises then two things happen - one you don't have an inflation, you have a redistribution, and two those price rises are unsustainable because you won't be able to sell your output as there is insufficient overall income to purchase it.

In a true inflation income rises along with prices so wage earners, and firms and indexed pension holders are protected. As are those living off investment earnings (since they just go up as firms earn more). Debts are rotted and debt holders (ie bankers) lose out.

The neoliberal trick has been to blow up a scare about bottleneck inflation as the supply side bat signal goes up but before the increased supply/constrained demand response kicks in and forces prices back down again. All in the hope of getting a policy change that will stop the income changes that would help increase the wage share and start the debt rotting process.

Wealthy people are the debt holders. Don't be their bag carrier.

> In a true inflation income rises along with prices so wage earners, and firms and indexed pension holders are protected.

This is not a given and far from necessarily perfectly correlated. Wage earners can still be hit.

There are several assumptions you make here, and none of them should be taken for granted.

And, well, people who hold cash (unless you classify those as debt-holders, which, sure, yeah, but that should be pointed out) or happen to invest in the wrong thing are also hurt badly.

> In a true inflation income rises along with prices so wage earners

So "true inflation" is no different than a "true scotsman."

Wealthy people invest, buy properties, and have assets that grow in value with inflation.

The poor have cash in a bank or in their closet that becomes increasingly worthless with inflation. Their rent, gas, and bread prices go up by large amounts, but if they're lucky, they might get an extra 2 cents an hour for their work.

If you buy assets, the seller of the asset has cash. It's a hot potato that you have to pass around for this to become true and you are never allowed to pass the hot potato to workers.

If the seller of the asset is a worker, then you have already lost.

If the seller of the asset is a rich person, then you just are back to square one as the second rich person has the inflation problem.

If the seller of the asset is a company, then it has to do something with the money as inflation erodes it, but it cannot do anything with the money because hiring people would give it to workers again, which means you lost the hot potato game again.

> If the seller of the asset is a company, then it has to do something with the money as inflation erodes it

The company does share buybacks and puts it back into the hands of a rich person.

>>Wealthy people are the debt holders. Don't be their bag carrier.

Source for this? Wealthy people invest in assets that also go up with inflation. Sure they may have some debt assets but I bet that is not the large part of their portfolio

however neither of you are really correct. Inflation hurts the middle class the most.

Wealthy have diverse portfolio's that factor in inflation, the poor are most likely debt ridden and live paycheck to paycheck, with inflation your debt becomes less expensive

The middle class however often have the most cash assets in traditional savings accounts, they also are in that sweet spot of not living paycheck to paycheck but not really having enough money to have a large diverse investment portfolio

Inflation is a tax on savings, anyone that has savings is hurt by inflation that normally is the Middle Class

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