As a person living in the UK, I have definitely noticed a considerable rise in unit prices. One of many examples is that a loaf of my favourite bread increased from £3 to £4 recently, which was a shocker. Toilet roll prices, as ever what the news loves to talk about, has exploded, increasing by around 70% since 2020 by my anecdotal observation.
A sad thought I have about inflation is the fact that it is, wittingly or not, a weapon wielded by the rich against the middle and lower classes. In an inflationary economy, the winners are rich who have valuable assets whose value skyrocket - think real estate, businesses, etc.
The lower classes rely on A) proportionately much more on fiat, i.e. monthly paycheck going into current and savings account, and B) a blue-collar job, the wage of which always lags further behind inflation than white-collar jobs.
Those two factors combined means that the lower classes get absolutely battered, while the rich just sit gleefully as their asset values balloon and pass down wholesale price increases, etc.
It's the dark, sinister side of inflation, and I think we are all beginning to see the societal tensions that it is breeding, e.g. endless blue-collar UK worker union strikes, riots, protests, etc.
Not saying that it is only one class that is affected, but let's face reality here - the lower class suffers by far the most in this situation.
The lower class does suffer the most, but unfortunately it is the policies intended to help them which actually cause most of the problem. By giving money to people without producing more stuff - or even making it harder to produce the same - you MUST have inflation, rationing, or empty shelves - and often all three.
The solution to allowing lower classes to have more stuff is to make it easier for everybody to produce more stuff.
Giving money CAN help with distribution of stuff, allowing poor people to purchase a larger share. But it requires lots of money given directly to the people that need it (vs allowing the gov't to spend it themselves). And also requires lots of high inflation. Imagine, for example, just giving everyone £10M to spend on whatever they want. This would not create any more stuff - but it would sure be a big equalizer for people buying that stuff!
But really - if we could all focus a bit more on production - allowing, encouraging, and celebrating it - then we'd all have a lot more stuff.
This seems to come from the same place as the argument of "trickle down economics". Yea no, I've seen similar things done in Japan with abenomics (with one of the targeted goal even being more inflation; without achieving it) and studies show it doesn't work.
Those spending never reaches the "lower classes", and seldom even reach places where it would have the potential to increase productivity.
It's a tired, old argument that is done to justify stupid spending and enriching certain pockets while claiming to benefit all with a shoddy reasoning that omit the important details
His argument is that the government can do 2 things:
1. Interest-free money for businesses to launch, grow, and advance. This leads to more goods in the market and thus lower prices
2. Free money straight to the people which means more money in the market and thus, inflation, empty shelves, etc.
His general point is that having interest-free money keeps existing players honest since newcomers can come in and start a competing business. Now that the money is drying up, existing players are increasing their moat.
The US has had extremely low interest rates for a very long time, and yet effective competition is further than ever in many industries. Something I'd observe is how unreasonably difficult it can be to legally sell things in the US. For instance hitting on this topic (of food prices), why can't I simply start baking bread and selling it? You can make an amazing loaf of bread for a tiny fraction of what people pay in a grocery store, but somehow actually being able to legal sell it is painful, at best.
By contrast I now live abroad in a developing country and it's quite amazing how ripe small business is. Want to sell bread? Okay, bake it and sell it. You can even get it stocked at "convenience marts" easily enough since a that's often just some guy's lower floor transformed in a shop. Talk to the owner, who's probably the guy at the counter, and make a deal. If people like your bread, you're now officially a baker - congrats.
Make it easier for people to sell stuff, and there will be more stuff. And the prices of stuff will trend downwards. While money is a way around these issues, a regular joe who happens to make a great loaf of bread probably isn't especially keen on taking on 5-6 figures of debt just to see if selling his bread actually works, let alone being something he really wants to dedicate himself to.
This is a highly relevant point. The more difficult it is to learn about and comply with regulations, the fewer businesses will attempt to do so.
In some cases, business simply ignore regulations that that are obscure or inefficient to comply with; this leads to corruption and/or shadow economies.
In more cases, business is simply discouraged and doesn’t grow, or just doesn’t start at all.
The messy patchwork is city, (sometimes) county and state licensing and taxation framework in the US is a huge drag on small business.
I am not arguing for no regulation, licensing, or taxation, only that these entities recognize that requiring businesses to file paper tax returns every quarter, even if they have done zero business in a given city is a significant hindrance to business activity.
Safety, including healthcode safety, is a good thing. A level playing field ensures that everyone in the market is making safe, hopefully good quality, products for that market. Reviewing, streamlining, and creating easier for small businesses to follow guidelines about the regulations that exist in a given field also sounds like good ways of improving consumer choice and safety.
> Safety, including healthcode safety, is a good thing. A level playing field ensures that everyone in the market is making safe, hopefully good quality,
Sure, you can raise the standards so much that only multi billion companies will be able to comply. In fact that is what we witness today. How many mom and pop shops still exist compared to the '60s?
> A level playing field ensures that everyone in the market is making safe, hopefully good quality, products for that market
I don't believe "safe" and "good quality" are necessarily aligned. I live close to a dairy farm where they sell (their own) unpasturised milk. You bring your own bottle, fill it, and pay in the honesty box. The farmer has a (small) disclaimer suggesting that the milk be boiled prior to consumption, but I don't believe any of the local buyers actually do that.
My OPINION is that it should not be forbidden BUT that it should be clearly labeled.
UNPROCESSED Raw Milk (animal species)
There should probably be a poster or something created by the FDA that quickly summarizes the risks involved with not performing each of the mandatory safety steps for normal retail 'Milk', and it would be helpful if more detailed information were available on a website and from the local health agencies.
There has been a complete and confusing lack of deregulation talk in the inflation discussion and I don’t know why. Your example could also be taken with housing - why is construction not deregulated in smart ways to jump start residential building? Building a house is a total red tape disaster.
Because home prices are tracked so closely, sited widely, and used as a barometer of economic success and political success.
But yeah I think that's weird and destructive. Wouldn't it be better to prominently track and celebrate how much new housing is built?
OTOH, many people have all or most of their net-worth tied up in their home price. So even though NOTHING CHANGES when that price goes up or down, it has a psychological affect on them, who vote a lot.
HOAs are even worse than county & state governments when it comes to building a house. Many HOAs have building codes which include a minimum square footage. Some HOA regulations require over a 1000 sq ft livable footprint (garages don't count). The problem is HOAs have an incentive to raise property value, which makes it far more expensive for people to build a home to live in. HOAs are incentivized to increase property value of the neighborhood & large houses increase property value.
Small plots of land are dominated by HOAs. Finding small plots of "unregulated" (no HOA) land often requires one to live very far from a city & decent grocery stores.
I'm not a big fan of the red tape of regulation & how regulations can be abused by large capital, but in the case of housing, HOAs are a bigger problem. Of course, there are also municipal regulations which require small plots of land to be more tightly regulated re: housing.
A solution is to improve house design which can be modularly expanded as one gains more wealth. That way, a family can start small & gradually build additions or attach additional modules as time goes on.
> Make it easier for people to sell stuff, and there will be more stuff.
This is an excellent idea. Just lower the barrier whatever that barrier is.
Some people can think that lowering the entry barrier can result in subpar products and services but in fact the higher the competition, the higher the quality will be.
> but in fact the higher the competition, the higher the quality will be.
If this were true, then appliance manufacturers who produce higher-quality goods would be rewarded. But instead, we're at a weird state where appliances are still not cheap while also not being built to last.
Competition isn't guaranteed to keep the market honest; I'd argue once a market passes a certain size the number of people who can spot lemons becomes insignificant, and then it's a race to the bottom.
If that was true... You might end up with mass bacterial infections everywhere as only those cutting standards while providing highly addictive products survive etc. There was a reason why those regulations started initially. Overburdening with new more and more expensive regulations might be the issue.
There is always a tension between economic growth and consumer protection. Selling bread is hard mostly due to health regulations. We used to have a lot of people die due to contaminated food. Now that's so rare that it makes the news when it happens. Food safety rules were written in blood.
Some states such as California do have special exemptions for "cottage" production of low risk foods such as bread.
> Selling bread is hard mostly due to health regulations. We used to have a lot of people die due to contaminated food. Now that's so rare that it makes the news when it happens. Food safety rules were written in blood.
Bread was just an example. Just try to open a small corner shop and see how easy it is. Almost any small business has legal obstacles and a barrier as a high to entry as a large corporation. While the corporation can pass that barrier, little guys can't.
> Want to make screwdrivers and sell them to the local hardware store? Go ahead.
I doubt you can do it without having to pay attention to thousand of different regulations.
Your claim is trivially falsified. There are literally hundreds of small restaurants and retail stores within a few miles of me that are run by small businesses or individual proprietors. The barriers are more in high rents than in regulatory compliance.
The bread example seems pretty bad too. There are tons of local bakeries that take more of an artisanal spin on things in my neck of the woods, and I bet all over the US. They'd have to be niche because it's not like they're going to compete with a national brand that has automated factories that crank bread out. That's who a corner store in the US is going to buy from.
But the point is that you can compete against these national brands, quite trivially. I wasn't exaggerating on the cost. You can make a loaf of bread literally for pennies. And it's better in every single way than what you buy in the store besides the fact that it will tend to go stale within a few days if not refrigerated. But even that's arguably a benefit as well. It goes stale because it's not jam full of chemical preservatives.
It's only when you start making all sorts of things for yourself that you really start to see how completely irrational the markup on many things is, which then begs the question - why isn't anybody simply dropping the prices by 50% and making a killing? And the only answer I can really see is because it's become really quite painful to be able to sell things in America, unless you want to go all-in on it.
I'd also add that in terms of food safety, the big concern is not small business, but big business. Buy food from an individual or a family and you're eating what they're also eating for dinner, and probably have been for decades. By contrast at e.g. McDonalds, those executives probably aren't touching their "product" except for photo ops. Their only motivation is to maximize profit, which often comes in the form of sacrifices in quality or even safety of what's sold. [1] And this has always been true. "The Jungle" wasn't about Joe Bob's streetside shop.
The answer that you see is just totally wrong and ignorant. Instead of making a fool of yourself here perhaps go talk to an actual commercial baker. Ask them how much they spend on licensing and regulatory compliance versus other costs like rent, labor, insurance, utilities, machinery, etc.
Sure if you bake a few loaves of bread at home then that probably seems cheap in terms of ingredients. Now add in your labor, allocate costs for utilities and kitchen appliances, and figure out what it would cost to drive around all day delivering that bread to retailers. Suddenly it's not so cheap.
The false dichotomy you're assuming is precisely the problem I'm talking about. There's a huge range of production between 0 and industrial scale commercial baker. At least there can and should be. But this false dichotomy isn't really so false in America, precisely because of our systems. Go to most of any (and to my knowledge literally any) "developing" country, and you'll see everything I've described here, and it's awesome! The effects on prices, independence, society, 'neighborliness', and more just have such great knock-on effects.
At my corner store, you can buy a taco wrapped in foil that was clearly made by some local next to a crack pipe and milligram scales. The bread is Mrs. Baird's or some other national brand. If you think that strict regulation is what created this state of things, then you may want to re-evaluate that.
> For instance hitting on this topic (of food prices), why can't I simply start baking bread and selling it?
Excessive bureaucracy and excessive legislation have the perverse effect to seemingly protect the consumer while in reality helping the big players. Small players will go out of business while new players can't enter. It wouldn't be much surprise if powerful lobbies ask for such legislation while they pretend they think of the public good.
No one likes competition, even entering the bar as a new lawyer is difficult.
>1. Interest-free money for businesses to launch, grow, and advance. This leads to more goods in the market and thus lower prices
We tried that. It all went into real estate and stocks and gave birth to a massive scam industry involving crypto and other get rich quick schemes as the world is full of stupid people and opportunists.
The average joe didn't see much trickle down to him unless he was already invested in real estate or stocks.
It was basically a wealth transfer. Housing is now about 30% more expensive than pre pandemic but take home wages are not.
Giving away free money without any strings attached to individuals or corporations is a bad idea.
Exactly this. And it’s not anecdotal either. In the UK, 75% of that new money goes to asset purchases[1], that’s likely a similar number in the US. Chronically low interest rates is a wealth redistribution program to the ones who get the biggest loans (guess who). The legend of the honest guy who needs a tractor or a fishing boat may as well be a mythical creature.
At least giving money directly to poor people is spent on things that can grow local economies. It is not perfect, but a lot more “stimulating” than giving money to institutions, corporations and rich people.
