Hacker News Reader

Comment by fasteddie31003 | Hacker News Reader

Inflation is the elephant in the room no one wants to talk about that keeps poor people poor. If you don't have any assets during the past year, I feel bad for you. You have lost so much purchasing power. I'm all for raising the minimum wage to keep up with inflation, but you never hear anyone talking about why we have to raise the minimum wage. They just want to cure a symptom and not address the root cause of why we need to raise the minimum wage. Hell, if you want to help address poverty by giving poor people more purchasing power, wouldn't you want deflation? Oh yea, people who own assets only benefit from inflation and are the ones pulling the strings on monetary policy.

View on HN

This is incorrect.

Historically, periods of very low inflation (such as the 19th century during which currencies were pegged to the gold standard) were great creators of inequality, because they allow the wealthy to continuously expand their capital stock through rents.

>because they allow the wealthy to continuously expand their capital stock through rents.

Is that hard to do during inflation or something? Given that asset values generally don't get inflated away, I'm not sure how inflation would be bad for them.

Asset values do rise with inflation, and that itself doesn't make the owners of capital any better or worse off. But in an extremely low inflation environment, owners of capital can collect rents on their capital which will generate a consistent return that won't be destroyed or devalued by inflation.

The relationship between inflation and inequality is pretty complicated because there are a bunch of other factors (notably growth) that play a significant role. I just wanted to point out that the economics of inequality does not support OP's argument (i.e., inflation creates inequality).

The money supply should track the economy.

If the economy expands, the money supply should expand. If the economy contracts, in a secular way and not a cyclical way, the money supply should contract.

Inflation is not bad per se. It's necessary, as others have pointed out, to prevent incumbents from being pointlessly enriched by rents.

What's bad is monetary inflation that raises the prices of everything. This means the growth in the money supply is outstripping productivity growth.

We appear to be tipping over into monetary inflation after four decades of good monetary policy. The last time this happened it took ten years to sort out.

I dont think inflation hurts the poor. It hurts the middle class with 5-15k in savings.

The poor are living oaycheck to paycheck and they will continue to do so. Yet the people on the first wrung of wealth building see their progress destroyed.

Yeah. In fact, the poorest have a negative net worth due to owing more on debts than they hold in assets so inflation makes them wealthier

This would only be the case if wages rose with inflation which they don't.

they do at the bottom. people cant live below a certain threshold. business need employees.

it is a combo of gov funds and employment that keeps them alive. see % of walmart employees on food assistance.

The article notes “ Inflation-adjusted compensation is down in most industries, but there is one notable exception: Leisure and hospitality. That industry's employers are scrambling to find workers, resulting in a 1.6% bump in pay and benefits since December 2019, according to Furman's analysis.”

So it really depends on your industry, there are plenty of poor working class who have hospitality jobs.

> It hurts the middle class with 5-15k in savings.

If you have 5-15K in dollar-denominated-fixed-interest savings you either:

(1) Are in the middle class and have at least a couple orders of magnitude more than that in productive investments that aren't dollar-denominated fixed-interest assets.

Or, (2) are in the working, not middle, class, and probably despite having that in gross savings, have net dollar-denominated debt.

Or are a young adult who is saving for a house.

If you have long-term savings and they are predominantly in dollar-denominated fixed-interest accounts, you are doing investing for the future wrong.

Well, I also have a 401k and an Roth IRA, but I have a large amount of money in dollar-denominated fixed-interest accounts because it's money I'm planning on using within the next few years.

Is there something else I should be doing? I don't consider <5 years to be long-term savings. Am I incorrect?

If you're saving to buy a house in 10 years, putting the money in a savings account (or similar) is almost certainly a bad idea. If you're saving to buy a house in 6 months, almost anything else would be a bad idea.

You think that the "middle class" has 500k-1.5M in "productive investments" per household??

I think you need to double-check your definition of "middle class".

Inflation does not cause wages to go up (at least it’s not always the case). I lived in a place with high inflation and wages did go down at that time because the economy was bad. (Stagflation)

Not only it hurts the poor more; it basically roasts them as they can’t pay for necessities.

> Inflation does not cause wages to go up (at least it’s not always the case).

There are many forces affecting wages, but inflation puts upward pressure on wages and wages put upward pressure on consumer prices, so they tend, and not just by coincidence, to move the same direction.

> I lived in a place with high inflation and wages did go down at that time because the economy was bad. (Stagflation)

“Stagflation” has a name as a combination of economic conditions because it is unusual.

