Bigger numbers are better than small numbers and I have no idea.
“1/3 is bigger than 1/2 because bigger numbers are better than smaller numbers and I have no idea”
That is exactly what happened with third pound burgers.
https://www.snopes.com/news/2022/06/17/third-pound-burger-fractions/
hints :
- inflation increases the nominal amount of tax on added value, good for countries balance sheets
- inflation decreases the real value of sovereign debts
- a company will never lower its prices as long as sales do not plunge
- energy actors only look at natural gas prices when it raises, never when it comes down
you could add your own items to the list, it’s a long one.
Debt is what drives inflation. Let’s say you got a total of 1k USD in circulation. Now, let’s say that some person decides he needs to borrow 100 USD from the bank. The bank gives him the 100 USD, but with intrest. Let’s say that that intrest is 10 USD. So, the person gives back the 100 USD plus 10 USD intrest. But, there’s a problem. If a total of 1k USD is in circulation, where do the 10 USD come from. It can’t come from thin air, so it has to be printed. Thus, now you have 1.01k USD in circulation which inflates the prices of things.
There are other reasons as well. This is all well explained in Zeitgeist. I suggest you take a look at the documentaries.
Eh, I think you need to rethink this, as this is nonsense. Maybe you forgot some steps?
Why is it nonsence? It makes perfect sense to me 🤷. Granted I may not remember everything correctly and other things that were explained in Zeitgeist, but I think I remeber this correctly.
Because the 10 USD are not created from thin air but taken from the 1000 USD in circulation and transferred to the bank.
But it is true that the bank’s ability to conjure up the 100 USD debt even if they don’t actually have all of it contributes to inflation, so I guess your source might have gotten it correct, but you clearly misremember the details.
This is because inflation isn’t a bug it’s a feature.
Anything that transfers wealth up the chain, from working class to middle class and from middle class to upper class, is a feature of the western economic system.
For example, in England and Wales the Bank of England is charged with keeping inflation at a target of around two per cent. This means that the pound in a workers pocket is supposed to devalue. The advantage is that the government borrows money in its own currency so inflation means that its debt goes down (in real terms) when inflation goes up.
In other words, it’s similar to a tax in that the money you earn today, by the time you spend it, is worth less by design.
Inflation does has have a positive feature of encouraging investment and spending, rather than hoarding under a mattress. The money is put back into the economy because every day it isn’t, it loses value. If money were getting more valuable over time (called “deflation”), you’re incentivized to treat it like an asset—not a currency—and hold onto it as long as you can (like Bitcoin), rather than reinvest or spend.
Yes, this is true but you also have to factor in the marginal propensity to consume, or in plain English, the poorer you are the more of your income you have to spend on necessities like rent or groceries.
There are always high interest investments available to people with a large amounts of spare cash floating about even when inflation is low.
If your rent + utilities + food = your income then you ain’t hoarding money even in a deflationary spiral.
No, but you are more likely to get fired and lose your income as demand for labor drops.
Well, yes but no. The typical worker (sadly) has zero real savings and ideally their union manages to get at least an inflation adjusted raise each year. So those people are actually not effected by inflation at all.
It’s mostly a tax on upper middle class savings and a way to sneakily decrease wages if there is no strong labour representation preventing it.
Which union secured their members a 10% wage increase in the past year?
The poor are the most affected by inflation. Just because their spending pattern doesn’t shift doesn’t meant they aren’t affected. The shift in spending patterns is a way to avoid the effects of inflation. A person whose income cannot be diverted is the most effected.
It’s like a plane is crashing and one person ejects while the other person doesn’t. Yes getting ejected from a plane’s cockpit is a high energy event. But crashing in the plane is an even higher-energy event.
The people who you are saying are “most affected” by inflation are experiencing those effects in the activation of anti-inflation mechanisms in their life. Those anti-inflation mechanisms while they do represent an effect are not as big as the effects felt by those without access to those mechanisms.
Some managed to do so, but 10% inflation is exceptional anyways.
Otherwise I don’t agree. Obviously the poor are effected “the most” by any adverse economic effect due to their low coping capacity / economic buffer. But that they are especially affected by inflation is not universally true.
You need to drill down a bit further what inflation actually entails. The common “basket” used for calculating “the” inflation is far from perfect and depending on your consumption pattern you might hardly see any inflation in your personal expenses if it is mainly driven by an increase in energy costs as was the case in Europe during the last year.
Classic inflation aka devaluation of money only effects those that have money (savings). Of course if you have an increase in certain prices due to some external shock this can have a much broader effect, but it is actually wrong to call that “inflation”.
I’ve been taught that inflation deincentivizes hoarding wealth too, but seeing how wealth is still hoarded, I’m not convinced it’s an effective tool.
That’s the difference, they hoard wealth and not currency. The value of assets do not go down when currency loses its value with inflation.