> Chronically low interest rates is a wealth redistribution program to the ones who get the biggest loans
What's the mechanism? A big loan is a big risk. With a big risk you can have either a big reward or a big failure. Smaller loans, smaller risks, smaller rewards and smaller failures. It's proportional. Why do you think of wealth redistribution?
Big risk are if you use that big loan to start a new business, but not if you dump it all on stocks and desirable real estate in hot or future hot areas.
> We tried that. It all went into real estate and stocks and gave birth to a massive scam industry involving crypto and other get rich quick schemes as the world is full of stupid people and opportunists.
You tried the wrong thing. You shouldn't hand money without conditions. Instead of letting speculative assets grow, you should only let productive bussineses borrow money with low interests. Businesses which produce tangible goods and are creating jobs.
I always thought "trickle-down" economics was about giving money to businesses via tax-breaks and that money would make it's way back to the people as wages. We know this doesn't happen and companies do stock-buybacks with that money.
Here, we're discussing a different paradigm: interest-free money vs free money. The issue is that interest-free money has little to no use for individuals. They can't put that interest-free money into an existing business and reap the returns. That's why most people just use that "interest-free" money for stocks (margin trading) and even then it wasn't fully interest-free.
The fundamental issue is how to give individuals interest-free money and have them see returns. Maybe using that money toward job training, or starting incubators that find small businesses and infuse them with money, mentorship, etc.
The government can also buy things (like infrastructure) and employ people to provide public services, which directly injects money into the economy by paying it to the people who do that work.
The current UK government has not been doing much of this.
> The government can also buy things (like infrastructure) and employ people to provide public services, which directly injects money into the economy by paying it to the people who do that work
With interest free money, people will just borrow money and spend them massively which will raise inflation. Just what happened in the US with very low interest rate or in EU with negative interest rates.
Borrowing + consumption doesn't in particular generate inflation.
Debt is a heat sink, which is why Japan failed to spur inflation for two decades despite pulling every spending lever they could come up with. Debt kills economic dynamism, robbing the economy of the capital it requires to invest, expand.
To get to inflation out of borrowing + consumption, you need supply to not keep up. For most of the prior two decades for the US, supply kept up (courtesy of the China manufacturing juggernaut, which was a deflationary force for US consumers). The China effect has reached its end in terms of peaking, the next two decades will not see that kind of offset benefit (at least for the US).
Over the coming decades, the US will see similar problems that Japan did in terms of being unable to spark expected levels of inflation, despite high spending and debt problems. The cause will be the same, more and more of the economy will be locked up in the freezer as debt (typically yielding ever lower interest, in a downward spiral).
No, but communist countries were the poster child for "public owned".
To a degree you can do it, have the state own companies. But it will kind of be economically inneficient, high position employees and some politicians will steal money. No one will have the motivation to push farther.
That's not an accurate way to describe HK MTR or Japan Rail and it's definitely not accurate for Brightline.
Most US transit systems are bad because the government puts even more effort into stopping them from working (via bad land use, incredibly slow decision making, power-harassing Andy Byford) than it does operating them.
So in yourcideology it is wrong for governmnet to invest i to economy directly and it is wrong for government to give money to individuals for them to invest it
It is only acceptable to give money to corporations.
Seems very convenient and totally unbiased
So I go and register an LTD company now I am eligible for free government money.
Yeah, the reality is that this will always be the case as long as the national minimum wage (rebranded as the living wage) is in no way related to inflation or the GDP of the country.
As long as execs and CEOs are free to reap the benefits brought by their staff without paying any of it back this problem will continue to be exasperated.
Another contributing factor in the matter is the fact that politicians seem to be immune from the affects of their policies.
This gives them very little incentive to actually help people at the bottom of the totem pole as their funding is coming from the very same people whom are essentially exploiting a desperate workforce.
Is a shelf stacker in Sainsburys a high skilled job? No. Is it absolutely crucial in order for Sainsburys to have a working business? Yes.
The same is true for the cleaner in a bank. If a bank is covered in dirt and stinks people are not going to bank there. Likewise with cleaners of trains and pretty much any other industry.
When you pair the fact that governments are funded by the same people whom are also funding a divisive narrative throughout all media outlets you end up with a grim and bleak outlook for society.
As someone that has come from below 0 to get a good job and try and get out of the council estate poverty cycle it really strikes a nerve when people act as though we get given handouts for nothing.
My mother worked her damn arse off through my childhood and continues to do so now as a 69 year old woman with chronic health issues. She has been left behind and forgotten by society and ill informed people seem to lack any ability to see beyond the outliers in shows like benefits Britain.
> This gives them very little incentive to actually help people at the bottom of the totem pole
Err, votes are the biggest incentive for politicians.
> Is a shelf stacker in Sainsburys a high skilled job? No. Is it absolutely crucial in order for Sainsburys to have a working business? Yes.
Not really, they will soon use robots.
> The same is true for the cleaner in a bank. If a bank is covered in dirt and stinks people are not going to bank there. Likewise with cleaners of trains and pretty much any other industry.
I think in Japan cleaning is robotized already.
> When you pair the fact that governments are funded by the same people whom are also funding a divisive narrative throughout all media outlets you end up with a grim and bleak outlook for society.
Votes matter a lot less in an FPTP voting system, and the point about media division and ownership plays into the fact that people can easily be mislead into voting against their own interests.
Not sure if you are aware of the little old B word which was proven to have been based on a campaign of lies.
As for your remark about robots replacing shelf stackers and cleaners. I’ll leave that as the ill-informed and provocative comment it is.
Regarding government funding, governments spend public tax payer money, yes. Political parties receive their funding from private donors who ultimately end up expecting some kind of payback for their donation/bribe. Which ultimately comes out of the tax payer’s pocket.
This creates a cyclic system which is built to extract wealth from the bottom and middle classes in order to feed it back to the society’s richest people.
"Trickle Down Economics" is a talking point of those who oppose whatever it is that they want to attack at a given moment.
It can, and has at times, meant:
- Corporate bailouts and "welfare"
- Tax cuts
- Deregulation
- Lobbying / big money donations
Sometimes it means some of the above, other times it means all of the above. But the point is that no one on the fiscal conservative side of the aisle has ever come out and used the term "trickle down economics." Their opposition uses that word because it is loaded and it speaks to their base.
> Those spending never reaches the "lower classes"
What spending are you talking about? The OP was talking about removing barriers to creating business and attributed these barriers to good intentions. We can probably safely assume that the OP is a fiscal-conservative who favours deregulation and a business-friendly environment. And for what it's worth I am not trying to take one side over the other, you just lost me at "spending." The OP is talking about the exact opposite of spending. They are taking a "private solutions over public solutions" position. One where you spend less by having less overhead and red tape standing in the way of those who want to produce goods & services thus creating abundance of supply which lowers prices in addition to more jobs which puts more money in peoples' pockets.
https://www.epi.org/productivity-pay-gap/ shows that producing more stuff per person since 1978 hasn't fixed inflation (not graphed there), and we can afford less of it because real wages haven't kept up.
No, that's not what real wages mean. Real wages going up means we can afford more stuff, full stop.
The fact that real wages haven't kept up with productivity means that we can't afford as much more stuff as is being produced, but we can still afford more stuff.
I'm not making a point about society, I'm making a point about what real wages mean.
You're quoting the outputs of a propaganda industry, not the outputs of credible independent research.
These are the orgs who persistently try to sell trickle-down economics, minimal taxation, low regulation, and other discredited, disastrous, and irrational neoliberal policy arguments.
Many are also enthusiastic climate change denialists.
> and other discredited, disastrous, and irrational neoliberal policy argument
Never mind. I guess we have nothing to agree on.
> Many are also enthusiastic climate change denialists.
You're clearly influenced by the outputs of a propaganda industry, not the outputs of credible independent research. See what I did there? I'll even one-up you with some links:
Inflation in 1980, when Carter's presidency ended, was at 12% YoY, the highest they'd ever been in his entire presidency. Rising oil prices were not the only, or even primary, cause of inflation.
From the article: "In the early 1960s, a pair of Nobel Prize–winning economists, Paul Samuelson and Robert Solow, argued that in order to keep unemployment around 3 percent, U.S. policy makers should be willing to accept that "the price index might have to rise by as much as 4 to 5 percent a year. That much price rise would seem to be the necessary cost of high employment." Both economists were close to Kennedy, who pushed for low interest rates, hoping to spur rapid economic growth."
This idea turned out to be false.
Also from the article: "In the early 1960s, a pair of Nobel Prize–winning economists, Paul Samuelson and Robert Solow, argued that in order to keep unemployment around 3 percent, U.S. policy makers should be willing to accept that "the price index might have to rise by as much as 4 to 5 percent a year. That much price rise would seem to be the necessary cost of high employment." Both economists were close to Kennedy, who pushed for low interest rates, hoping to spur rapid economic growth."
This turned out to be true. And, lastly:
"In the 1970s, that is exactly what happened in the American economy, often by design. As Frum wrote, "The United States had consciously chosen to inflate its currency. It made that choice because of the political ideology and personal weakness of the men entrusted with the job of managing the American economy: their utopianism, their arrogance, and then finally their cowardice." The inflation that vaulted Reagan into office was not an accident or an incidental effect of policy. It was the result of deliberate policy choices."
As I said. Took several years and Volcker was appointed late '79. To R's credit, he didn't get in the way of that part.
Although tax cuts don't help inflation so wasn't a clean assist.
He also vastly increased govt spending later in his term, despite the common narrative about being frugal.
"It was only after the election, when Volcker knew Carter had lost, that he really clamped down on the money supply. This illustrates an important point: Presidents get the Fed policy they want, no matter how “independent” the Fed may be. If there had been any doubt about this, it was settled in 1967, when Fed Chairman William McChesney Martin buckled under pressure from Lyndon Johnson and eased monetary policy even though Martin knew he should be tightening. This caused inflation to jump from 3 percent in 1967 to 4.7 percent in 1968 and 6.2 percent in 1969."
And:
"Few people now remember how much pressure there was on Reagan to get rid of Volcker and have the Fed run a more accommodating monetary policy. Yet Reagan not only supported Volcker publicly, he appointed like-minded people to the Fed whenever he had the chance. He reappointed Volcker to the chairmanship in 1983 and appointed Alan Greenspan to replace him in 1987.
The result of the Fed’s tight money policy was a far faster reduction in inflation than most economists thought feasible. From 12.5 percent in 1980, inflation fell to 8.9 percent in 1981 and 3.8 percent in 1982. It is difficult to explain just how remarkable this achievement was. Most economists would have considered it impossible in 1980, especially given the big 1981 tax cut, which economists schooled in Keynesian economics generally viewed as pouring gasoline on the fires of inflation."
You can be as self-assured as you like, and that's your prerogative, but why post a response if you're not going to take the time to be convincing in any way, such as by providing any evidence, information, or even rhetoric? I'm certainly not going to change my mind because you said you read a book.
Cutting and pasting someone else’s work is not a discussion. Not to mention what you added didn’t exactly contradict my take so there’s not much else to say.
I mean, I did contradict your take. I contradict that inflation dropped primarily due to Carter picking Volker, or that dropping oil prices were a major factor. How much more contradictory can I be?
The authors claims that the Reagan tax cuts were a key ingredient without which the inflation reduction may not have occurred at all, or it at least would have occurred at a much slower rate.
But, look at me not carrying on a "discussion" because I keep citing other sources. I should just respond with one single sentence stating my belief as fact, right?
Inflation has been remarkably low since 1980 though… and that graph doesn’t mention prices. Theoretically if more is being produced then you don’t need wages to keep up to afford the same luxuries. In fact all the stats I’ve seen shown that we can and do afford a lot more these days
Meanwhile the headline article is saying the exact opposite.
We're not talking about luxuries, we're talking about essentials. A nice iPhone is useless if you can't afford to feed your family or pay your energy bills - which is quite literally the situation many families in the UK are now finding themselves.
>By giving money to people without producing more stuff - or even making it harder to produce the same - you MUST have inflation, rationing, or empty shelves - and often all three.
Completely inaccurate. Giving people money that came from taxes does not increase the money supply.
Giving people money that came from selling bonds does not increase the money supply.
The main driver in inflation is monetary velocity - the rate at which money is exchanging hands in the market. Increases in monetary supply almost invariably lead to increases in monetary velocity, so the two are generally equated - but this is not strictly necessary. If I gave you a quadrillion dollars tomorrow, and you chose to simply keep it under your [rather large] bed, but otherwise continued living as you do - then obviously no inflation is going to happen, even though you just increased the monetary supply quite substantially.
