Comment by crdoconnor | Hacker News Reader

Comment by crdoconnor | Hacker News Reader

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>inflation is good for net debtors and bad for savers.

With "savers" being a close approximation of "the rich" and debtors being another word for "the poor".

>price inflation is a necessary consequence of monetary inflation.

Counter-intuitively, it actually isn't a necessary consequence - not if velocity of the new money grinds to a halt after creation. Newly created has to be spent and respent and respent and so on for it to cause price inflation.

There are many ways that this can happen - e.g. if the money just ends up parked in a bank account or if the dampening effect of industrial slack offsets the creation of new money (i.e. a glut of inventory soaks up the excess cash).

>basic economics distinguishes between price inflation as a result of monetary inflation and price increases due to other reasons.

Economists actually get this wrong all the damn time. Monetarists (like Milton Friedman) attributed price inflation due to the 1970s oil shock to a so called excess expansion in the money supply that didn't happen.

Essentially, Saudi princes siphoning off more wealth via higher oil prices was blamed on money printing rather than cartelization, and it was decided that "debtors" should be the ones to take the financial hit for that by jacking up interest rates.

> With "savers" being a close approximation of "the rich" and debtors being another word for "the poor".

thats false. many rich hold vast amounts of debt, which makes them benefit from inflation. also relevant is the discouraging effect of monetary inflation on savings. so poor people are incentivized to live paycheck to paycheck

> Counter-intuitively, it actually isn't a necessary consequence - not if velocity of the new money grinds to a halt after creation. Newly created has to be spent and respent and respent and so on for it to cause price inflation.

thats true, if the money is never spent. just like filling up your gas tank doesn't contribute to climate change if no one ever burns the fuel.

in the real world, people deposit that money in banks, who loan a multiple of their deposits out. so that money actually gets turned into debt and spent on a lot of stuff. thereby bidding up the price of stuff, which is price inflation as a result of monetary inflation.

> dampening effect of industrial slack offsets the creation of new money (i.e. a glut of inventory soaks up the excess cash).

that means that price inflation soaked up the decrease in prices that everyone in the market would have enjoyed. thats an example of how monetary inflation robs everyone except the first people to get the new money.

> Economists actually get this wrong all the damn time.

they still know that the difference exists, which is something that the parent comment apparently didn't realize.

>thats false. many rich hold vast amounts of debt, which makes them benefit from inflation.

"rich" people in vast amounts of debt aren't rich, they're broke.

Rich people are owed money. They have money to spare so they lend it out for interest, see?

>poor people are incentivized to live paycheck to paycheck

people who live paycheck to paycheck, minus a few exceptions, do so because their cost of living equals their salary.

Your concern for the "poor savers" is touching albeit misguided.

> "rich" people in vast amounts of debt aren't rich, they're broke.

not necessarily. if you have a lot of debt, but you hold the title to capital goods that produce income, then you can be very wealthy.

> Rich people are owed money. They have money to spare so they lend it out for interest, see?

indeed, there are rich lendors and rich debtors. that doesn't mean a person who owns factories who has issued a lot of bonds is broke. far from it.

> people who live paycheck to paycheck, minus a few exceptions, do so because their cost of living equals their salary.

cost of living for many people is variable. if you are incentivized to spend your money before it depreciates, that changes the calculus on many decisions, such as how much to spend on housing.

> Your concern for the "poor savers" is touching albeit misguided.

how is it misguided?

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