Hacker News Reader

Comment by mlindner | Hacker News Reader

I think the arguments are much more complex than that. Some primary reasons:

- High inflation destroys savings. If someone is saving to buy a house or saving for their children's schooling, inflation destroys it if it's not invested in something.

- High inflation is rarely if ever matched by wages going up. Just look at the minimum wage, it hasn't matched inflation at all.

- Inflation penalizes anyone who isn't invested in things that hold their value versus the value of the money. Namely if you're rich enough to invest in stocks and bonds your money holds better value than if you live day to day or keep your money in a savings account. It's a form of regressive taxation.

- Inflation isn't bad at all for people who are in the financial system itself, namely the people who actually control the inflation rate.

- It frees the government to spend even more wastefully as they can use the inflation to erase the federal debt

View on HN

>High inflation destroys savings

This is not true. When the inflation is high, normal savings accounts pay interest rate that protects from inflation. Besides if you are saving a lots of money you should invest it for something. Like government bonds at least.

> High inflation is rarely if ever matched by wages going up.

This is not true. Inflation and real wages are not connected. Why would they? See for example: https://en.wikipedia.org/wiki/Real_wages#/media/File:United_...

What high inflation does in some jobs, it allows employers not to lay off people by not increasing their wages (when their productivity is not increasing).

> Inflation penalizes anyone who isn't invested in things that hold their value versus the value of the money

And this is how it should be. Money should not be good store of value in long term.

And as I said before, savings account interest rates are not zero when inflation gets going. https://www.finder.com/history-of-savings-account-interest-r...

https://www.bankrate.com/banking/cds/historical-cd-interest-...

> normal savings accounts pay interest rate that protects from inflation

Pray tell which banks are you banking with?

> What high inflation does in some jobs, it allows employers not to lay off people by not increasing their wages

shorter: "Let's screw the labor class over so that their managers don't have to fire themselves."

> Money should not be good store of value in long term.

"it is important to encourage consumption at all cost in the long term"

It's definitely not a bank in Canada.

A TD High Interest bank account has a 0.050% interest rate after $5,000. Before that the interest rate is 0.000%.

Don't worry, as long as you have $25,000 dollars in there, they'll waive the transaction fees every month ($5 per transaction).

I might as well stick it under the mattress and pretend I don't have it at those rates.

You are discussing a theoretical world. In the real world, interest rates are 0.

I can't find a SINGLE savings account over 1%, while inflation is over 5%:

https://www.bankrate.com/banking/savings/rates/

Treasury bonds are barely better -- 10yr < 2% (!)

> And this is how it should be. Money should not be good store of value in long term.

Other than the last hundred or so years (and a few historical fiat currencies) money has always been a good store of value. Or I should really say ‘specie’ instead of ‘money’.

We have lived in a time of very low interest rates for a long time, if they ramp it up; the leveraged real estate market will collapse. Repeat the money printing to bail them out. A hole cannot be escaped by digging deeper.

I dont think economics works that way. You absolutely can escape a hole by digging deeper. "Escaping" including mechanisms such as trigger a revolution, pogroms, world wars etc.

This comment is spot on.

Interest rates are not in line with inflation, therefore, savers are being eaten alive. Those on fixed income (retirees, disabled) are getting absolutely screwed.

> And this is how it should be. Money should not be good store of value in long term.

LOL. If money isn't a good store of value, the market will find something else that is.

Inflation and wages are in fact connected.

real wages and inflation are not (this is what I said)

Wages follow inflation, of course.

Not entirely true..

https://www.investopedia.com/terms/w/wage-push-inflation.asp

THIS IS WHAT THEY BELIEVE

https://youtu.be/QsAnssN1cxM

Is it wrong?

In short, yes. The part where the professor says "jobs will catch up" is naive at best, dangerous in reality.

Reply on news.ycombinator.com