So while one could nitpick some points about the specifics of government actions in relation to the monetary supply, even if we take all of your points for granted - there would almost certainly be inflation proportional to the amount given. The only way there would be no inflation is if this action didn't increase monetary velocity.
>The main driver in inflation is monetary velocity
I would say this is also mostly innacurate. Velocity is one factor, but may or may not be the driving factor depending on circumstances.
If a global pandemic shuts down most of the manufacturing cities in China, and a war in Ukraine takes Russian energy and Ukrainian grain out of the supply equation, then the velocity of money is irrelevant compared to supply constraints.
Again this is not really a solution to the problem. Because the issue is not one of monetary supply, but of velocity. Giving money to people who will spend that money increases monetary velocity. The only way to prevent this is to reduce the amount of money people are spending.
That's why, for instance, the Fed is currently raising interest rates. They want to 'gently' brake the economy (while trying to avoid breaking it) such that people stop spending so much money, and inflation cools down. By contrast countless countries have tried to solve inflation by simply naively tackling the problem.
People don't have enough money to buy chicken? Well obviously we just need to give them more money! And that's how you get Zimbabwe. [1] Alternatively, another direct approach is to say "Okay - companies may no longer charge more than $0.50 for a chicken." That's how you get Venezuela. [2]
Printing Money == Borrowing Money in our modern banking systems. And borrowing is often exactly how this gets funded.
Also, it's not just about the money supply. It's about who has the money and what they do with it.
Taking money from a rich person who might have had it tied up in stock, and giving it to a poor person who takes it to the grocery store - will not put anything more on the shelves in that grocery store. In the aggregate, it MUST do one of those three things. It may ALSO decrease the price of stock as it's sold by the rich people.
Clearly the economy is complicated, and it's hard to follow around the money. That's why I like to get back to fundamentals. Not even economics, but basically physics: We can't consume what isn't produced. Money is to some degree beside the point. If we want people (of any class) to have more stuff, then we must allow for that stuff to be produced.
>Printing Money == Borrowing Money in our modern banking systems.
Not exactly. Printing simply introduces new money supply. Borrowing (or selling bonds in our case) comes with a corresponding liability that decreases the supply over time in an aggregate amount greater than the original amount, and results in a corresponding difference in behavior from the borrower.
Actually money from selling bonds does increase the money supply.
The government hands out that money, and people use it to buy more bonds, then the government hands out more money, and repeat. There is now more money in the world.
Yes, if you unwind everything it will go back down, but that's never actually done.
> Actually money from selling bonds does increase the money supply.
With a corresponding liability that will eventually remove more money from the system than was introduced. This is of course a dramatically different equation.
We avoid inflation by taxing the wealthy and redistributing that to the lower socioeconomic classes.
Global ecosystems are already in a free fall, we don’t need to “encourage production” [by deregulating industries? perhaps getting rid of those pesky environmental and worker protections? (that’ll definitely help out those workers) ] and even more rapid resource consumption.
The biggest growth period in the Western world - after WWII - happened to coincide with enthusiastic social spending programs, aggressive government funding of new R&D, and very high tax rates.
In the US the rate peaked at 91% on earnings over $400k - which is about $4m adjusted.
I often see the arguments made about how the US didn't suffer from the 90% tax rate. Those same arguments universally and intentionally ignore the elephant in the room: the US was the prime industrial power left standing in pristine shape after WW2 and largely inherited the globe accordingly. The US stepped right into being globally dominate in manufacturing, which produced a temporary, artificial prop for the middle class of gigantic proportions. That can't be repeated today and it wasn't the high tax rate that helped make things so great for the middle class.
This is also why middle class tax rates are so high in Nordic countries, and most affluent nations with good social welfare structures. Taxing the rich isn't nearly enough. The US would have to shift to a much higher tax system for everyone, and the US middle class (which is spoiled by relatively low income tax rates) will not go for it (not yet anyway).
You avoid inflation by taxing everybody. That takes money out of the system. The "wealthy" are already taxed pretty heavily, and they don't buy a lot of stuff. In fact, your best bang-for-the-buck on reducing inflation is to tax the lower classes, since their money tends to be higher-velocity than the money of the wealthy. It sounds fucked up, but mathematically speaking, you need to tax the poor if you want to stop inflation.
>By giving money to people without producing more stuff - or even making it harder to produce the same - you MUST have inflation, rationing, or empty shelves - and often all three.
Says who? Why can't the people producing stuff simply take lower profit margins instead?
Prices lower than the market-clearing price necessarily mean rationing or empty shelves. If you have a hundred potatoes and two hundred people, lowering prices just mean some people won't be able to buy at the low price.
Exactly this - the current inflation is not demand driven. It is supply constraints that is causing it.
This means that the normal way of controlling inflation (e.g. taking money away from people so they can't spend it) is not going to work. And in many ways is probably counter productive as it is making supplying goods more difficult.
There is a very strong disconnect between the value created by the lower class though their labor and what they are paid in wages.
Companies don't use some formula where they give a percentage of what you create to you in return, they try to squeeze your wages down as low as possible. It doesn't matter if you produce 5000 bucks an hour or 100 bucks an hour in value for your company, they still want to pay you as little as possible.
Stuff like staff loyalty and retention has been to a large part abandoned in favor of simply keeping wages down.
Is it? Are the rich people eating up all the bread? Buying up all the shoes?
It you take all the cars from the top 1% and give them to the other 99%, how many additional cars do you suppose the average family will get? How about for houses? How about for haircuts?
> Imagine, for example, just giving everyone £10M to spend on whatever they want. This would not create any more stuff - but it would sure be a big equalizer for people buying that stuff!
This is mostly true, but it isn’t always, and it isn’t a perfect formula.
For example, there are some goods that have zero or negligible marginal costs to provide. For example, a streaming service. If people use the extra money they get to buy Netflix subscriptions, it isn’t like there will suddenly be a shortage of Netflix streams. It doesn’t take many resources to add additional subscribers for Netflix… it isn’t exactly zero margin, but it is pretty damn close.
This is even somewhat true for some physical goods. There is a lot of latent productivity in our economy… factories only running at 50% capacity, for example, or mines that aren’t producing all the ore they can because the demand doesn’t exist for what they produce. If demand suddenly increases because there is more money being spent, they can increase productivity without putting strain on the productive capacity of the industry.
Obviously this is not infinite capacity, but it is why it is not as simple as “creating more money == 1 to 1 equivalent inflation”. In other words, you aren’t going to get a 10% inflation if you add 10% to the money supply. It would be some fraction of that 10%.
And what's good of having high GDP like Ireland (neighbour to UK) if then there's no housing and prices are insane and people who don't already have a secure situation are screwed and have to leave anyway?
Why do tax reliefs and strategies always benefit the big companies with lots of lawyers.
Lower the taxes of the common folk. Their interests are not being met, but those of the lobbyists.
The wealthy in the UK are largely landed gentry. They can't flee with their property and if they sell it off at firesale prices to ordinary folk to avoid being taxed that would largely solve the housing crisis.
The problem wouldn't be that they would leave. The problem would be that they would stay and become violent.
Not the structure built on it (well ... not much ... and you can often just tax that through the resources it consumes).
Not only are you taxing the asset that can't flee the country, and which the poor typically don't own, you also incentivise efficient land usage (it becomes too expensive to be a NIMBY).
Not really sure I'd call the "Hinduja" family wealth "British" although what small % of their wealth they do have in the UK is undoubtedly in property.
There's quite a number of very rich foreigners who economically have very little effect on the UK apart from monopolizing scarce inner city property.
In NYC for example, 40% of the tax revenue comes from 1% of the tax payers[1]. High taxes are causing high earners to leave the city. What's going to fill that gap in revenue?
Cristobal Young and Charles Varner did a study “Millionaire Migration and State Taxation of Top Incomes” and found that when taxes were jacked up on New Jersey residents they tended to stay despite low tax states (e.g. Connecticut) being quite close.
If people are reluctant to move to a nearby state to save on taxes theyre gonna be even more reluctant to move to a whole other country.
They can leave if they want, as long as they pay an exit tax. But personally I think that's bullshit, they'd rather be less rich in France than more rich in Romania.
And if you're talking about companies leaving France, then that's flimsy too. French citizens are among the richest in the world. International companies will pay higher taxes to access that market, and if they don't that's fine, a domestic company can step in or the government can snap up the productive capacity to invest in infrastructure.
Government has funded those things way more, but when a rich person runs a museum it's "philanthropy", when the government does it it's a "waste of taxpayer money".
There's no reason the government couldn't fully fund those things instead.
In fact, "businesses that require high capital" are almost always funded by the government. It's called infrastructure spending.
Good? It's not like they're using that money to enrich the country they live in or the other people or society, they're not building hospitals and funding schools anymore or employing people or raising wages. They're buying assets and becoming landlords and lobbying politicians and making things worse. Not just 'let them go', get rid of them, let them be somewhere else's problem.
>The lower class does suffer the most, but unfortunately it is the policies intended to help them which actually cause most of the problem. By giving money to people without producing more stuff
Which specific policies of this Conservative government amount to a change in the direction of giving more money to more nonproductive people? If anything, exactly the opposite has been happening, and yet inflation has been getting worse.
At some point AI will produce stuff for us. It is just a matter of time until AI can do the basics: grow food, build houses, operate people, etc. I mean, that is what technology was always for: making life better. So clearly there cannot be a correlation between how much you produce, and how much you consume.
I understand where you're for: patching things for some at the bottom doesn't help produce more.
But focusing on the alleged producers while fleecing the people in the middle (who are not the lower end either) is equally bad.
The people in the middle get high taxes, no real possiblity of ownership, no benefits of the bottom (state help) or of the top (the top just increases their own margins).
The top lobbies government and sets an unfair advantage for themselves, making the whole alleged democratic representation a farce.
The government should be more frugal with their won bureocracy and corruption and lower the taxes for the middle and bottom. The pretende that increasing conditions to the top will drip down is demonstrably false. It's mostly a rigged game, depending on where you started.
Whatever we do with corn is a good example. We have way more of it than anyone wants, but it continues to be produced because the producers are subsidized. (We have found alternate uses for the corn glut; high fructose corn syrup, ethanol in your gasoline, etc. Neither of these things exist in countries that don't subsidize corn production.)
In theory, you could do this with toilet paper or loaves of bread too.
Or you know, deregulate things? Things like allowing free import of cabbage seeds, removing restrictions on manufacturing in residential areas, letting folk build homes which are different to what the local urban planners envisioned?
> but unfortunately it is the policies intended to help them which actually cause most of the problem.
In the US, the Fed is not concerned about the bottom. They're solely concerned on the top. Check the numbers, zero interest rates did *not* trickle down. Instead they helped further increase the income inequality gap.
To blame to poor (read: the powerless) in any way, shape or form is, at best, misinformation. Worse it gives those responsible a free pass.
"I sit on a man's back choking him and making him carry me, and yet assure myself and others that I am sorry for him and wish to lighten his load by all means possible… except by getting off his back."
> The lower class does suffer the most, but unfortunately it is the policies intended to help them
I defy you to find any policies in capitalist countries that are intended mainly to "help the poor." Even the liberals' beloved FDR claimed he was just trying to save capitalism with his social programs.
I know this is probably going to give a heart attack to some of the libertarian tech-bros here, but there is an easy and tested solution for that: price controls. Inflation has a very clear source, it happens when someone decides to raise the prices. Why not stop the problem at the source?
The rises are due to a power dynamic: the companies raising the prices can basically get away with it ("whatever the market will bear").
Why can they do this? One reason is monopoly power- monopolies must be broken up.
But what else can be done (besides central bank driven demand destruction)? So instead of price controls, a more palatable solution is collective buying. This gives buyers more clout, allows them to bargain for lower prices.
So we need more large non-profit buyers clubs, things like that. In the US, allow medicare to bargain with drug companies- it's insane that they can not.
An example where this works: my parents live in a gated community. They pay very little for the cable + internet + cell phone because the entire community has a deal with the provider.
Large retailers have this exact role: they certainly demand and get lower prices from their suppliers. We need a non-profit version of this, why should Walmart owners only benefit from their buying power?
Grocers are typically a commodity business, one feature of which is that the companies do not have pricing power. So unless the grocers have increased their net profit margins, I don't think evil-powerful-corpos is a tenable answer. It's a nice simple, market-based answer that gives people someone to blame, but it's just wrong for grocers.
