By magical means of course.
Inflation is a sneaky way to give the poor a wage cut. How else do you suppose the fed is supposed to be able to increase employment using inflation?
Edit: down voted, ok here is a citation from an economics Nobel laureate:
https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...
> when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation would lead to lower unemployment
By its very nature, giving laborers inflation-matching pay raises counters the explicit, intended policy effect of using inflation to increase employment. Or, your employment model could be relying on "let's use increasing prices to light a fire under people's asses to get them to look for jobs". Which, if you ask me, as a neoliberal programme is far crueler, far more pernicious, than any slash-public-services scheme that fiscal conservatives dream up.
Suppose we print a bunch of new money and hand it out to everybody. Now people have money in their pockets and want to spend it, so demand goes up, so prices go up, and we get inflation.
But most goods and services have elastic supply. We can make more of most things given higher demand. So companies make more of stuff and have to hire more people to do it; unemployment goes down. Hiring people is supply and demand again. Demand goes up, wages go up.
Then, if you stop printing money, the demand (in real dollars) goes back to the original level once prices and wages have both increased. If you continue to do so (i.e. a constant rate of inflation), the extra demand is sustained by the continuous infusion of money.
Now suppose you do the same thing, but instead of giving the new money to individuals, you give it to the rich, or to borrowers in the form of low interest rates. They use it to bid up housing prices. Then people have to work more to afford the same house or apartment, which lowers unemployment. This is obviously bad and screws the poor.
The most important thing is who gets the new money. It needs to go to individuals, not borrowers, not institutions.
Government by its very nature must generally give out newly created money to the wealthy (handing out money to the public directly does not get low income housing built, or highways, or military bases, or warships, or scientific research... To "get shit done" you must give it to already-wealthy contractors), and by its current construction, the interest payments to create that money goes to banks. Now if you want to argue that "government maybe should not be doing a lot of that shit", perhaps you do have a concrete proposal for reducing the wealth divide.
Why?
Last year they sent everyone a check. They could do that.
Sure, they can do that sort of thing from time to time to make people like you happy, but the primary spending of government, as in, "to do shit", cannot be structured like that.
Are you arguing that 100% of government spending should be stimulus checks?
I'd be down. Count me in on your reform program.
In a bout of inflation, not all prices increase at the same rate at the same time; this is known as the Cantillon effect (https://en.wikipedia.org/wiki/Richard_Cantillon).
The rich own assets, they financed these assets with debt. Debt becomes less burdensome with inflation, increasing their equity.
At the same time, lendors lose with inflation. But who are the predominant lendors now? Life insurance companies, pension funds, mutual funds, household / nonprofits, state and local govts., etc.
All of these institutions seem to be an aggregation of middle-class / poorer people vs. elites.
If you're Elon Musk you own Telsa. You're main source of liquidity is likely cash from a revolver[1]. During inflation, your debt becomes relatively smaller to your Tesla equity. Your net equity becomes larger.
I think this just leads to more inequality, more corporate control, and weaker labor bargaining power.
We'll see - hope its ok.
[1] form of debt, where Elon is the lendee and is using Tesla stock as the collateral
This is a pretty bold statement given that it is the opposite of all conventional wisdom, and historically those concerned with the poor have argued that inflation is a way for the rich to rob the poor. For example, the "misery index" in the 70s was the sum of inflation and unemployment, because it tracked how much wages were falling and how much unemployment there was.
So this "new economics" that says inflation is good for the poor is pretty stunning -- is it something you figured out on your own or do you have a reference for statisticians or economists making this case?
> Statistically, the wealthy have way more cash than the poor, while the wage-earning population will get increased income along with inflation.
Let's take a look at what is going on:
Over the past year inflation is up 6.2%, so let's deflate:
- real SP500: +25%
- real bonds: -7.8% (PIMCO total return)[2]
- real wages: -1.2% (using BLS data)[1]
Now definitions of "rich" are always arbitrary, but if you are rich you have most of your wealth in the form of assets -- stocks, bonds, etc. If you are poor, most of your wealth is your future labor - wages. That's another way of saying that the rich make money from passive income while the poor have to work.
So inflation reduces wages but the effect on passive income is mixed. Stocks go up and bonds go down. A typical wealthy person will own a mix of stocks and bonds and will generally own more stocks than bonds, so on balance their holding of equity protects them and their wealth still increases. But that's not true for the poor, who have only their wages.
This is why conventional wisdom about inflation mostly hurting the poor is correct, and the galaxy-brain takes that inflation helps the poor and hurts the rich is incorrect. Wealthy people can shield themselves from the rising cost of consumption while the poor cannot.
[1] https://www.bls.gov/news.release/realer.htm
[2] https://www.pimco.com/en-us/investments/mutual-funds/total-r...