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Comment by argentinian | Hacker News Reader

> This is in fact one of the often ignored aspects of inflation, as well as taxes: a way to mitigate or avoid concentrations of wealth detrimental to society.

As somebody living in Argentina, a country with usual double digit inflation, your argument is complete bullshit.

Here the wealthy are not affected by inflation: they can save in real state, strong currencies, shares... And the same rich families stay rich for generations. We also have very high taxes.

Inflation harms the poor more than the rich. Try living in Argentina for some years and you will learn.

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> As somebody living in Argentina, a country with usual double digit inflation, your argument is complete bullshit.

The only bullshit I spot is this idea to use Argentina, or Zimbabwe or Venezuela, as the posterchild of responsible monetary and economic policies, when they are actually the result of gross and perpetual mismanagement.

https://www.wsj.com/articles/why-argentina-faces-an-economic...

Meanwhile most of the world reaps the benefits of sane and responsible monetary policies, and thus is free from hyperinflation, and somehow that's supposed to mean nothing? Only your cherry-picked appeals to emotion matter?

Even the European Union, which has been subjected to quantitative easing policies from around a whole decade and thus has been seeing their central banks print money like crazy, at most only complains about low inflation and mild economic stagnation.

> Even the European Union, which has been subjected to quantitative easing policies from around a whole decade and thus has been seeing their central banks print money like crazy, at most only complains about low inflation and mild economic stagnation.

The part with print money like crazy is absolutely true. The claim that there's low inflation in Europe, is absolutely false. Official inflation numbers are relatively low only because real estate and other things are arbitrarily excluded from cpi. It's always astounding to me how people can pretend as if rising real estate prices did somehow not trickle down to rents and thus effectively all everyday purchases, people make.

The world is full of zero-sum games whose existence people often deny ... just because many of them are long and complex and interconnected chains of interactions which means they are lots of work to describe accurately doesn't mean they're not there.

I agree, the inflation here is the effect of the perpetual and gross mismanagement.

What about your idea regarding inflation as a way to avoid concentrations of wealth? (the idea I quoted and I replied to). That one is unsustainable.

There is a distinction between inflation and hyperinflation. An analogy would be someone saying that a modest reduction in caloric intake is healthy for most people, and you responding that it isn't, anorexics die without enough calories.

When inflation is present, but less than 3%, there isn't an incentive to hoard it, because simply sticking it in a bank account means it will be slightly less valuable a year from now than it is today. For poor people, who are spending most of their money on necessities, it won't mean much (unless their employers don't match incomes with inflation, which IS a problem). But for rich people, it offers a powerful incentive to spend today, or to invest their money with hopes that the returns will offset the inflation. A rich person's money flowing through the economy, be it through exchange for goods, or through investment, is far more valuable to society than it is sitting under their mattress.

Debts are also easier to pay off. With inflation, your debt of $X is easier to pay off in the future than it is today. Poor people struggle to pay off debt more than rich people, and governments are more likely to rack up debts to pay for public works and infrastructure, knowing the bill will be easier to pay down the line with inflation.

Compare that to deflation. With deflation, your money gets more valuable over time, not because you invested it in something useful, but simply because it exists. Now if you are rich, why do anything at all with your money other than stick it under a mattress? Why spend it, or take the risks that come with investment, when you are guaranteed it will be worth more than you have now in the future? Poor people don't have this luxury. They have to spend money on their needs today, which means they are missing out on even more value tomorrow.

Deflation is just as toxic to the economy, and especially poor people, as hyperinflation.

> For poor people, who are spending most of their money on necessities, it won't mean much (unless their employers don't match incomes with inflation, which IS a problem). But for rich people, it offers a powerful incentive to spend today, or to invest their money with hopes that the returns will offset the inflation.

The way I see this, there's a fallacy there.

The claim, that inflation won't matter much for poor people is wrong. Even if their employers compensate for inflation with accordingly increased salary (which they don't always do) then there's still the fact that poor people are treading their treadmill, unable to advance one bit. In the best case they stay right where they are (relative to others).

Rich people on the other hand have the "burden" of sitting on assets that do not suffer inflation. And any excess money they earn which they don't need to spend on everyday items, they can put into investments that again do not lose value like cash does (under inflationary circumstances).

Quite simple: rich people have opportunities to invest and earn profits, letting them improve their position relative to poor people even further. Poor people don't have these opportunities and they even have to constantly fight for compensation of inflation while having shorter levers to push everywhere in society.

If rich people weren't urged to invest money they have sitting around (by threat of inflation), they'd maybe just hoard bigger proportions of it and sometimes spend some, instead of using it to acquire ever increasing proportions of assets from poorer people who have to sell. I'd say inflation almost directly causes wealth concentration.

In this way, inflation does indeed mean much for poor people. No, it's not totally obvious, kind of counterintuitive even. But it's true.

The current development is like a continuously happending race along a path of steadily increasing availability of pleasant goods and opportunities ... where the rich are moving significantly faster along the path than the poor. Yes, the poor do advance, but the lead of the rich continually grows larger. Since wealth is psychologically very much a relative thing, this is bad, even if the absolute wealth of the poor is indeed increasing over time.

see answer to brother comment https://news.ycombinator.com/item?id=29013635

mainly the referenced links

> What about your idea regarding inflation as a way to avoid concentrations of wealth? (the idea I quoted and I replied to). That one is unsustainable.

You're free to discuss the facts I've pointed out, instead of going off on a tangent with a non-sequitur regarding Argentina's hyperinflation. It's undeniable that stockpiling cash out of the economy has a deeply negative social, economic, and even fiscal impact on a nation. Inflation provides an incentive to actually put the money to use, and interest rates for the most conservative investments, like risk-free bonds, are then used to provide incentives to couple investments with economic cycles.

You said that inflation and taxes are a way to mitigate or avoid concentrations of wealth.

As a counterargument I said that rich people don't save in cash and that inflation damages the poor more than the rich, the world bank has evidence for that: https://openknowledge.worldbank.org/bitstream/handle/10986/1...

> Inflation provides an incentive to actually put the money to use,

Inflation provides an incentive to get rid of the money that loses its value over time and instead change it for something else. This not only affects the rich, but also the poor. An effect is that it becomes more difficult for the poor to save and invest. The rich can handle inflation much better than the poor.

I found another article that arguments about this https://mises.org/library/whats-so-scary-about-deflation

And you are sure that the US government will never, ever mismanage anything?

> And you are sure that the US government will never, ever mismanage anything?

The US, unlike Argentina, hasn't spent over a decade experiencing with a >10% inflation rate, and half a decade at >25%.

Most of the world hasn't.

Until it does, any comparison with Argentina, or any country experiencing years of hyperinflation as a result of gross mismanagement, is overwhelmingly positive.

They are speaking of modest inflation, the 1-3% mentioned above. Obviously hyperinflation is bad. But deflation will also harm the poor just as much, while the rich are the sole benefactors.

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