Re:Why do people hate inflation?
by high_priest on Tuesday July 13, 2021 @04:59PM
(#27826256)
> Of course nobody likes it that prices go up, regardless of the "veil of money". People who remember sub-$1 gasoline will always think of that as the right price, regardless of what wages have done since then.
This argument against inflation is brought up very often in my family and circle of friends. People are used to the way of living they were brought up in, especially because of the "savings sock" culture that seemed to be common in their youth. People that bought into it and kept their finances frozen, or bought into retirement plans that try to pay out less than promised 30+ years ago, when even if they did pay out full, it would be of insignificant worth.
It is also very difficult to fight for a decent wage, with leaders and job-givers preaching "In your age I earned half what you are asking"... Which would be not enough for rent in current money.
It focuses heavily on the 1970s, which were over four decades ago. Inflation in the 1970s was driven heavily by a shock in oil prices, which contribute to just about everything else. Wages didn't match inflation because the prices of inputs went up, and out of the country.
We haven't had anything to match that since the 1980s. Inflation has largely been around the Fed's target rate. For the past decade, it's been under the target rate. There has been inflation in the asset markets, driven by quantitative easing, but not much at the consumer level.
The other cultural factor is that objections to inflation depend partly on ideology. The loudest voices about inflation are also the ones promoting supply-side economics. The claim is that anything that helps the consumer side of economics, like minimum wage increases or subsidies for health care or college, will cause inflation -- while subsidies for the supply side (such as lower capital gains and corporate taxes) will create jobs and increase the economy.
This comes primarily from one set of economists, and is widely considered faulty by other economists. I bring it up not to debate the merits, but to point out that it may have less to do with individual perceptions of prices and wages than the article suggests.
Rather, I think a lot of it has to do with ideological unity: it's an accepted fact among some people that inflation is so inherently bad that it must be avoided at all costs. Whenever I hear such discussions, "inflation" and "hyperinflation" are treated as practically synonymous; any potentially inflationary move draws comparisons to Zimbabwe. The US hasn't turned into Zimbabwe despite more than a decade of very loose monetary policy, and yet I keep hearing it.
Of course nobody likes it that prices go up, regardless of the "veil of money". People who remember sub-$1 gasoline will always think of that as the right price, regardless of what wages have done since then.
So I don't think ideology accounts for all of it. But I believe the article needs to consider it to get a full picture. The 1970s were a time that has driven a lot of American political division, and that has more to do with who people believe they are rather than any considered economics. They'll pick the economists to suit their beliefs, not the other way around.