Target has a NET 2.6% profit margin, Walmart has 1.9%, which are on the low side of what you'd expect for a sustainable commodity business. Tesco appears to have a GROSS (not net: this is after cost of goods but before salaries, etc.) margin of 6.5% and Sainsbury's has 7.6%. [1] Obviously their net profit margin is going to be less. This is hardly a company with a huge pricing power dynamic. If you want to see that, look at Apple (24.5% NET margin), Coca-Cola (22.2% NET margin), Visa (50.3% NET margin). (Note however that Coca-Cola's customers are its bottlers and Visa's customers are merchants so their pricing power might be invisible to end consumers)
>Large retailers have this exact role: they certainly demand and get lower prices from their suppliers. We need a non-profit version of this
This was tried a lot in the 20th century (starting in the 19th century), usually emerging from the labour movement. I think in food retail and energy it has mostly failed or simply stopped making a difference. The profit margins of food retailers are small to begin with and easily lost by being a bit less efficient.
But Europe and the UK in particular has been using a similar model pretty successfully to keep drug prices low. Some argue that costs were merely shifted over to the U.S. I think this is only partially true.
Price controls are equivalent to welfare payments, except instead of being handled by an at least theoretically accountable government, the responsibility is imposed on random third parties with no oversight. Unsurprisingly, most of those third parties decide they'd rather keep their wealth instead of selling at a loss.
Gives anybody with elementary knowledge of econ a heart attack. How far up the supply chain do you want to go with these price controls to try and avoid the inevitable shortages and black markets? Labor price controls? Would that be effective?
> "It happens when someone decides to raise the prices"
What would drive someone to raise the price of something with the confidence it will still sell at that price?
Rising demand and limited supply. Someone with a monopoly on all the widget production can arbitrarily decide to limit supply (e.g. your "limited edition" MTG card), which is a farce.
More often and importantly, in an environment where there are many producers of a commodity like toilet paper, they suffer input shortages or other increases to the cost of production/delivery. On and on this analysis goes until you get to your question, "why not stop the problem at the source". Where is the source in the price increase in toilet paper? Paper production costs are up? Ink costs are up? Shipping costs are up? Regulatory costs are up? Energy prices are up? Labor costs are up? Freeze all of these by government mandate?
As the guy cutting down trees for toilet paper with a shortage of gas for your chainsaw (meaning it costs more to run), do you want the cost of your product arbitrarily frozen with no regard to your input costs? What if the cost of your logging lease from the government increased? Can you raise the price of the toilet paper logs you're selling? No? How is that fair? What if landslides decreased your tree availability by half, but the number butts that needed wiping hasn't changed, or worse, has increased? Are you to sell your now scarce trees at the same price you always did? Or shall you sell to the highest bidder? What if the government says you can't auction the trees but must sell them for the same price? Maybe you look for off-the-books compensation - free tickets to the game, whatever. Someone still bears that increased cost.
If rising demand relative to limited supply is the actual source of the problem (too many people want toilet paper) why not stop the problem there by simply rationing toilet paper? Turns out this is what happens more frequently - rationing eggs, toilet paper, trying to prevent hoarding, scalping, etc.
Arbitrarily limiting the supply costs of a product or the demand for a product is a temporary solution at best.
Price controls and rationing go hand in hand. Ultimately the goal is to ensure that everybody is able to acquire the goods that they need to survive. We are not talking about luxury yachts here, we are talking about food. If the source of the price increases is an insufficient supply of the raw materials, would you rather allow the market to increase prices until the point that some people are starving while others are buying ten times the food that you need to survive to feed their pets?
> Gives anybody with elementary knowledge of econ a heart attack
Plainly, this isn't true. This opinion is not uncommon amongst so-called "Marxist economists" such as Richard Wolff. You can disagree that price controls and rationing would be the best way to solve the problem, but it is outright ignorant and needlessly insulting to make this claim.
That went really well in my country 30-40 years ago.
My father once went to buy me diapers and returned with living room furniture set(ugly one also), because this was only one available since month or so, and he had to take it on the spot, because entire shipment will be gone in next few hours.
Then he had to go back to the diaper line and wait a few hours, because I wasn't impressed with the furniture enough to stop eating.
I'm not sure you really get how markets work. Price controls can have a few different effects depending on the good in question, but one of those is shortages, which can be really bad when the good is food.
People don’t decide to raise prices out of the blue… it isn’t quite this simple, but for the purpose of understanding the basic concept, you can think of it as the price goes up when you can easily sell your inventory at the current price… if your product sells out quickly, and you still have people eager to buy your product, you raise prices, and you keep raising them until you can just barely sell all your product (of course it is more complicated, because you are trying to maximize profit and not minimize inventory, but the basic idea is the same)
If you fix prices, it just means the product keeps selling out quickly and most people can’t get the product.
This is why prices go up when there is a supply shock (like with eggs and the bird flu). There are fewer eggs available, and raising prices reduces demand until it matches the supply (as people who only kinda like eggs switch to cheaper alternatives). While it sucks that eggs are more expensive, at least you can still buy them if you really like eggs. With price controls, it becomes a crapshoot on whether you can get them or not.
With eggs its kind of a different story. The price of eggs has increased for the supermarket to buy, by maybe a cent or two coming down to up to 16 cents.
Packaging takes 4 cents per egg.
Meanwhile the eggs in the supermarket cost 56 cents each.
Hope you don't mind me re-posting this from another comment of mine, but since you specifically raise the UK it's actually more relevant here. In the UK it doesn't look like gouging is the issue:
Honestly you're right that inflation can benefit the well off, but I don't buy the conspiracy theory angle. "The Establishment" has been holding inflation rates at historically unprecedented lows for the last generation. It's been the number 1 priority for central banks since the early 90s. The last time the UK inflation rate was above 4% was over 20 years ago.
The money supply gets brought up in every single discussion around inflation on this forum, and it’s obviously relevant.
However inflation!= growth in the money supply. A lot of the reasoning behind that growth was because inflation was persistently below the 2% target for the entire period up until 2021. That’s two decades of stubbornly low inflation, despite the feds best efforts in juicing the money supply.
It’s maddening how common it is for this forum to treat the issue as so simplistic and formulaic as though policymakers are somehow dunces compared to software engineers.
What is consistently lost in the M2 supply talking point is the demand aspect of currency.
One of the reasons why the M2 supply increasing wouldn't directly correlate to inflation has to do with global demand to hold the asset in reserve.
So the argument I don't think is bad, just misguided in the sense that once the global demand for currency reserve is saturated the party is over for increase in supply with out a very direct affect on inflation.
It's called the Cantillon Effect. And there usually is a delay from implementation to experienced effect. After 2020 the money printing was excessive, and it almost immediately lead to unprecedented growth in the stock market. Now, however, the delayed effect of that party is leading to unprecedented growth in food and energy prices, which affects the lives of everyone.
Correct, however parent comment wasn’t referring solely to 2020, they explicitly went back to 2000. Hence why I spoke to the whole period in my comment.
The GP specifically mentioned bread prices too, and for that surely supply due to the war is also a factor. Food supply limitations, shipping being threatened near Iran, trading partners being asked to pick sides. This is all very similar to the picture Zeihan depicts in his stuff. Unnerving.
That chart shows a net increase in M2 of about 5% for the UK, rather than multiples - the Y axis doesn't start at zero, which might be misleading at first glance.
I may be missing something, but the page I posted has very similar numbers to those referenced for the StLouis Fed. You have to click on "25 years" to have a comparison with year 2000.
The post you replied to referenced the St. Louis Fed chart saying 4x M2 growth from 2000 to now. The page I referenced shows the same 4x M2 growth for the UK: from 750k at 2000 to 3000k at 2023 (values in GBP Millions). Virtually identical.
So you're saying just because this is an entirely different economy, country, currency, money supply growth rate, central bank and interest rate regimen, that this means the elites aren't conspiring to do the thing they hate more than anything else, the thing that causes them to intentionally decrease jobs and employment to prevent?
IIRC deflation and inflation are equally as bad. If 'inflation' rates are negative, the economy grinds to a halt. Having an inflation rate of ~2% is widely considered to be beneficially for everyone, since it's in a 'goldilocks' zone, it creates stability.
With lack of fundamentals in economics this is very counterintuitive. Japan is a good example of the negative consequences of zero or negative inflation.
Stability is a feature of industrial processes. Natural processes are all over the place. Also, there are external shocks that you can't control (e.g. oil producers raising prices in the 70s, Russia invading Ukraine, etc.).
Compare pre and post 1945. The 1800s had a depression every banking cycle, now we just get recessions. Bank failures no longer take down your life savings. The king of England doesn't sometimes surreptitiously start putting copper in the gold coins to fund wars any more (e.g. inflation). GP's chart is pretty impressive, actually. Aside from the 70s oil shock, inflation is pretty constant, especially in the last couple decades.
But then again inflation benefits people with debt. 4% annual inflation means their real debt load is 3.8% lower. Low inflation is basically a subsidy to creditors.
I just want to point out that pretty much every natural economic condition is beneficial for the rich. The thing about money is it’s very flexible. You can hoard it in deflationary cycles, spend it on assets in inflationary cycles, grow it in economically good times and buy cheap property and goods in economically bad times.
Thing is inflation isn't 'natural' economic condition, it is mostly a product of economic policy according to a very respected school of thought (monetarism). In other words it is as natural as slapping a wealth tax of 80% on the super wealthy, which is definitely not beneficial for the rich.
Both income and point of sale taxes definitely feed into inflation so I'm not certain why you're trying to draw a distinction between those taxes on productive money and taxes on accumulated wealth (generally unproductive money).
Those are deflationary. They reduce transactions (because you want to spend less) and they reduce the money supply. Wealth taxes reduce the money supply as well, but they increase transactions because you have to buy the currency to pay them in by selling your assets.
That's because you still have to pay wealth taxes in currency, not just by giving up your "wealth". You can't pay taxes in 1/4 of a house or painting.
Although I'm pretty sure an 80% wealth tax would just collapse the economy because people wouldn't own their homes or businesses anymore. Maybe you could take 80% of their debt too?
Basically, when times are bad, the rich are solvent enough to afford to just "buy the dip", and sit on it to appreciate during the good times when rates will be low enough again, then rinse and repeat between the boom-bust cycles to increase wealth.
Inflation helps them as their assets are inflation-proof and it helps wipe out their debd.
Money isn’t fundamentally a zero sum game like it seems on the surface… rich peoples wealth is invested, and gets used by less wealthy people to also create value - they might say draw a salary supported by a business loan, or mortgage a house.
You're quite correct - but poor people's money also does that. Rich people's wealth is generally less productive in being accessible for loans since it's generally tied up in speculative investments... compared to less well off folks that are more likely to have a pile of cash in a bank account.
If by "natural" we mean somehow rooted in or consequent to human nature, then economies are very much natural. Human beings are social animals, and within this social context, we exchange goods and services for mutual benefit and for the sake of the common good. Economies become unnatural to the degree that they are detrimental and depart from human nature, in which case they cease to be economies to the degree that they fail. The details of economic practices are subject to a great deal of prudential judgement, and regulation is but a prudential determination of general principles of human nature to specific circumstances.
Economies don't live in some abstract realm, of course. They are the sum of human exchanges which themselves are a product of individual choices themselves influenced by culture and law. When the law is used by those in power to exploit everyone else for their own (myopically understood) benefit, we call that a tyranny.
But to be able to judge any of this requires a clear grasp of what is just. Recall that justice consists in rendering onto others what is their due.
Many, but not all: an example of unfavorable economic conditions for rich is real estate bubble burst (2008). Rich own real estate disproportionally to low and middle class.
How many rich people were foreclosed upon? The poor always feel the real brunt of any unfavorable economic conditions. The rich will stay rich and likely become even richer because they can take advantage of the recovery.
Correct. Being rich is always better than being poor no matter what the economic context is. Even Marxists should be able to understand that.
Although, to be precise: Inflation hurts everybody maintaining their savings in some form of cash. Rich people with a large pile of cash also have a lot to lose.
In the medium term current retail prices will be offset by wage increases as long as inflation does not become a galloping inflation.
In fact, Marxists understand this point most of all. Which is why the moral impetus is to remove the possibility of being individually rich, in order to bring a more beautiful wealth to all.
Individual "wealth" is so boring and flat and uninspired. Just Scrooge McDucks everywhere. Doesn't it feel like an archaic concept at this point? Such a narrow instantiation of humanity, can't die soon enough.
Assets are deflating at the moment though. S&P500 is down, property prices are down, etc. Asset prices are highly inversely correlated to interest rates, so for a 'rich' person you are actually much better off without inflation, as interest rates are lower and asset prices rise faster.
Not sure why you are being downvoted. Stock prices are on the slide and property prices and rental yields are extremely precarious.
I also agree that low rates were good as you could invest in property with leverage and in businesses which could borrow and raise money to cheaply to grow.
