Very few people are on fixed incomes, though. Social security has a yearly inflation adjustment. You would have to be on a private pension only to be on a fixed income.
I'm not 100% how to respond to this except that virtually all Americans are enrolled in SS. If you have an SSN, you're enrolled. You need 40 credits at up to 4 credits per year (~ $5500 is required to get all 4 credits). After working about 10 years (even part time) you should qualify for benefits.
There are still hardships because it's not a full income replacement, but it's a far cry from 'not all are worry-free rich'.
Edit: The majority of the remaining 10% are covered by state level public employee retirement systems who don't accumulate SSA work credits and private pensions. SSI also exists to provide 75% of the poverty line if you have extremely limited means. Here is a paper by the CRS about senior poverty. https://fas.org/sgp/crs/misc/R45791.pdf
Well.. most real estate requires constant care and feeding, and as inflation is seen in material cost increases, labor price increases, utility increases, etc., rental prices will reflect that in the sense that increased expenses are passed on to the renters.
A homeowner bears those costs directly with nobody to pass the expense on to, so this absolutely affects them.
In theory it will make your mortgage easier to pay off - inflation favors the borrower if it's sustained long enough for the borrower to see their income increase. If you have an ARM though, you might be in for a bruising year or (looks at watch) three to four.
Inflation will raise property "values" which then raise assessments, and thus Property Taxes. There are exemptions for home owners in my state, but those are getting wiped out by the increase in "value" of my home that I can't afford to sell.
I dislike inflation because it means any money I have in the bank becomes worth less and less, forcing me to take risks and invest instead which I'd like to avoid.
> Cash as an investment--meaning cash that is held in an account--behaves differently. It appreciates in nominal terms, because of compounding. If placed into one-month Treasury bills, and reinvested, three 1933 dollars would now be worth $54. What once could purchase 100 first-class stamps currently buys 98 stamps. Roughly speaking, reinvested cash preserves purchasing power. The reason to hold riskier assets is not to protect against the damage caused by inflation, because reinvested cash does that, but instead to grow one's wealth.
How applicable is that today? QE has tanked rate of return on bonds/savings accounts to below inflation. In many european countries interest rates on savings accounts are zero or even negative.
Currently “high yield” savings accounts have negative interest rates. So not much help compared to putting everything in the market and hoping there isn’t a major crash.
I don't think people hate it nearly as much as they should. Just look at the way newly generated "money" is injected into the economy - through interest free federal loans to investment bankers. A totally hidden transfer of purchasing power from everyone already holding a dollar - directly to the top of our economic power structure. It is hard to not have very dark feelings about those bankers and politicians.
Exactly! We're living in the most technologically advanced and productive time in history, but the mandate of the Federal Reserve is that this shall never be reflected in consumer prices. Even worse, the newly created money primarily goes to a single meta-sector of our economy instead of funding anything productive. Instead of a twenty hour workweek or flying cars, we get never-ending paper-pushing fake jobs.
I believe the article is missing some important cultural factors.
It focuses heavily on the 1970s, which were over four decades ago. Inflation in the 1970s was driven heavily by a shock in oil prices, which contribute to just about everything else. Wages didn't match inflation because the prices of inputs went up, and out of the country.
We haven't had anything to match that since the 1980s. Inflation has largely been around the Fed's target rate. For the past decade, it's been under the target rate. There has been inflation in the asset markets, driven by quantitative easing, but not much at the consumer level.
The other cultural factor is that objections to inflation depend partly on ideology. The loudest voices about inflation are also the ones promoting supply-side economics. The claim is that anything that helps the consumer side of economics, like minimum wage increases or subsidies for health care or college, will cause inflation -- while subsidies for the supply side (such as lower capital gains and corporate taxes) will create jobs and increase the economy.
This comes primarily from one set of economists, and is widely considered faulty by other economists. I bring it up not to debate the merits, but to point out that it may have less to do with individual perceptions of prices and wages than the article suggests.
