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Comment by _yb2s | Hacker News Reader

Why would expenses need to track less than inflation, if your wages are tracking with it? Expenses, by definition, track with inflation.

With (c) stock prices are generally tied to the underlying value of a company which is protection from losing value due to inflation except in rare cases where the inflation directly harms the business model. Assuming the inflation continues to increase over time, you just buy the stocks as soon as you get the money, there is no need to do it "before the inflation" or any sense in which stocks can be "already inflated."

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There's such a thing as a personal inflation rate.

CPIH in the UK for example includes the cost of housing but the weighting of housing is effectively an average of a teenager, a mid life family and a pensioner. It comes out at like 20% weight which is well under what most people spend on housing.

>Why would expenses need to track less than inflation, if your wages are tracking with it?

Because wages don't go up in real time so you get robbed of the difference for the duration.

You make $3. Rent costs $1. You have $2 leftover to improve your life, pay down debt, whatever.

You make $3. Rent is now $1.50. You have $.50 leftover

Your wage goes up to $3.50. Rent is now $2. You have $.50 leftover.

Repeat a bunch of times.

Your wage goes up $.50 again. Rent stops rising in price. You have $1 leftover.

See how the inflation robs you of $.50 multiplied by the duration?

If you get an annual cost of living adjustment, presumably it is ahead of cost half the year and behind the other half which averages out. Rent usually updates annually also. If all other debt payments are effectively decreasing, you’re just doing better.

It only feels psychologically worse when you notice food prices going up steadily and you have slightly less left over than you did last month. People will still be mad about that even if actually ahead.

You make $3, rent costs $1, you owe $300, it takes 150 to repay your debt

Inflation doubles everything

You make $6, rent costs $2, you owe $300, it takes 75 to repay debt

The person so wealthy they lent you money loses out, you gain.

If that's universally true, why would lenders lend in a high inflationary environment?

The interest is usually still more than inflation, they just make less money- and the alternatives for them are either cash, which loses more, or investments that are higher risk and more volatile.

Because they lose more if they just stick it in a box under the bed.

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