Because the British media feeds this narrative by making it look like the rich always win. The only changes in their wealth that the media draws attention to are increases, and if there's a drop that just gives a new baseline for the next round of headlines about increases. High inflation and increased interest rates got assets down across the board? Well, that means that the better off are getting lots of "unearned income" from interest whilst normal people's wages decline in real terms, never mind that the value of whatever savings they're earning that interest on is also dropping in real terms by more than they're making back in interest.
Because they do always win (in aggregate, in relation to other income brackets). With changing economic situations, those with more resources have more options, and are therefore on average able to adapt more effectively. Sure there will be winners and losers in every tax bracket but a quick look at a graph of income inequality over time should disabuse you of the notion that the rich are somehow at a disadvantage in all this.
The parent's point is that these events are not making the rich any richer than they would be.
Anyone with debt is better off with higher inflation as the amount required to pay back is worth less. Anyone who gave money away for interest takes a haircut. The richer entities usually loan money so this is better for the poor with debt. If wages don't raise than this changes
Rich people have a lot more debt than poor people. If you're too poor, nobody will loan you anything. The more money you have, the better the conditions will be which are available for you. Would a rich person ever consider something like your average payday loan? After the last couple of years with practically free loans, who do you expect to have borrowed more? The rich or the poor?
> I also agree that low rates were good as you could invest in property with leverage and in businesses which could borrow and raise money to cheaply to grow.
You can't get something from nothing.
This was simply subsidizing business borrowing / capitalists at the expense of the labor's purchasing power.
It shouldn't be a mystery why inequality sky-rocketed to surpass Belle Epoch levels under ZIRP.
And they're still hugely inflated compared to a couple of years ago, while wages are either constant or significantly lower in real terms.
The price-to-earnings ratio is 9X in London and around 5X in the rest of the UK.
Property speculation is always ten steps forward and one step back. Prices in the UK would have to crash by at least 50% to return to any kind of widespread affordability.
Because only one class will come out of this with MORE assets that at some point will return back to their higher valuable. It's a completely facetious argument. Sure you lost your house, but think of how much the poor billionaire's paper value dropped (while the billionaires asset acquisition continued apace taking advantage of the firesale forced upon the lower classes).
It isn’t facetious. People with investments and assets have lost a stack as inflation has taken off and could be waiting for a long time to return to the peaks. On a long enough timeline I’m sure you are right, but this year and likely over the next few years nobody is winning.
Of course it's relevant. It's absolutely fundamental.
The real metric isn't total cash, it's outgoings vs income.
Billionaires do not have significant non-discretionary outgoings. At the billionaire level food, housing, and transport are essentially free, and your time is your own. There may be mild chagrin if you can't afford a bigger yacht or another private jet, but mild chagrin is all.
That's not true for most people. The poorer you get, the more aggressively you have to sell your time, and the more likely it is that your outgoings are going to exceed your income.
Not because you can't organise your finances, but because inflation and wage stagnation have made any other outcome impossible.
Always worth remembering that, at least for property prices, "being down 10%" doesn't mean that 1y they were worth 100 and this year are worth 90, but that 2y ago they were worth 100, 1y ago they were worth 110, and this year they are worth 119. In other words we often talk about "the % year on year increase is down", not "the value of the house is down".
Can you point to a single usage in the context of property prices where "being down X%", without specifying that X is referring to a YoY increase, means what you say?
Inflation, asset deflation and a financially strained middle/low class causing them to be upside down on debt = firesale on what assets they had for the top class to acquire. I believe this cycles used to be called pump and suck when directed at third world economies, get them addicted to debt then acquire their desirable assets. Crazy to see it being used now on the UK and USA middle class. We never thought the banking leopard would eat our face.
Folks feast like kings when the cheap money is flowing, failing to realize that eventually the tab comes due.
It's what you're seeing happening in Silicon Valley right now.
Usually a reality check occurs every decade or so, bringing heads back down to Earth, but I think too many felt that the COVID lockdown lows in the markets were that reset. They then went right back to their old habits, after a brief pause.
Just thinking about how long it took to recover from 2000, 2008, etc., it's obvious that we didn't truly have that reset.
The lockdowns fundamentally changed a lot, but few people seem to want to acknowledge it. The effects of the lockdowns will been seen for a long time, I honestly do believe.
> Asset prices are highly inversely correlated to interest rates
this is true in the short term because a lot of assets are held with borrowed money. when interest rates go up those assets get sold to cancel the debt and bring down the market value.
however, either if inflation is sustained or interest rates go down, asset values will inevitably bounce back, but money will NEVER recover its value.
Higher prices don't mean more profit. People adjust their behavior and retailers eat some of the costs of higher prices. They'll sell a lot less. Their revenue might not even go up necessarily
Are they down YoY or compared to pre-Covid? The linked article doesn't seem to have that information concretely, but does include "The average British home now costs about nine times average earnings: one estimate I recently read reckoned that the last time UK houses were this expensive was in 1876." which suggests they're still higher by that measure than three years ago. So: correction of a super crazy time, but still a "win" for asset values for the owners over the last 4 years, or "overall trending down"?
they "have" to be when interest rates are up, since it means the price of money (to borrow) is high. When money can be had for cheap (rates), prices balloon, and when rates are up, real estate prices will, relatively speaking, go down. Another way to put it is that RE prices are always viewed through the relative lens of current interest rates. Yet another way to put it is that it can be hard to figure out if they have objectively risen or fallen, because of the changed rates.
UPDATE: I can see a comment below says they have gone up in some places. Well, when both rates AND prices have gone up, it is not hard to tell :-)
The winners from inflation are anyone with debt. If your mortgage was equivalent to 1000 loaves of bread yesterday, and it buys 500 loaves of bread today, you just got a bunch of free money. This assumes wages keep pace with inflation; at the very low end of the spectrum (minimum wage) they probably don't, but for professionals, it seems like everyone has gotten inflation raises over the last couple years.
Other than the sticker shock on the price of everything, it's not too bad for a lot of us.
Amazing that you were able to bring class divide that inflation fosters without mentioning the major responsible for it: the government and central banks.
In fact, inflation is, in its current form, a tax levied by the government on all citizens--rich and poor. You are correct that the rich can find ways to hedge some of the effects of inflation, but that's expected as the rich have way more disposable income.
I just want to know for how long people will close their eyes to these policies (green energy stimulus, self-inflicted supply chain bottlenecks, QE and bailouts to ultra rich and party donors via deposit bailout).
I am a "believer"(#) in Modern Monetary Theory. So yeah I do think inflation is a choice by government - but only because they do not "believe" in the solution.
(roughly speaking the UK can print as much money as it has productive capacity, ie nurses or house builders, then pay those nurses to do something useful, then when there is too much money in nurses pockets and they go spending 4 pounds on bread, the government can tax the money back out of the economy. Either by taxing nurses, or you know million pound equity portfolios or billion dollar companies. The point is if inflation is too much money chasing too few productive capacity the government has a way to remove that money from the economy. How is the politics, but belief is the overton window)
Anyway, yes inflation bad. Solution is not to spend less but to tax more. Who you tax is a political choice. Personally Machine Gun Kelly is the brains here - rob the banks because that's where the money is. Tax the rich because that's where the money is.
(#) not sure what the right term is here. It seems so simple and obvious. But believer is close.
Wealthy, central banks, government are all a rotating and revolving door of interests. I don't understand why you're making a distinction. Who do you think the government acts on the behalf of? The wealthy.
Assuming you took a look at the search result I provided, but in case you missed it - “The OECD said last week that the U.K. is lagging substantially behind other developed economies, performing second only to Russia among the world's major economies.”; which is saying a lot given Russia basically committed economic suicide.
I'm not so sure I would say that. Inflation is more harmful to those with assets, it generally accompanies a strong labor market, and the means central banks use to fight it amount to deliberately increasing unemployment.
We can say that inflation is good for those with assets, and interest rate hikes are harmful to those with assets, and the two tend to go together -- but not always; that's mainly up to the central bank.
> We can say that inflation is good for those with assets
If the assets are liquid ones not really; that's one of the reasons asset-holders start to clamor for the Fed to do something when inflation is high. I read the introduction of Secrets of the Temple, which is kind of a counter-conventional wisdom explanation of how higher rates of inflation were salutary for regular people at the expense of the ruling class, and it was pretty compelling.
For some reason when I hear people saying this I just picture them as thinking of the poor as having a mortgage on their second summer home or something like that.
And a large part of today's work force is simply not familiar with fighting for wage increases. They're used to getting meager increases that don't keep up with inflation. Workers have been getting screwed for decades, the slowly boiled frog. It's not worth the fight so they have in effect gotten pay decreases, in aggregate, over 30+ years.
Of course the poor are getting payday loans at interest rates of up to 664%[1], or credit card debt at 20%, both of which make inflation irrelevant, while the super-rich are taking out loans backed by their stock and real estate[2] at interest rates below inflation.
That can also be true if you have sufficient loans. It's really a balance between how long your comp takes to catch up with inflation and loans vs cash. That said, I think better off people generally might have leveraged their assets even more, getting the double whammy of the mortgage becoming cheaper while the underlying asset goes up in value. Credit card debt also becomes less meaningful though... It all depends (just like in software engineering).
Do those loans have interest on them? Many major religions banned usury because it’s primarily a way for the haves to keep from the have nots.
The alternative where the rich are sitting on piles of money because they can’t profit off loaning would quickly make apparent how they’re leaching off the labor of the people.
> a loaf of my favourite bread increased from £3 to £4
What on earth are you eating? From where? The average 800g loaf costs £1.36.
But to feed into your point about who suffers, if you had to give up your luxury loaf, you could still afford two average loaves in its place. People who could only afford a 80p loaf before are now going without.
A 1kg wholewheat sourdough loaf. I'm a bit picky regarding bread and have actually started making my own in the last few months due, in part, to A) rising prices, B) manufacturer corner-cutting, and C) it's fun!
> In an inflationary economy, the winners are rich who have valuable assets whose value skyrocket - think real estate, businesses, etc.
Actually, it's the opposite that is happening, because central banks have aggressively raised interest rates to bring inflation under control.
When rates rise, the net present value of every long-term cash-earning asset declines, and those individuals and businesses (including banks) that borrowed too much in relation to the declining value of their assets, can and will suffer large losses.
It's not a coincidence that stock markets are down, businesses are cutting costs, office buildings everywhere are starting to file for bankruptcy protection, mismanaged banks are now in financial distress, venture capital firms and their investors are facing the prospect of large losses, and so on.
Rising interest rates make debts worse and asset values (including those belonging to the rich) to decrease, whereas it's mostly just the value of money which improves.
Also, who is rich/poor and has assets/debts can be hard to tell from appearances alone. Would you call this guy poor [0]? Seems like he has a good life. Which begs the question... when we talk about taxing the rich, who are we thinking of exactly? Someone living beyond their means, or below their means?
I think it is very important to note that when it comes to grocery price increases, even if suppliers are raising their prices (and this isn't always the case), groceries stores aren't just passing down wholesale price increases, they're raising prices even further.
For grocery stores, this isn't an issue with (unqualified) "inflation", it's an issue of price gouging.
Everyone cites "price gouging" every time prices go up in any industry, but if you bother to look it up the average profit margin of a UK grocer in 2022 is about 3%.
Unless that has jumped to 10-15%, or jumped in any meaningful way, you're just seeing inflation, not gouging. Generally, grocers are among those businesses with the least pricing power.
What you'll note from this article (from the Daily Mail, but the quotes seem legit) is the source of the price rises is contested. The grocery store management said -- somewhat vaguely, after being questioned about it -- that, yes, suppliers could be raising prices excessively. Then an "insider" said that actually it was the groceries that were doing it.
The whole point with inflation is that nobody knows what future price-levels are going to be, so there's upward price instability. Everyone is trying to gauge how much to raise things -- and of course, they tend to overshoot, which leads to a higher rate of inflation. That's what makes inflation so pernicious, and hard to eradicate. It's not so much that a constant rate of inflation is damaging, but when increase become noticeable, people begin trying to anticipate it, and that increases the rate of change.
You'll also see this in pay negotiations: you'll see more strikes over pay raises, but it'll be very hard for unions or companies to accurate gauge what the pay rate rise should be. It's not that unions are trying to "gouge" management -- it's that the consequences of demanding too small a pay rise is the same as accepting a pay cut. So labour demands more than inflation, which in turn tends to push up the inflation rate.
You are talking like inflation is some conspiracy wielded by “the rich” (who are they? Are they all friends with each other and plan all their schemes together?) against the “others”.
