Who are the people who save money? Or rather, more specifically are either holding cash or in bonds whose real-yields are very negative?
Tourists, downpayments, and retirees.
Flipside, who is benefiting the most right now? People who are leveraged the most. Jeff Bezos and amazon isn't building all these warehouses out of pocket. These are all being financed and amortized for 25 years at tremendously low rates with real yields in the negatives. Or rather Jeff Bezos is being paid HUGE money to take on debt.
Retirees are getting poorer by the day giving their money to Bezos.
High inflation disproportionally benefits the ultra rich by huge degrees.
Meanwhile most people keep their savings inside their body as human capital. Most people make a living by utilizing this human capital. If inflation gets them a job it is worth it.
Now, it happens that in the US the people working the least paid jobs have seen a wage increase, but that won't be necessarily the case and they aren't the only ones on a tight budget.
I don't think we disagree.
And how much of that $10k will dwindle as your expenses go up and your income is no longer in surplus?
One thing to add is that, in addition to being a tax on savings, inflation also leads to misallocation of resources, because the newly printed money is not distributed equally. (If it were, it would actually have little economic effect, because all prices, including wages, would rise by exactly the same fraction and everybody's behavior would be unchanged, other than the unavaoidable tax on savings.) So the money that is being taxed away from those with savings is being given to whoever is favored by the authority that is printing the money. That allows those favored parties to bid away resources from others even if those resources would be more productively employed elsewhere. And so we get, for example, huge swaths of commercial real estate built (because one of the favored parties is financial institutions who give loans on real estate) and sitting empty for years, while our infrastructure crumbles because there aren't enough construction resources available to fix it.
You will bark at the wrong tree for the rest of your life. Permanent money causes inflation because the physical world isn't permanent. It needs a constant energy input to keep running. This energy input is simply ignored. So it has to be modeled after the fact via inflation.
A negative interest rate on cash makes money no longer permanent meaning money no longer has to be replicated endlessly to model energy losses or liquidity costs.
Yes, nature is stealing your youth, it's clearly a tax on youth. Imagine if you could just simulate your age being 18 on your id and everyone thinking that you are 18 forever by legal decree. At some point people will notice your grey hair and the ruse is over. They get the silly idea of adjusting your age back to your real age. Money should age via negative interest rates to be consistent with the laws of thermodynamics.
This is nonsense on so many levels that I don't even know where to begin.
>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.
That's a bold statement. Why should the adjustment be proportionally more when there is more inflation? Isn't it more likely that pay is merely adjusted to the previous level and the time of increased inflation just reduces the net income even more?
That's basically Germany's state motto.
sarcasm...
You could have scenarios where the central bank does not change policy but money supply increases because banks are lending more money and therefore using the discount window more.
Also people could expect more inflation in the future, so they try to get rid of cash faster to buy goods. This increase in money velocity will also increase inflation.
Which is why monkeying with how inflation is calculated usually means chicanery and tomfoolery is afoot.
Savings are to be invested. If investments can’t beat inflation then you have a shrinking economy and no amount of deflation is going to get the wheels turning again.
It’s not that Keynesian economists don’t understand that inflation is a tax on money, it’s that they see the purpose and reason for inflation from a completely different angle than, say, Austrian economists.
It acts as a mechanism which nudges me to lend less apples overall. If inflation is good, why not ramp it up to 200%? At that level it's clear that nobody would accept money and barter would take place instead. And my thinking goes that it is also bad at those lower percentages, except to a lesser degree. I don't see how it can suddenly turn to positive at, say 10%.
What you describe is something like a promissory note, and doesn't really capture it. If you can trade that note to someone else for a box of framing nails, then you get to the crux of the issue.
It's not pressure for you to ask for the the apple back soon, but to use it for something soon not just sit on it.
The economists will tell you this pressure keeps the economy trucking along nicely. Of course, if it goes too far, you ruin peoples lives. Going to far in the other direction, also ruins lives.
If the coupon spoiled via negative interest rates then the person who holds the coupon and is responsible for the storage costs is paying for the privilege of not worrying how to store an apple that is spoiling.
Barter says you buy you sell. Money says you buy and buy or you sell and sell. Quite absurd isn't it?
Replace apples with workers and the orchard with the economy.