This is completely wrong, it disproportionally affects the poor and middle class the most because all they have is their wages and a little bit of cash. Wages are not that elastic and will certainly lag behind. Rich are heavy on assets and it doesn't affect them at all unless they are stupid enough to convert those assets to cash during high inflation period (it of course doesn't happen).

I agree. I'm not ashamed to admit though, I'm still a little baffled by Buffet's backing off into "cash" - or out of the market - I guess cash means different things to different people...

This is so wrong I don't know where to start. I'll just say 2 things:

a) your charts are a classical example of "try hard enough and you will find 2 charts that correlate"

b) Inflation affects the poor because they don't, and sometimes can't, hold assets that traditionally protects the rich from inflation, such as real hard assets (such as real estate) and a sizeable chunk of stocks (some types) and bonds (TIPS and short duration). The poor lives paycheck to paycheck and see their income staying the same while everything else around them is increasing in price.

As I explained above, some assets protect you from inflation. Like stocks in companies with pricing power, real estate... But almost no assets protect you from the raise in the risk-free-rate that is usually following a high inflationary periods. As the risk-free-rate enters into model valuations of future cash-flows and a raise to it implies a multiple contraction.

Is it? What if we go even farther?

http://www.aboutinflation.com/_/rsrc/1369736776695/inflation...

Without looking back at the wealth inequality chart. What would you say was the result of the highly deflationary period of the 1920s? Increase of wealth inequality or decrease of wealth inequality?

Without looking back at the wealth inequality chart. What would you say was the result of the high inflationary period of the 1940s? Increase of wealth inequality or decrease of wealth inequality?

> Inflation does not affect (relatively speaking) the poorest more.

Not at all: people with low incomes struggle the most to get raises.

And those who barely get to the end of the month struggle the most when their purchase power decreases by 5%.

> On the contrary, it's a tax on people that have a lot of cash or cash-equivalent assets.

No, wealthy people tend to invest theirs saving in various things that resist or often even beat inflation.

I think you are confusing two things. The poor may struggle to reach ends-meet more than the rich, of course. But that doesn't mean that relatively speaking inflation is a regressive tax that the poor have to carry the burden of disproportionately.

> No, wealthy people tend to invest theirs saving in various things that resist or often even beat inflation.

This is easier said than done. Given a risk-free rate it's not that hard to find investments that beat it. What usually happens is that the risk-free rate is around inflation. But right now the risk-free rate is significantly lower than inflation. If the Fed raises the risk-free rate to match inflation then high valuations will correct resulting in a strong correction in the stock market.

SP500 historical chart: https://www.macrotrends.net/assets/images/large/sp-500-histo...

Look at the 70s, same period of high-inflation I was referring to above. The wealthy didn't beat inflation back then, which again is reflected in the previous wealth inequality chart.

> But that doesn't mean ...

I explained how salaries are not automatically tracking inflation, especially low ones.

https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...

https://www.epi.org/productivity-pay-gap/

All things being equal (income for one) inflation in the most practical sense dis proportionally affects the poor and the middle class.

In a numerical sense the rich may suffer more but they won't eat a sandwich less because of it, whereas poor people may end up much poorer and the middle class (aka the comfortably poor) are significantly impacted.

Keep in mind that at the same time there’s a high tax on cash central banks have arranged things such that there are no safe investments. They’ve pushed people into memecoins, electric car companies that haven’t made any cars, and flipping homes in the exurbs of Las Vegas.

"rich in cash"? No. Just those without other assets. Are you rich in cash if all $100 you have is in cash?

Inflation is the most regressive tax possible on the poor.

Only if wage inflation doesn't keep up with price inflation. If wage inflation keeps pace, it's actually a fairly progressive result since debt loses value relative to wages.

For people without income or assets it's a disaster.

Very true. And, unfortunately, thus far, the wage growth we saw earlier on in the pandemic has not held, because it was largely the result of lower paid people becoming unemployed. Wages have barely budged relative to inflation since 2019, even if you only consider employed people. We're definitely in the "very not good" scenario here.

See https://www.pewresearch.org/fact-tank/2021/09/07/despite-the...

Minimum wage is always going to lag way behind inflation. In practice, almost all wages lag behind inflation. But "people without income or assets" is my definition of "poor" and ...yeah, inflation basically takes a meager $1200/mo government check and makes it worthless. they're already on the brink of starvation.

I don't disagree with the overall point that it's likely that inflation will hurt a lot of economically vulnerable people.

I do think defining poor as unemployed is way too narrow. There are plenty of people who are employed and also poor.

>> I do think defining poor as unemployed is way too narrow.

Definitely. You floated the idea that inflation would be progressive if the creditors have to pay higher wages (if wages rise in sync) while their loan portfolios in "old dollars" become essentially a worthless write down. There's a beautiful, even just economic logic to that. The trouble is that the lag itself becomes wealth under inflation. Normally, TTL between promising a worker a check and sending it gives a nominal value for holding that money as long as possible in an interest bearing or inflation-proof asset. Under inflation that time differential goes wild. Sometimes within a day or two, the value of the payment is gone by the time it gets to the employee. This is before it even enters the system as purchasing power.

Time becomes the most crucial element of profit and control, under inflation.