Fact is the inflation we are seeing here is caused by the after effects of Covid, the Energy price surges caused by the Ukraine war and in the special case of UK - Brexit, which has lead to huge import shortages due to increased bureaucracy at the border, etc…
So please stop this conspiracy talk about the “rich” creating inflation to disown the “poor”.
If a particular group has converging interests and is facing a similar set of incentives, they don't need to be in an explicit "conspiracy" to be aligned. The emergent behavior in a system can both advantage a particular group at the expense of another without there needing to be a conspiracy whatsoever.
Consider the comparison between Norway and Sweden, two extremely similar countries in almost all respects.
Food inflation in Sweden is 22.1% over 12-month [0]
Food inflation in Norway is 8.8% over 12-months [1]
Obviously someone is making money hand-over-fist from this 12.7% discrepancy.
Comments like the one above are really disruptive to any constructive conversations. It is not a conspiracy.
The comment above is (at best) astonishingly naïve. While it is a emotionally plausible argument, we can see it does not hold up if we compare the rates of inflation over similar countries.
Norway and Sweden are hardly similar in this respect. Norway is a net food exporter. Sweden is a net food importer. That alone can account for much of the discrepancy.
That could only makes sense if you count food in currency value, not in stuff you eat. Sweden is not great in agricultural productivity (terrestial argiculture), but it's a giant compared with Norway.
Maybe we should mention that Norway exports oil and gas, and Sweden does not.
It's pretty simple. Subtract the value of food imports from the value of food exports. If the value is positive then the country is a net exporter, and if it's negative then they're a net importer. Every major country imports some foodstuffs and exports others, but countries with a trade surplus are generally better positioned to handle food price inflation.
Food’s already super expensive there. A lot of stuff is required to be made locally. Tariffs on food imports are super high, like 100% IIRC. A burrito was $45 last time I was there. Big outlier country in general.
The "who are the elites?" question is one that many people struggle with when looking for who to point a finger at for modern economic woes. A lot us who post on this site are in technical fields and are well-compensated. So it wouldn't shock me if many people in the world consider "us" to be part of "them".
In this case though, we're simply talking about inflation. One cause of inflation that you've neglected to mention is quantitative easing and how it's been used to artificially lower interest rates while allowing for higher deficits. I'd suggest you start there before you strawman people who disagree with you as "conspiracy theorists"...
It's not really an active conspiracy. It's just the rich pursuing their own interests. When the workers or poor pursue their interests too effectively, the rich in positions of power make them take their medicine. But when the rich do it too effectively, well, that's just the free market and you can't do anything about that.
I find it fairly unlikely that the rich in the UK don't actually know each other. The UK probably has the most developed class divide of most western countries, so in-class socialisation is a pretty big deal around here.
> You are talking like inflation is some conspiracy wielded by “the rich” (who are they? Are they all friends with each other and plan all their schemes together?)
No of course not. That'd be 90s-Mr-Burns territory.
Nowadays you pay a SaaS offering to do it for you if you're a landlord:
So the question is -- is real estate the only market you'd do that in? Seems unlikely.
"If I had to guess, I would bet that the big food conglomerates have all signed up with some common AI-backed pricing software package, and that shares data between them. Or, at the very least, they've all started using AI algorithms to increase or decrease production of any number of goods to maximize their profits based on real-time sales and economic data. And since they're all probably contracting this out to the same or a handful of similar AI firms, the conclusions they reach are similar. If all the production companies are running algorithms that tell them to jack up their prices at the same time, well they all jack up their prices at the same time. They don't actually have to meet in some smoke-filled backroom to plot a price-increase conspiracy. They just all run similar algorithms that respond the same way to market trends. The consumer market is highly consolidated, with most goods having just 1-3 producers. If those few producers all sign up for the same AI price-setting software, there won't be price competition to punish needless price increases."
I think it's in Hackers & Painters that Paul Graham talks about the commonly held view that wealth is like a pie, that one group of people having more somehow means others must have less. He's also immensely wealthy, so I take what he says with a pinch of salt
"They" are the wealthy people, property owners and such, in society who make a scene if their wealth gets taxed any higher.
Every western society heavily taxes working, where often for me as a freelancer it hardly pays of to work more then 6-8 months per year.
But taxes on wealth are very low. And owning property often has many tax cuts, and tends to benefit from low interest rates.
The effect of it is is that either you play the wealth game through property or investing or you are lost out.
I think it would be fare to protect the assets people accumulate through hard work, but at the same time it should be more balanced then it is now and we shouldnt all have to be financial experts.
It's incredible, a lot of people in developed countries are thinking like argentinians now. In Argentina, the propagandist media companies that belong to politicians do everything in their hands to blame anyone for inflation, except for money printing policies dictated by politicians. And we have over 100% anual inflation.
I don't think it's a conspiracy theory - lots of companies are posting record profits right now as their prices have risen above the cost price inflation, so profiteering is a valid fourth class of price inflation.
This is. Tired talking point and basically entirely lies. Necessity prices have risen by large margins in the name of inflation, but they have also recorded insane profits at historic levels.
"rich" and "poor" are just holdovers from conquerer and conquered. Just because the mandate that one group acknowledge the other's right to create value by fiat (e.g. by stamping Caesar's face into a coin) is no longer delivered by guys with swords doesn't make it not a conspiracy by one group to keep another group in its place.
They got smarter about it in the late 70's. The rich don't even have to send guys anymore, they just send guns to the local thugs with an agreement that those thugs will, upon seizing power, hook the local economy into the US banking system.
The thugs get to keep the loans, but the debt gets transferred to the local community, which cements the "somebody who isn't you gets to create abstractions that you have to treat as money"-part of the deal.
The words that used to go with it are "progressive free-market policies", but I think Kamala Harris recently called it "anti-corruption" or something along those lines.
More like, "IRS". Taxation is the demand for the currency. Even if you conduct all trade with other people in seashells (or whatever), you'd still need to obtain dollars to pay your taxes.
Do central bankers and other policy elites have no truck with financial elites? What does it mean when stimulus is injected into markets for the purpose of 'stabilizing' them? Are they not concerned with financial markets? This seems to be the directly stated objective of many economic policies.
Is this a conspiracy theory or a simple observation of incentives?
The corporations lobby the gov and both enrich each other. It's not a conspiracy but a well known aspect of the modern world.
It breaks democracy benefitting a few in power.
The effects of covid are actually the effects of covid policies which benefited govs and big tech and other corporation's while screwing most people. Yes, it appears that people wanted it but when you consider the censorship, behaviour modification propaganda and unconstitutional state force application to suppress people who wanted to oppose them, it's not that clear of a picture.
Then Ukraine, also something that benefits the gov, the energy/war companies and corporations, and not the people. Also heavily propagandized to push more profiteering through endless war.
No conspiracy. Just the system at work and people like you dismissing the true criticism with the same old labels. You may feel an impulse to call me fascist, racist and other customary labels soon, heh.
It doesnt matter what you think. Poor people that loose money without possibility to do anything about it = angry people. That is a big problem. We know from history the consequence of terrible inflation in 30's in Germany.
This comment is bizarre. Corporations taking advantage of the current economic climate to make a profit is a conspiracy now? Most of the large corporations responsible for selling these supposedly "inflated" goods are posting record profits with no shame, and here you are covering your eyes and ears to defend them.
Inflation means price increases across all actors in an economy. Large corporations also have to pay higher production costs now. So all these „profits“ are eaten up by the price increases those corporations see, too. I don’t think you have a valid understanding of what a „profit“ really is…
> So all these „profits“ are eaten up by the price increases those corporations see, too. I don’t think you have a valid understanding of what a „profit“ really is…
Uh, you should google what the word "profit" means. You're thinking of "revenue".
Er, nope. You are mixing it up, I am sorry. Profit = revenue minus all expenses. So if prices are rising, revenue grows but profit stays the same as expenses are driven up too by inflated prices of the factors of production.
But it’s a typical observation I have whenever discussing economics with Europeans — economic illiteracy is rampant, here, unfortunately, because schools do not give much priority to basic economic facts.
> I have whenever discussing economics with Europeans — economic illiteracy is rampant
The economic illiteracy would be not being aware that all those megacorps are posting record profits and trying to gloss it over with made-up theories of your own and accusing an entire continent of people with economic illiteracy in the process:
If their costs were rising more than their revenue, they wouldnt post record profits. They are posting record profits. You are simply wrong. You just !made up! a theory to avoid the actual reality.
Why have you made such a blunt, exaggerated, false statement like 'European economic illiteracy' without doing so much as a google search. Do you know how that made you look...
That‘s a newspaper article published last year citing an NGO report based on annual reports on the year 2021… that was way before the price surges really began. I would wait for the annual reports on the year 2023.
Nestlé e.g. (to stay in Europe) reported a 45.2% decrease of its net profit for 2022 — but, supposedly, also due to out of the ordinary profit in 2021 after selling L‘Oréal. But they also note: „Organic growth reached 8.3%. Pricing was 8.2%, _reflecting significant cost inflation_. Real internal growth (RIG) was positive at 0.1%.“
But it’s typical for leftists to cherry-pick their data and only read news sources that confirm their bias. I hope you are even more angry with me now. :-p
There are heaps of other companies other than Nestle. One company doesnt make an argument.
> But it’s typical for leftists to cherry-pick their data and only read news sources that confirm their bias
Its not 'leftists' cherry-picking data. Its those who use vague words like 'price increases REALLY starting' - whatever that means - even as the very capitalist publications of the most capitalist corporations on the planet say that food corporations profited off of pandemic and the war.
So its basically the words of CNBC, Oxfam etc versus your 'really' theory.
> I hope you are even more angry with me now. :-p
I didnt notice that you were disingenous debater. I do now. It explains your absurd arguments, and the 'really' theory of price increases. I'll act accordingly and avoid losing time discussing with you.
I am sorry but you are mangling together so many different things just to prove your narrative about greedy food corps profiting from food price inflation. It all just doesn’t quite make sense. At least, I am assuming that’s what you like to communicate: Food prices increase because food corps want to make insane profits. Right? You are used to being agreed to, of course, as nobody likes big anonymous corporations making billions in money.
I’ll try to show you now why food corporations might make profits and impressive ones, too, but why they can’t have anything to do with steeply rising prices and why their profits do not hurt the average joe, necessarily.
Let’s reflect a little a bit about what a price is: When food prices rise why do they based on economic theory?
In a first approximation it could just reflect a scarcity. Say apple juice becomes more expensive. That could be because apples had a bad harvest season. Or transportation was hampered so not enough apple arrived in the factory or became spoiled. Or there were not enough people available for the harvest or the transportation. Can apple juice corps. expect fat profits because of an apple scarcity? Well, only if a company was lucky enough and managed to produce and sell the same amount of apple juice for the same cost compared to the last season. But since there is an apple scarcity, most companies would have less apples and, hence, have less juice to sell. Furthermore, people tend to drink less apple juice when it’s expensive. Both effects offset the increased revenue per apple on average for all the apple juice companies and, hence, imply a constant profit.
Another reason for a price surge might be monopolization. Say, Nestlé bought all apple juice corps. and can now command a much higher price. Fat profits? Well, Nestlé would have had to buy all their competitors first and in that process had spent quite a lot of money to be in this position. That would have seriously slashed their profit (even though their apple juice revenue would have sky rocketed). Furthermore, again, people would drink less apple juice under these conditions. Finally, obviously, Nestlé isn’t the sole provider of apple juice and in fact does not happen to be the sole provider of food (as you stated yourself) —- so it can‘t in fact profit from a monopoly under the current situation.
A third reason for a rising apple juice price might be a trend shift: People might find apple juice suddenly more attractive and tend to buy more of it at the expense of orange juice and are willing to pay more for it. Surely, that would increase profits for companies only producing apple juice. Producers of both apple and orange juice (like the typical Food Corp), however, would just measure a net zero revenue shift and a rather similar profit unless apple juice production is much more efficient than that of orange juice. But — whatever, consumers wanted to spent more money on apple juice and are now happy nevertheless.
That leaves inflation for another driver of increasing prices. Inflation means our money is losing value and, hence, can not buy as much apple juice as last year. That affects both consumers and producers, however, meaning consumers can buy less apple juice but at the same time apple juice producers can buy less apples (and less machine parts and transportation services). That brings us back to my original argument: Inflation can not drive real profits as — per definition — inflation affects the economy as a whole and hurts consumers and producers alike. Inflation does not mean a redistribution from consumers to producers as your thesis implies. Well, inflation implies a redistribution from consumers of money to producers of printed money but that’s quite a different story…
So why do apple juice corps. make profits in the first place? Because they spend less money in producing apple juice than they make in selling it. The larger the profit margin, the more efficient the company is and the bigger its profit. In a competitive market economy companies cannot just increase the price of the product they produce to boost profits. It is commanded by the market and is simply given. All they can really do is lower the costs of their production.
