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by jerguismi 2644 days ago
Why not have inflation at 10% to have even better "nudge" for people to work?

You are essentially communicating the same thing that the crypto nerds are saying, just from a different angle. The individual pays the 2% "nudge", and crypto people don't prefer paying that, and that's why they use crypto. Whether it is good for society or not is irrelevant in the individuals context.
1 comments
ForHackernews 2644 days ago
> The individual pays the 2% "nudge",

Only if you a) keep your money in cash under your mattress and b) aren't also benefiting from having your debts reduced by inflation.

It's very simplistic to say that (low, predictable) inflation hurts individuals.

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aserafini 2644 days ago
Even if you are investing your cash ‘productively’ and keeping none under your mattress you are still paying the 2% nudge as your returns are partially eaten by inflation. It just reduces investment returns in real terms, investment does not make the cost of inflation disappear.

This affects poorest members of society disproportionately because they don’t have spare capital to allocate in order to offset their loss from inflation. They just pay higher prices.

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imtringued 2644 days ago
If someone invests $10 million in stocks and loses 2% of potential growth through inflation this amounts to $200,000. The poorest members of society with $10,000 or less in their bank accounts are going to lose at most $200 per year. So tell me how does this affect the poor more than the wealthy? Those price increases you mentioned don't happen in a vacuum. They are caused by higher wages.
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aserafini 2644 days ago
> how does this affect the poor more than the wealthy?

Because the $10 mil in stocks also appreciated by the roughly 7% average annual S&P 500 returns, meaning the rich person's wealth still increased 5% after 2% inflation.

The $10,000 in a current account earned 0.5%, making the poor person 1.5% poorer after inflation.

It's a textbook case of 'the rich getting richer, and the poor getting poorer'.

The poor do not have the flexibility to allocate their capital to higher yield assets that allow them to 'escape' inflation.

I am not advocating a fringe position. In fact, the first three papers I found investigating this issue came to the same conclusion: inflation actually increases poverty:

[1] "Inflation and the Poor" https://www.jstor.org/stable/2673879?seq=1#page_scan_tab_con...

[2] "Poverty, inflation and economic growth: empirical evidence from Pakistan" https://mpra.ub.uni-muenchen.de/34290/1/MPRA_paper_34290.pdf

[3] "Has Inflation Hurt the Poor? Regional Analysis in the Philippines" https://www.adb.org/sites/default/files/publication/28370/wp...

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not-satoshi 2644 days ago
The 10,000th dollar to a poor person is more valuable to them than the 10,000,000th dollar to a rich person.
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ForHackernews 2644 days ago
The poorest members of society are disproportionately indebted and so they will disproportionately benefit from having those debts reduced by inflation.
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millettjon 2644 days ago
Chile has a separate currency called UF that is inflation adjusted. The UF is used to denominate almost all loans to middle class. While they are earning generally in pesos but their debts are in UF and hence not reduced by inflation. The poorest members do not have access to loans at all.
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aserafini 2644 days ago
The poorest members of society are not disproportionately indebted: they don’t have mortgages or student loans like the middle class.
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oarsinsync 2644 days ago
The interest rates on their debt is generally higher than inflation, so they're still losing, just losing fractionally less than they were before.

Those without without debt are also losing, less than those with debt, but still losing.

Only people winning are the people with enough spare capital to 'participate'

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chii 2644 days ago
the interest on debt will take into account inflation, so as a poor individual with debt, inflation doesn't help you.
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jerguismi 2644 days ago
> It's very simplistic to say that (low, predictable) inflation hurts individuals.

Hurting might be the wrong term. Analogy would be something like having some bonus card which gives you 2% off for every purchase. Some people obsess about having that kind of card, but most people wouldn't care, because it is only 2%. Obviously the 2% difference isn't "hurting" most people, more like very small tax.

Btw there are cashback credit cards which give back something like 0,5% to 1%, I wonder how popular those are...

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