Rather, I think a lot of it has to do with ideological unity: it's an accepted fact among some people that inflation is so inherently bad that it must be avoided at all costs. Whenever I hear such discussions, "inflation" and "hyperinflation" are treated as practically synonymous; any potentially inflationary move draws comparisons to Zimbabwe. The US hasn't turned into Zimbabwe despite more than a decade of very loose monetary policy, and yet I keep hearing it.
Of course nobody likes it that prices go up, regardless of the "veil of money". People who remember sub-$1 gasoline will always think of that as the right price, regardless of what wages have done since then.
So I don't think ideology accounts for all of it. But I believe the article needs to consider it to get a full picture. The 1970s were a time that has driven a lot of American political division, and that has more to do with who people believe they are rather than any considered economics. They'll pick the economists to suit their beliefs, not the other way around.
> Of course nobody likes it that prices go up, regardless of the "veil of money". People who remember sub-$1 gasoline will always think of that as the right price, regardless of what wages have done since then.
This argument against inflation is brought up very often in my family and circle of friends.
People are used to the way of living they were brought up in, especially because of the "savings sock" culture that seemed to be common in their youth. People that bought into it and kept their finances frozen, or bought into retirement plans that try to pay out less than promised 30+ years ago, when even if they did pay out full, it would be of insignificant worth.
It is also very difficult to fight for a decent wage, with leaders and job-givers preaching "In your age I earned half what you are asking"... Which would be not enough for rent in current money.
Reduced purchasing power that's disruptive to your way of life (read: starving to death) is the obvious reason why everybody cares about inflation.
The real reason we have actual policy to attempt to control inflation is that high inflation is bad for capital lenders, and capital lenders have significant power in human culture (all over the world).
Historically, inflation was used to "pay back" massive war and reconstruction debts from WW2. It was a great deal for all the regular people in those societies, but not so great for the (1% of) folks who lent them the money.
The article covers these points are more, it was a good read!
For most people, the company they work for is also enduring an increase in costs from their vendors, and salary increases often take a backseat to keeping supplies inbound. Multiyear lease agreements and many support contracts get pegged to CPI for annual increases, meaning budgets will have to increase for these basics. Since everything is competing for the same pot of money, inflation generally means you paycheck is worth less and you'll be lucky to see a timely increase to account for it.
From BLS: "In June, the Consumer Price Index for All Urban Consumers rose 0.9 percent on a seasonally adjusted basis; rising 5.4 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.9 percent in June (SA); up 4.5 percent over the year (NSA)."
https://www.bls.gov/cpi/
Inflation is the government sector leaching more than it produces from the private sector. So people in the government sector don’t mind it so much atleast.
29 comments
[ 3.2 ms ] story [ 70.0 ms ] threadThe software industry proves this. Salary growth is rapid, but only if you are constantly churning companies.
According to the SSA, approx 90% of Americans over 65 collect. https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf
There are still hardships because it's not a full income replacement, but it's a far cry from 'not all are worry-free rich'.
Edit: The majority of the remaining 10% are covered by state level public employee retirement systems who don't accumulate SSA work credits and private pensions. SSI also exists to provide 75% of the poverty line if you have extremely limited means. Here is a paper by the CRS about senior poverty. https://fas.org/sgp/crs/misc/R45791.pdf
A homeowner bears those costs directly with nobody to pass the expense on to, so this absolutely affects them.
In theory it will make your mortgage easier to pay off - inflation favors the borrower if it's sustained long enough for the borrower to see their income increase. If you have an ARM though, you might be in for a bruising year or (looks at watch) three to four.
E.g. https://www.morningstar.com/articles/998988/cash-as-an-infla...
