Re:Our Broken Economy, in One Simple Chart
by mikeash on Tuesday August 08, 2017 @01:44PM
(#14960380)
I thought that (reasonably slow) inflation would help the middle class and be more or less neutral to the poor.
Inflation doesn't affect your day to day purchases much. Prices go up, but wages go up too (wages are just prices on labor) so it cancels out. What it affects is savings and investments.
Your typical middle class person has some savings and a big mortgage. Their net worth is positive but their net cash is negative. Inflation effectively shrinks their debt over time, making them better off.
Poorer people living paycheck-to-paycheck without significant assets or debts aren't much affected either way.
Wealthy people probably hold equities and bonds rather than cash, so they're not much affected either.
The people who are hurt are people with large cash hoards, in excess of any debt they may hold. Which I think is not a particularly significant proportion of the population.
Inflation doesn't affect your day to day purchases much. Prices go up, but wages go up too (wages are just prices on labor) so it cancels out. What it affects is savings and investments.
Your typical middle class person has some savings and a big mortgage. Their net worth is positive but their net cash is negative. Inflation effectively shrinks their debt over time, making them better off.
Poorer people living paycheck-to-paycheck without significant assets or debts aren't much affected either way.
Wealthy people probably hold equities and bonds rather than cash, so they're not much affected either.
The people who are hurt are people with large cash hoards, in excess of any debt they may hold. Which I think is not a particularly significant proportion of the population.