So while the food price inflation is bad — no doubt — it is not the fault of the food corporations with their fat profits. Ultimately, you want them to make a profit otherwise they would go bankrupt and couldn’t produce any food any more. And no food production is way worse than expensive food production.
In the UK it is very hard not to look at it this way. Unlike the US and other countries, Covid stimulus was very much aimed at maintaining the status quo: there were no flat amount universal basic income style checks handed out to everyone as in the US - instead you got put on 80% furlough and had a large part of your salary paid for by the government. This basically meant the rich got ever richer whilst doing no work and the poor tried to scrape by. In addition, covid contract schemes were widely abused by business owners, the most high profile case being that of Conservative peer Michele Mone who made off with £200 million. It is estimated that billions of pounds of public money has been irretrievably lost through what is essentially government neglect and corruption.
On top of this, you've got Brexit which was orchestrated by the right wing conservative aristocracy class for their own benefit. And we've also had a conservative government that has not only not pursued a green agenda over the last 13 years, but bent over backwards to get Russian energy money.
So yes, the factors leading to inflation were outside of control. But that doesn't change the fact that the powers that be in this country have been running the country in their own self interests and have given up on even pretending otherwise and that is why the UK is being hit harder by inflation than any other country in the western world. They were so high on their own supply they even elected Liz Truss to cut taxes in an inflationary environment and only reluctantly accepted that they weren't going to get away with it when the global market responded by saying it would tank the property market (which the whole stack of cards relies on).
> Are they all friends with each other and plan all their schemes together?) against the “others”.
This is the UK with it's notorious and very real class and aristocracy system. They don't call the royal family "the firm" for nothing.
> In the UK it is very hard not to look at it this way. Unlike the US and other countries, Covid stimulus was very much aimed at maintaining the status quo: there were no flat amount universal basic income style checks handed out to everyone as in the US - instead you got put on 80% furlough and had a large part of your salary paid for by the government. This basically meant the rich got ever richer whilst doing no work and the poor tried to scrape by. In addition, covid contract schemes were widely abused by business owners, the most high profile case being that of Conservative peer Michele Mone who made off with £200 million. It is estimated that billions of pounds of public money has been irretrievably lost through what is essentially government neglect and corruption.
It was the same in most EU countries, but wouldn't that result in lower inflation? The rich that kept getting richer would invest in stocks, business, real estate, park it offshore, buy another helicopter or yacht, etc. which wouldn't impact demand for most products whose prices are increasing.
> In the UK it is very hard not to look at it this way. Unlike the US and other countries, Covid stimulus was very much aimed at maintaining the status quo: there were no flat amount universal basic income style checks handed out to everyone as in the US
How does printing more money to give to everyone lower inflation?
I didn't say there was an either or did I? But the US approach is definitely preferable to giving the most amount of public money to the people who already have the most. Larger sums of money should have been given to the poor with it tapering off gradually as income levels increased. Instead it was given out in the complete opposite way, with people at the top getting the most and those at the bottom getting the least. The pandemic could have been the perfect opportunity for a soft debt jubilee to rebalance the system. Instead, it was just another thing yet again exploited for the benefit of the 1%.
Money was given to the top because the top controls the systems that allow the bottom to make money. Give to to the bottom they spend it, create nothing and now we all have nothing.
>The pandemic could have been the perfect opportunity for a soft debt jubilee to rebalance the system.
I don’t agree with either stimmy or the lockdown business handouts but I find it ridiculous people are using a world tragedy as some sort of crowbar to bring about their idea of some sort of require rebalancing. Not sure how those people even think how that could possibly play out beyond 3 months.
Starting to suspect some people feel the pandemic was the best thing to ever happen to them and are now upset it didn’t go further.
> Money was given to the top because the top controls the systems that allow the bottom to make money. Give to to the bottom they spend it, create nothing and now we all have nothing.
Amazing. Yes, I am sure the poor will just piss their money away on nothing. Rather than you know, starting businesses or upskilling themselves or paying their houses off or whatever. Because, you know, only the people already at the top of the pyramid know how to be productive and everyone at the bottom are just there because they're lazy and useless.
> I don’t agree with either stimmy or the lockdown business handouts but I find it ridiculous people are using a world tragedy as some sort of crowbar to bring about their idea of some sort of require rebalancing. Not sure how those people even think how that could possibly play out beyond 3 months.
Because historically, debt jubilees have been a common occurrence to maintain social order. The topic comes up semi regularly on hacker news, including yesterday. The fact of the matter is, if you don't agree with business handouts or stimulus, then you either don't agree with lockdowns and think we should have just gone about our business and let nature take it's course (if so I can see where you're coming from), or you want social disorder (I don't see where you're coming from). There's no way in hell you could have maintained a lockdown otherwise. People need money to eat and keep a roof over the heads and the poor do not have the savings to do that for an extended period of time without work. So if we're going to give money away to keep people alive, we might as well give more to the people who are struggling to survive rather than giving thousands and thousands to people who already have substantial amounts of assets. Similarly now with energy payment help, why on earth are we giving energy payments to people with second, third, fourth and however many homes rather than using that money to increase the amount we give to the poorest? That is not a ethical allocation of public money.
> Starting to suspect some people feel the pandemic was the best thing to ever happen to them and are now upset it didn’t go further.
If you're aiming this at me personally I was living at home and working a zero hours contract at a local venue so saw basically hardly any furlough money when the pandemic happened. I got £100 week from the job centre for and a handful of hours wage from the venue for a couple of months before they let us go. Meanwhile a guy I know who had been in his new teaching job barely a few weeks before covid hit was raking in over £3000 a month in furlough and treating himself to all manner of things like fire pits, jacuzzis and game consoles.
I saw the pandemic as an opportunity to escape minimum wage drudgery and worked my arse off improving my coding skills and used that to land a job at a local company as a software developer. Despite the fact half the developers worked remotely abroad, they made us go into the office with hundreds of others throughout the entire pandemic and then, when lockdowns were finally lifted for the last time, handed us all laptops and said we were free to work from home. So yeah, that was my covid experience.
So no, I don't think the pandemic was the best thing since sliced bread and that it should have gone further. What I do believe, is that when you give people at the bottom an opportunity and a bit of breathing space as opposed to pummelling them into the ground with debt and drudgery, is that those people can go on to make something of themselves.
> that is why the UK is being hit harder by inflation than any other country in the western world
I don't think that's true. Right now, UK inflation is lower than almost any European country east of Germany, including Sweden, and it seems inflation was running lower throughout COVID than even the US.
Please send me links if you've got any because this is conflicting with what I have been reading so it would be nice to have a more balanced view if this is the case.
"Oops...did I do that?" is a comedic phrase uttered by someone who makes a mistake which harms others but benefits them. Call it whatever you want, i.e. "Conspiracy theory", but you cannot deny who is harmed & who benefits.
Why does Brexit have to equal "increased bureaucracy at the border"? Is it due to the lifelong bureaucrats that loves enforcing it? An effective government should do everything in its power to reduce the bureaucracy in extraordinary times.
All countries have customs checks, to check that incoming goods conform with regulations, applicable tariffs are paid, etc.
Except countries in the EU, which has a common market that made such checks unnecessary inside of it. Of course there are still customs on the outside EU border.
So if you leave that, and your borders are now not internal market borders anymore but your and the EU's external borders, you're going to do more customs checks than you used to have. In both directions.
There's two sides to every trading relationship. Even if the UK tries to reduce bureaucracy on their side, there's still all the bureaucracy on the side of the other countries they're trading with. And they literally just torpedoed all their trade relationships by leaving a large customs union that allowed them to trade with a large number of important partners with significantly reduced bureaucracy.
I agree with you that bureaucracy here is the problem, and Brexit was the cause of it.
They've decided to leave the European Common Market, which was precisely designed to avoid the bureaucracy and reduce the burden of the customs procedures.
I would also add bunch of people in IT working primarily on peddling ads and developing total surveillance tools for years instead of doing something that produces real value.
There's a good case to be made that Putin was the richest man in the world. Nobody's sure what he's worth, but it's quite likely it was more than the $200B Arnault has. And Putin is singularly responsible for a good chunk of the inflation.
So blaming it on the rich might be appropriate, but not in the way that it's usually meant.
what he says, is but the way in which he conveys the meaning
the rich by this point aren't any group of people, but a section of the system.
the system is structural, not-alive. he is choosing to regard the system like rungs on a ladder. each rung is a social class.
the point I'm making is that he's describing the "ladder", referring to structural/systemic aspects of our civilization, not the "persons" standing on each rung which is the meaning you chose to focus on.
our society really is arranged in tiers or classes regardless of you accept it or not (but again, this is a way to understand it; there may be others)
in the UK the so-called "rich" (to answer your question) would be people with legal noble titles.
in Smerica this class of people is not explicit. I guess the older European system (which inspired American ones) at least is explicit about the fact that the royals and their nobles are "the rich" class. I countries with continuing monarchies, like the UK, they really have a noble title and registration. they're "better than you" by legal definition because of choices their parents and older ancestors made (or were forced to make)
The war in 100% the result of Putin. Putting the responsibility of this on Biden doesn't make sense. Besides, Russia was sending troops into eastern Ukraine since 2014, way before Biden took office.
You showed the evidence in your own post. The return to Biden brought the return of typical American foreign policy, which Trump upset. This foreign policy plan has basically been the same under Bush, Obama, and Biden.
The last time Putin pushed the Ukraine issue was under Obama. Under Trump’s watch, Putin didn't dare touch Ukraine.
If I was Putin, and I wanted to invade a country, I would sure as hell prefer Biden as the opponent than Trump. Trump might actually finish the war before it starts. Biden is still trying to remember he's president.
now the story changes: the war that putin started in 2014 is not the fault of Biden, but the fault of the foreign policy of everyone except the former guy?
instead of the dude who actually started it with the invading?
you also seem to misunderstand that Putin has been "touching Ukraine" since the war started in 2014, and the former guy did nothing to stop the war
I'm not saying Putin isn't responsible. That's as obvious as crickets. If people didn't commit evil, the world would be perfect.
Obviously, people commit evil.
However, if you are charged with authority, it is your responsibility to defend against evil, while also pushing to being about peace. Obama and Biden did not keep evil in check. Trump did so much more, as ironic as that may seem to you.
the former guy did literally nothing to push back against the evil of russia's invasion and genocide of Ukrainians which started in 2014 and lasted his entire term (aside from trying to extort the victim for personal political favors and getting impeached for it), as ironic as that may seem to you
Do you mean the sanctions our rulers voluntarily chose to impose on that sector? Or is there something intrinsic to the war that would have that effect?
Help me understand: is this a stacked chart? Why does a chart that ends in 2021 show inflation in 2022 and 2023?
> This inflation is due to insiders (central bankers) printing money.
If this is about the money supply, why is food more affected than other products? IMO everything is a factor, and there is no one culprit, and therefore no one easy fix.
Imagine being a rational human looking at g7 central banks adding 40% to the money supply in <2 years, and your focus is "everything is a factor, there no one culprit" for price inflation.
I look forward to open source ai economic simulation tools - when you change variables like m2, you'll see what happens to inflation - and there'll be no more ambiguity
> Imagine being a rational human looking at g7 central banks adding 40% to the money supply in <2 years, and your focus is "everything is a factor, there no one culprit" for price inflation.
Imagine being a rational human and deciding that a war involving two of the biggest agricultural exporters in Europe, one of whom is also one of the main exporters of oil and gas, as well as a ton of different important materials (nickel, steel, fertilizers, etc.), after 2 years of pandemic that crippled global supply lines and resulted in explosion of prices in many raw materials, have combined absolutely no impact on prices anywhere.
just sayin': why did inflation appear when it did? why not sooner? why not later? Why is the impact of inflation non-uniform?
We know the model pretty well: "money printer goes brrr" leads to higher prices for good and services. But the data lately doesn't make a great supporting case.
> I look forward to open source ai economic simulation tools - when you change variables like m2, you'll see what happens to inflation - and there'll be no more ambiguity
Economists have been leading the way in multifactor causal inference, but GPT in particular is not well suited to it. And macroeconomics in particular is hard to measure via natural experiment, so you're left trying to estimate counterfactuals based on a paucity of data
but look, my day job is people coming to me with timeseries data showing an engineering fuckup and debating about what caused it (usually ops vs prod). if theres a nuanced take, im all ears, but so far your fire has brought more heat than light.