Wealthy have little to no cash that would lose value with inflation, they just buy everything on credit and have their wealth tied to assets and investments that probably gain value at least at the pace of inflation.
It’s still true that a deflationary economy would be a mess though. If we had deflation, the rich wouldn’t even bother investing and would literally just sit on a pile of gold like Smaug. I know trickle-down doesn’t work but an economy where nothing circulates would be hellish.
A little bit of inflation is a fuel for economic activity. If money doesn’t lose value people have less incentive to put it to work; if it gains value(deflation) people have all the incentive to hoard money.
Currency has no inherent value, it’s purpose is to facilitate trades(economic activity). Products and services are the real value in an economy.
That being said inflation is a real tax and disproportionately hurts the poor.
There are a ton of issues with our economic system, and there are a ton of structures in place to funnel money up, but keeping a moderate inflation is not one of those things.
Inflation is a specific counter-measure against people who already have a ton of money. It provides a reason for them not to just “take their ball and go home” once they have a pile of money.
To shelter their money from inflation, they need to either risk it on the open market, allowing that capital to do things like pay worker salaries, or buy things like GICs which are essentially loaning money to the government so the government can do things like build roads or fund social programs.
In either/all cases, inflation is designed to do the exact opposite of funnel money upwards, it’s a mechanic to wrench that money out of the hands of the wealthy.
Or just buy gold and bitcoin and other things that aren’t tied to the value of the dollar.
This is exactly how inflation is a tax on the poor: there are ways to counteract inflation, which only become available at a certain level of wealth.
Basically disposable income is safe because you can convert it; and non-disposable income is not safe because you can’t convert it.
Gold is a shiny bauble material, but never grows. It can be a good investment for that part that you want to put aside and will just sit. Bitcoin is invaluable for money laundering, but very unstable for saving/investing. Look at how many have been fleeced when someone gets their keys, or lost their coins by a hard drive failure. It is costly in electrical use to mine.
There are far better things not tied to the value of a dollar. I would suggest very low-fee indexed mutual funds as one better alternative. They offer an accessible way for people to get a share of the means of production. My experience is that for people who can can learn to not be ruled by fear or greed can, over time, build enough wealth to live better lives.
It provides a reason for them not to just “take their ball and go home” once they have a pile of money.
If that’s the reason for it it’s not doing its job. Investments are much like savings to high net worth individuals and their investments are managed by someone else and they simply lay in the cut and collect dividends. Yes there is a risk to investments but if you’re in a good wealth fund then over time you’re almost guaranteed to win even if you have disastrous months here and there.
Yes, and the people at the top do keep their money in circulation, and as a result their wealth stays constant across inflation while workers’ wages and savings go down.
I have no idea why you don’t see that as a transfer of wealth.
You say it incentivizes the rich to not hoard cash. Well, they don’t. In fact, it incentivizes everyone to not hoard cash, but the rich are the only ones with sufficient cash to trade that cash for income-generating assets.
It incentivizes everyone by punishing everyone for holding cash, but only the upper class is able to evade that punishment by converting their wealth. Poor people don’t have though cash to transform it into wealth. Their cash is only useful to them as cash.
This is why the poor are feeling the inflation the worst. People who own no stock are the ones hit hardest when the government printed a bunch of money and injected it into the stock market.
I feel like this story is essentially propaganda at this point- at least in the USA where the ‘risk’ for the rich never plays out.
The rich don’t actually risk their money. They risk the government’s money and other’s lives and livelihoods. When they fail, they get bailed. Bailed out by the banks. Or they simply don’t pay their bills and lay off all their employees and let everyone else take a bath.
Rather than inflating everything, why don’t we tax the shit out of their held wealth? Seems more direct without all the side effects of making FOOD, HOUSING, AND HEALTHCARE UNAFFORDABLE
There isn’t anything wrong with the mechanic of inflation as a means to encourage money to be reinvested into the economy.
You’re right about cost of living not keeping up with wages. You’re right about fucked up taxes on the ultra wealthy. You’re right about a massive erosion of social services. you’re right that the USA healthcare system is fucked up.
These are all issues that are distinct from the plan of maintaining a moderate (2%) inflation rate.
Yes, we SHOULD get living wages, unions and legislation should do that. The top tax bracket SHOULD be taxed at 70% that’s tax policy. We SHOULD reinvest in social services that’s government poicy. You SHOULD get universal healthcare, that’s a government program. Inflation isn’t the thing keeping you from any of these things.
Inflation happens when rich people find out you’ve got more money and rush to fuck you out of that too.
That’s why any kind of tax break, stimulus or welfare is met with “but inflation!”
Experts in pseudoscience may claim “it encourages people not to horde wealth!” but it’s just another lie that makes rich people richer when it fails to deliver for the 1000th time.
Central banks have a target inflation of about 2% and actively try to prevent deflation (much more so than inflation). In general moderate inflation is a good thing as it puts some pressure on keeping the money in circulation instead of hording it.