> Cash as an investment--meaning cash that is held in an account--behaves differently. It appreciates in nominal terms, because of compounding. If placed into one-month Treasury bills, and reinvested, three 1933 dollars would now be worth $54. What once could purchase 100 first-class stamps currently buys 98 stamps. Roughly speaking, reinvested cash preserves purchasing power. The reason to hold riskier assets is not to protect against the damage caused by inflation, because reinvested cash does that, but instead to grow one's wealth.
How applicable is that today? QE has tanked rate of return on bonds/savings accounts to below inflation. In many european countries interest rates on savings accounts are zero or even negative.
If inflation is sustained at a high rate, expect to see interest rates on T-bills (and hence also savings accounts) soar as well.
Were inflation to be sustained it’s likely HYSA interest rates will go back up too - that’s the general historic trend.
It focuses heavily on the 1970s, which were over four decades ago. Inflation in the 1970s was driven heavily by a shock in oil prices, which contribute to just about everything else. Wages didn't match inflation because the prices of inputs went up, and out of the country.
We haven't had anything to match that since the 1980s. Inflation has largely been around the Fed's target rate. For the past decade, it's been under the target rate. There has been inflation in the asset markets, driven by quantitative easing, but not much at the consumer level.
The other cultural factor is that objections to inflation depend partly on ideology. The loudest voices about inflation are also the ones promoting supply-side economics. The claim is that anything that helps the consumer side of economics, like minimum wage increases or subsidies for health care or college, will cause inflation -- while subsidies for the supply side (such as lower capital gains and corporate taxes) will create jobs and increase the economy.
This comes primarily from one set of economists, and is widely considered faulty by other economists. I bring it up not to debate the merits, but to point out that it may have less to do with individual perceptions of prices and wages than the article suggests.
Rather, I think a lot of it has to do with ideological unity: it's an accepted fact among some people that inflation is so inherently bad that it must be avoided at all costs. Whenever I hear such discussions, "inflation" and "hyperinflation" are treated as practically synonymous; any potentially inflationary move draws comparisons to Zimbabwe. The US hasn't turned into Zimbabwe despite more than a decade of very loose monetary policy, and yet I keep hearing it.
Of course nobody likes it that prices go up, regardless of the "veil of money". People who remember sub-$1 gasoline will always think of that as the right price, regardless of what wages have done since then.
So I don't think ideology accounts for all of it. But I believe the article needs to consider it to get a full picture. The 1970s were a time that has driven a lot of American political division, and that has more to do with who people believe they are rather than any considered economics. They'll pick the economists to suit their beliefs, not the other way around.
This argument against inflation is brought up very often in my family and circle of friends. People are used to the way of living they were brought up in, especially because of the "savings sock" culture that seemed to be common in their youth. People that bought into it and kept their finances frozen, or bought into retirement plans that try to pay out less than promised 30+ years ago, when even if they did pay out full, it would be of insignificant worth.
It is also very difficult to fight for a decent wage, with leaders and job-givers preaching "In your age I earned half what you are asking"... Which would be not enough for rent in current money.
The real reason we have actual policy to attempt to control inflation is that high inflation is bad for capital lenders, and capital lenders have significant power in human culture (all over the world).
Historically, inflation was used to "pay back" massive war and reconstruction debts from WW2. It was a great deal for all the regular people in those societies, but not so great for the (1% of) folks who lent them the money.
The article covers these points are more, it was a good read!
Those are obvious physical effects, but this is basically what happens to your money.
At best, you _might_ get a cost of living raise anywhere from six months to a year from now. Anxiety is understandable.
From BLS: "In June, the Consumer Price Index for All Urban Consumers rose 0.9 percent on a seasonally adjusted basis; rising 5.4 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.9 percent in June (SA); up 4.5 percent over the year (NSA)." https://www.bls.gov/cpi/
I'm really fortunate, my employer has been around forever and survived many things like this...
The pressure has landed here, differently. There's a certain human pattern in play where performance from everyone has been expected to skyrocket
Most other countries have similar goals. The means prices double every 25-30 yrs