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Comment by sonotathrowaway | Hacker News Reader

I don’t think it’s really been proven that high inflation hurts the poor more than rich - wealthy people hate inflation as it eats into their returns on capital.

They don’t make for sympathetic victims, but fortunately the WSJ has never been averse to changing facts to fit its narrative.

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Inflation hurts those, who have their resources denominated in inflated currency, so cash, bank accounts, even your wage specified in contract.

If you converted into other assets, whose price floats against the currency (stock, real estate, metals, art), the price is affected by the floating, but that floating can protect you against inflation as well. You can lose without inflation as well, the risks are different.

If you have that in foreign currency, you are damaged by their inflation, but not necessarily by domestic one.

And now back to your point: who do you think has the resources, that can be held in non-liquid form, convert back as/if needed? Rich or poor?

> Building on the existing literature, we just published a working paper based on a sample of 10 OECD countries since 1970 that isolates the impact of inflation from other factors driving income inequality.

> After accounting for the effect of other economic variables, we find a negative correlation between long term inflation and income inequality for low inflation rates. The results suggest that this link turns positive for higher inflation rates (i.e. above a threshold that we estimate at an inflation rate of 13%). These results are in line with other previous studies, which also find a U-shaped relationship between inflation and income inequality (Galli and van der Hoeven, 2001, Bulir, 2001, and Auda, 2010). However, they contradict the strong and widespread belief that inflation hurts the poor more than the rich and thus increases income inequality.

https://www.cepweb.org/inflation-and-inequality/

> The economic channels behind the negative correlation between inflation and income inequality are still unclear. How this negative correlation turns to be positive for higher inflation rates also remains to be better understood.

Until the causes of the correlation is better understood, it could as well just an error in the model.

A lot of poor people, maybe most of them, have more cash-denominated debts than cash-denominated assets.

If they're poor, their debts are likely not backed by collateral - akin to credit card debt or payday loans.

Those debts are at such high interest rates that inflation and rate hikes have little bearing relative to how much it already costs to sustain them.

By contrast, wealthier people mostly have mortgage debt, backed by real estate as collateral. Those are at much lower interest rates and benefit from inflation.

How can it not hurt poor people more? Food prices, gas prices, rent increases are things that are critical for survival for poor people. Rich person in a Tesla is not affected. If you are a minimum wage or near minimum wage earner, you have no margin to deal with price increases. We are talking about hurt in the sense of survival, not rich ppl crying about losing their stablecoin.

You're right; my understanding is that for the poor person, inflation is only part of the picture: wage growth is the rest. Inflation is always bad for the investor class. Inflation is only bad for the wage-earning class when their wages don't follow.

Unfortunately, the wages for a vast majority of workers are set by the owning class. I believe some beardy German bloke wrote a couple of volumes all about the consequences of this over a century ago.

I do bristle at the whole "1970s inflation spiral was caused by inflation-pegged wage increases demanded by unions" argument. The logical end of that argument is that when inflation happens, wages should suffer. Meanwhile we have oodles of subsidies and tax/legal carve outs for big business and variously protectionist trade policies. Why isn't it "when inflation increases capital gains tax also increases", hmm?

It's also an odd argument for a supply-failure-induced inflation spike. Fiat currencies just have a hard time dealing with that kind of thing--such situations come dangerously close to making people realize the currency is literally worthless because all you have is this weird paper when you want gasoline. The bug isn't a bug, it's the system working as conceptualized (printed money = the stuff/services you can buy with it).

The question is: why aren't wages also thought of this way? I don't really care that I make N dollars. I care that I can buy N gallons of gas. Unions sought to make that a reality in the 70s, perfectly reasonably, and we've let conservative economists make that the boogie man.

I think a fair counter argument here is "if there's less stuff, we can't guarantee that your wages will always let you get N% of it", but my rejoinder here is why are wages the first thing on the chopping block? It seems like we have a lot of other areas to trim first, but our immediate reaction is "lower wage power by not pegging them to CPI, and raise unemployment by raising interest rates", both of which workers bear the brunt of. That strikes me as pretty unfair.

I'm sure I'll recognize the name of the books once you mention it, but could you clarify who the beardy German bloke is and what books he wrote?

I think they mean Marx haha.

> my understanding is that for the poor person, inflation is only part of the picture: wage growth is the rest.

Depending on how you define "wage", there might be a 3rd category as well: government-provided benefits. E.g., social security, food stamps, tax credits, etc. My impression (very well could be wrong) is that there's often a lag between true inflation and adjustments to those benefits.

Also consider elderly on fixed income:

https://thehill.com/changing-america/respect/poverty/3572806...

And we know wage growth for the poor unemployed is far below current inflation levels.

This depends upon how much is required to be “rich”. The wealthiest people on Earth tend to use the most debt, and debt likes inflation. You pay off your debt with cheaper dollars. Additionally, it is precisely during periods of recession and/or inflation that we see the disparity between the wealthiest and poorest widen most quickly.

https://www.cepweb.org/inflation-and-inequality/

I was using the superlative. “Wealthiest”. This is billionaires, not millionaires. Not merely rich, but the most rich.

So the wealthy are concerned about their investments, while the poor are concerned about where they’re going to get their next meal, or if they can afford to pay rent next month. And that’s an equal amount of “hurt” in your view?

You’re trying really hard to find something to be offended about.

You could go write for the WSJ - they need more hot takes about why rich people getting poorer is actually a tragedy.

I guess that depends on how you define hurt. Rich people may lose more in an absolute sense, but poor people will suffer more from their smaller loss. Most or all of their money is needed for survival.

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