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by runT1ME
2015 days ago
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>The beauty of inflation is that it hurts you in direct proportion to how well off you are, This is the opposite of true. In practice, inflation is wealth transfer to the upper class. Inflation benefits debt holders, the people who are most levereged (with debt) into inflation proof assets are those who are rich. |
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It may be counter intuitive (it actually isn't, it's perfectly logical) but inflation is merely what happens when demand exceeds supply. This means if you constantly increase demand for labor you will get to see consumer inflation. Since there is barely any consumer inflation there is very little demand for labor. This isn't surprising because a lot of the jobs are now abroad and domestic training opportunities are poor (companies don't provide them) or inaccessible (college is expensive and time consuming). If you could somehow make every American highly educated so that they can work in the highly profitable sectors of the economy that remained (there is no shortage of those) you would still get to see decent economic growth (2% YOY) in developed countries. The reality is that not everyone can get such a job and some need a secondary career after they lost their first. Since there are not many low skilled jobs that can't be done abroad there is little demand for these workers. If you can increase consumer inflation you will directly increase the wages of those unneeded workers because the consumer inflation is excess demand for (low skilled) jobs.
> the people who are most levereged (with debt) into inflation proof assets are those who are rich.
Yeah but here comes the trick. If there is consumer inflation the only way you can make your assets inflation proof is by productively employing workers. If you are owning real estate then the value of your assets will grow but only insofar that workers can afford to pay rent.
The rich won't make money off of sitting on assets, they will make money off of using those assets productively by renting them out. In our current twisted reality you can often make more money off of just letting the property sit empty so that you can have a quick sale 5 years down the line. The idea of unused real estate growing in value is insane but it only happens because there is asset inflation and mismanagement by the central bank.