Inflation hurts banks and helps lenders especially poor lenders

A small constant rate of inflation also helps drive the economy

You mean it helps borrowers, not the lenders. Lenders are screwed by inflation.

yes thanks for the correction

If you truly think that you can seek salvation in deflation then you are mistaken. There is only misery there.

https://www.naturalmoney.org/explanation.html

We need to raise the minimum wage because some specific items have grown much faster than inflation. Housing, healthcare, and education specifically.

The idea that it’s because of inflation that we need to raise the minimum wage does not hold water when housing is increasing in cost at a much faster rate.

How about lowering the cost of healthcare, housing, and education instead?

How would you decrease housing prices? Right now it's impossible, because we barely build any new homes (much less then people would need them /want to buy them)

New home building starts are high and have been rising for several years.

https://fred.stlouisfed.org/series/HOUST

You answered your own question. Build more housing. A lot more housing.

Greatly increase property taxes on second and subsequent homes. Make the tax not apply to dense multi-unit housing, only sparse single-family homes and condos.

Make housing covenants illegal.

Both of these ideas are super unpopular to the landlord/speculator class, but they'd certainly open up the housing market.

A land use or land efficiency tax would probably be a wise move in some metro areas.

You are living in the part of the country with rising housing prices? Go find out the housing prices in many other parts of the country. You can get a house in the Rust Belt for 50,000 and the Rust Belt is a big area stretching through many states: Ohio, Pennsylvania, Michigan, etc…

Heck, there are parts of California where housing prices have grown less than inflation. Want a house for less than 200k about 80 miles from San Francisco?

We need to reindustrialize.

> You can get a house in the Rust Belt for 50,000 and the Rust Belt is a big area stretching through many states: Ohio, Pennsylvania, Michigan, etc…

You can, but there are no jobs there, which is why housing is so cheap. The residents of these towns are leaving for the nearest growing city in huge numbers, leaving behind cheap housing and economic stagnation for those that remain.

And in the places where the jobs are, housing is getting expensive. Even in the “rust belt”. They’re cheaper than San Francisco, sure, but with places like Columbus seeing their housing prices grow 20% year over year, it’ll get bad fast.

> Want a house for less than 200k about 80 miles from San Francisco?

Again, it depends on what you do for a living. How long is the commute from there to the nearest job center? I’m assuming the answer is “unbearably long”.

Again, right now housing is cheap where people dont want to live.

So you are for building all this housing when existing housing stock exists rather than trying to revitalize depressed economic areas???? How is that efficient?

Please point out where I’m opposed to revitalizing depressed economic areas. I’ll wait.

If you revitalize economically depressed areas then there is less demand for housing in the hot areas thus precluding the need to build so much housing in those areas.

So focusing on building housing in the hot areas does not address the root cause.

That’s a good theory, we’ve been flailing around and failing at that for quite a while now. I have no confidence that anyone will figure it out, and in the mean time the working poor continues to suffer.

I personally see no reason to block policy changed based on the theory that we’ll suddenly figure out another policy issues that we’ve been utterly failing at fixing. That’s a recipe for permanent inaction.

> Inflation is the elephant in the room no one wants to talk about that keeps poor people poor.

Keeping inflation down has been the central policy of Western banks for 30 to 40 years. It absolutely absurd to claim that it is "not talked about."

It is not absurd. There was little to no conversation around the impact of trillions of dollars of stimulus injection last year or the further $4 trillion injection of the current infrastructure bill. Injecting nearly the annual US GDP in 18 months has consequences, and almost none of them are positive. Especially when they are not targeted.

> almost none of them are positive

For you perhaps. That spending helped countless people, averted untold hardship, and for some could only be described as life changing

I am not against supporting those in need, but blanket unmetered injection has consequences. The IRS is capable of disbursing based on income, primarily because it is reported digitally and manually monthly via payroll taxes, and those with no or reduced reported income would be default to fund.

Beyond that I am not sure the result will be worth the cost, especially for those that are the most price sensitive.

Positive in the sense that eating a giant bag of candy and cookies is positive. Unfortunately that positivity is rather short lived as the consequences play out over time.

It's not about keeping it “down”, it's about keeping it “low enough”. Which leads to understanding that there is some corridor of acceptable inflation and you have some wiggle room until Zimbabwe or Venezuela levels, when it's high and the economy is “struggling” but it's not a terrible disaster. That is, there is no talking about eliminating inflation as it were universally harmful; the general understanding is that it's actually beneficial to the economy as a whole. It may be harmful to some parts of the society but you don't go admitting that publicly, saying that won't do anything about it because someone's lives are less important than the economy.

Reply on news.ycombinator.com