Unless people who can afford it are hoarding groceries an increasing monetary base shouldn't be affecting grocery prices. Only a decrease in supply versus demand, or increase costs of production, should be increasing grocery prices, if market manipulations aren't happening.
I actually do get it. An excess of money doesn't automatically make things cost more. An excess of demand with (more purchases), or for (higher prices), that money does. The demand excess has to start somewhere.
What do you think putting more money into circulation does to demand & nominal purchasing power?
An excess of money causes increased demand per unit dollar and subsequently, higher prices and inflation, through mechanisms including the Cantillon effect, changes in monetary velocity etc.
If i deposit more $ in your bank account, what happens to your nominal demand?
If it was as simple as you say, why didn't we see double-digit inflation in 2021 and 2022 when the money in questions was actually being handed out? There are multiple factors at play here with "money machine goes brrr" being only one of the causes of inflation.
> What do you think putting more money into circulation does to demand & nominal purchasing power?
Ideally people would save for a rainy day. But people don't, and can't, always do this. Because for some this is the rainy day.
Non-ideally I would assume that most demand increases would go for non-groceries, and non-commodities in general, such as housing and travel, though I would expect some increase in durable goods commodity prices as people replace older goods with newer. Yet here we have grocery price increases. Are salaries in the grocery production chain going up 18%? Warehouse costs? I doubt it. The price increases are mainly coming from elsewhere, not from money printing.
It doesn't have to be groceries that they're buying. Factories in China producing non-essential consumer goods run off the same natural gas supplies that could otherwise be used to make fertiliser. Jets taking tourists on vacations run on basically the same fuel that could go into farmers' tractors or lorries transporting food to stores. More money allowing people to make more non-essential purchases impacts food supply if the global economy and global fossil fuel supply don't have the capacity to produce that stuff, and it turns out they didn't.
Sure. But there's a more immediate impact to fossil fuel supplies in the UK than an increase in demand. An increase in demand from an increased money supply is likely a contributing factor, but not the sole cause that elevenoh4 says it is. Has fossil fuel demand even fully bounced back to what it was in 2019?
Passive rich are usually severely hurt by inflation as well. One feature of inflation is that interests rates rise to cover expected future inflation. High interest rates = low asset values, since the value of an asset is the discounted value of all future cash flows and the discount rate goes up with prevailing interest rates. In theory companies' earnings should rise with inflation, but in practice existing companies are often too locked into existing price structures and competitive markets. Additionally, anyone with fixed-denomination assets (bonds, bank deposits) sees the value of them decline in real terms since the dollar is worth less.
The main winners of inflation are:
Adaptive over passive. As you mentioned, the average blue-collar wage growth always lags behind inflation. We aren't really seeing white-collar wage inflation either in the U.S. right now though - fast food workers are making $22/hour and Amazon drivers $18/hour, but FAANG engineers are getting laid off. Who are the winners then? The people who swap jobs or swap industries into ones with pricing power, or who found new businesses enabled by changing price structures. What we're seeeing in the U.S. now (with ~5% wage inflation) is that the 80% of wage earners who stay put at their job are getting ~0% raises, while the people switching are getting ~20% raises.
Debtors over savers. This is well documented in econ textbooks - inflation is a transfer of wealth from savers to debtors, because debtors can pay back their debts with less valuable money.
Governments over citizens. Partially this is because of government usually being a net debtor if it gets into a position where inflation happens, and partially it's because of the government's power to issue new currency. Plus tax revenue is usually a percentage of economic activity, so if all prices & wages increase by a certain percentage, so do tax revenues (and the government can bracket-creep you into higher tax brackets).
Poor people usually fare worse than rich people because of the adaptive vs. passive bulletpoint - they have fewer options and less awareness of options than richer people do. But the debtors-over-savers effect works in their favor: poor people usually have higher debts than rich people, and inflation is a form of debt jubilee. If, for example, they jump into a fast-growing new business started because of inflation (like Microsoft or Apple Computer in the 70s) it could be their ticket out of poverty.
> Debtors over savers. This is well documented in econ textbooks - inflation is a transfer of wealth from savers to debtors, because debtors can pay back their debts with less valuable money.
Wouldn't this be true when interest rates are fixed only? People with variable rates will suffer as interest rates tend to spike during inflation and drive bankruptcy.
Also given wages lag inflation, the debt cost proceeds the payback.
So it feels a mixed case of, this will make some people loose out significantly, but those that can see the other side do well.
The debt effect is true for the term that the interest rate is fixed for. So for a 30-year fixed mortgage, you lock in expected inflation based on the interest rate when you take out the mortgage, and if inflation happens to run above that, you profit. For a 7/1 ARM, you lock it in for 7 years, then the principal will have inflated away by some percentage, and then you're at the mercy of current inflation expectations. Bonds are usually fixed rate for the term of the bond (I-bonds excepted), which is why 10-year Treasuries have gone down so much relative to 90-day Treasuries.
Wages only lag inflation if you stick with one job. If you're forever job-hopping, you get the new wage as soon as you land the new job, which could be within weeks.
Yes, this means that you have an incentive to never do any actual work and instead spend the time immediately looking for a new job. This is one of the positive feedback loops that turns inflation into hyperinflation and state failure. With everyone incentivized to look for new work rather than do the old work they signed up for, no actual work gets done. This exacerbates shortages, which causes further price hikes, which increases inflation, which means people have even more of an incentive to take very short jobs and not do them. It also prevents the formation of capital stock - nobody can get good at a job, or train on some expensive piece of machinery, if they need to take a new job tomorrow. That's why there's this compression of time horizons in countries undergoing inflationary episodes, where everything becomes focused around surviving until tomorrow rather than building for the long-term.
Is a 30 year fixed mortgage common where you are? I'm Australia and they don't exist. About 25% of people have fixed mortgages and this is usually for 2-3 years so this view doesn't apply here.
Also regarding job hopping, that may be true but taking a macro view of the world, most people don't or can't job hop that often, so I feel this is more the exception that the rule.
Generally I'm not convinced debt is a good thing during inflation as a broad rule. I feel it's more there are good exceptions if the right conditions align but this is not true to the average.
Thank you for taking the time to provide the detail. I see now that the subject is quite a lot more complicated than I thought, and it's less about wealthy versus not-wealthy but rather a list of X versus Y, where X and Y are not what you would necessarily expect, such as gvmt versus citizen, etc.
There is a counter-argument (which I don't necessarily agree with, but is interesting to note) where the ability to accumulate assets that keep pace with inflation is the only thing that motivate extra work.
e.g. the ability to accumulate "Tokens of Power" (vs the equivalent of arcade game tokens for commodities) is what motivates the Steve Jobs and Elon Musks to do their universe denting.
This is quite different than say tribal societies where extra resources do not maintain their value across time. An abundance of meat and other resources can only be transmuted into common cultural power via Feasts and Festivals.
Metaphorically, "gold" creates "dragons" because it allows immortal hoarding. Dragons are the only thing with influenceable agency that can reshape "nature". Controlling dragons allows this dominance (for better or for worse) at the cost of dragon externalities (burned towns, randomly devoured livestock)
>A sad thought I have about inflation is the fact that it is, wittingly or not, a weapon wielded by the rich against the middle and lower classes.
I’m sure the Roman plebeians also thought as much during drought induced famine; “the wealthy caused shortages by their greed”
Seems to be the natural response of the hyper-social-aware-confabulatory-ape-mind we, as humans possess.
But make no mistake, inflation is caused by a mismatch between societies expectation of productive capacity, and its real productive capacity.
Right now, real asset values are going down. Yes, some businesses have maintained nominal increases, but as consumers feel the squeeze so will asset real values. Asset valuation is based on real returns, and consumer behavior drives real returns.
The conventional analysis is the other way around.
When inflation is entrenched, wages and prices rise at a similar rate so that workers aren't too terribly effected but the value of financial assets don't keep up.
Inflation is insidious in that respect in that it compounds like interest, you might think 5% a year is not that much, but over 50 years the value of your assets are less than 10% than what they were.
It is harmful to the financial services industry in that people decide it is not worth investing. In 1979 Merrill Lynch was practically a penny stock because they didn't have any products to sell that people found attractive.
Indeed. All the institutions which might possibly have produced that level of coordinated unrest were deliberately dismantled or atomized. There's no way to turn dread into political action.
> In an inflationary economy, the winners are rich who have valuable assets whose value skyrocket - think real estate, businesses, etc.
On the other hand, rising interest rates causes all assets to decline in value, and the decline is worse depending on how far away the "maturity date" is. It looks like the UK has been raising rates, similar to the US. [1]
It’s hard to grok but inflation is just the “price of money” in terms of goods and services. (I.e. I can ‘buy’ one pound with X good)
Inflation only negatively affects the poor in that their wages are sticky and do not adjust in time (so in effect, their wages in goods and services terms declines)
The same thing happens to rich people, it’s actually a “capital owner vs salary man” divide. (A small building owner is impacted less than a very wealthy athlete for example, since one can raise rent yearly and the other is in a long term salary contract).
I first really liked the athlete example, but now think that that also depends on where the athlete is in their career and what they have done with their past income. A athlete a little bit later in their career, should have substantial investments unless that more than make up for the inflation impacting the value of their current salary. They probably also have a steady stream of sponsorship deals that get (re-)negotiated more frequently than salary at McDonald's
Very similar dynamics probably hold almost by definition for anyone who is wealthy.
>A athlete a little bit later in their career, should have substantial investments
Yes, that makes them a capital owner, but it's hard to make a metaphor where people aren't allowed to buy stocks with their excess money.
>They probably also have a steady stream of sponsorship deals that get (re-)negotiated more frequently than salary at McDonald's
Sure, but that still makes them worse off than a capital owner.
>Very similar dynamics probably hold almost by definition for anyone who is wealthy.
Sure, but a relatively low-wealth landlord is hurt less than a wealthy banker who consumes most of their salary. That's the only point- that it's more than rich/poor, even if the true nuance is correlated to rich/poor.
I don’t think that’s quite right. Lower classes also have debt, and inflation effectively reduces your debt. In that case, it’s a direct transfer of wealth from lenders to debtors.
There's a lot of national and consumer debt to inflate away so I think inflation is what's on the menu. Workers are going to bear the brunt of the fallout if they cannot or will not demand increased pay. Workers can't get sucked into the trap of employers claim they can only afford to pay more for rent, loan, and supplies costs - and not wages.
I don't think it's that simple - inflation is also especially beneficial to debtors which is more of an upper middle class or professional/managerial phenomenon. The truly rich would likely have a cash buffer that gets eroded by inflation same as the typical person's wage.
So, do you feel that the focus of the central banks to keep interest rates low and inflation low is to protect the lower class? I would submit that what the central banks want is to benefit the main asset holders who suffer the most from erosion by inflation.
Asset holders do not suffer the most from erosion by inflation; asset holders benefit from inflation (which is a devaluation of the currency) because the price of their assets increases. It is those whose wealth is mostly in cash that suffer the most.
Keeping interest rates low keeps inflation high. Raising interest rates reduces inflation but also hurts asset prices and can potentially bankrupt some heavily indebted businesses. This is the balancing act the central banks have been trying to perform. The reality is that getting it wrong in either direction hurts the lower class: excessively high interest rates lead to high unemployment; excessively low interest rates lead to high inflation.
Its always someone else's fault, no matter what. I mean, the current laws of physics are just a conspiracy to benefit the rich. Congress just needs to pass a law making everything free without limit.
When you point your finger, there's three point back at you
I will copy a previous answer of mine to a similar comment:
A 1kg wholewheat sourdough loaf. I'm a bit picky regarding bread and have actually started making my own in the last few months due, in part, to A) rising prices, B) manufacturer corner-cutting, and C) it's fun!
Regarding "A quarter of that", that is, IMHO, very optimistic. 1kg of bread for £1 would be quite the steal.
However I should have been more specific about it being sourdough, which is much more expensive to produce than "regular" bread at UK supermarkets.
Perhaps I should have been a bit clearer on that part. I was thinking of the recent political turmoil in France, which is somewhat related to the economy (rising retirement age is always a response to struggling economies, in part due to ailments like inflation).
Do you think that won’t recover? Anyone with means can buy up now or keep saving. The poor can’t and their 0 investments will be worth 0 after as well.
A food producer may benefit from inflation, whereas a government loses out, despite both representing "the rich". An unattached young trades-person can ride the wave of inflation because they can easily switch to jobs with higher wages, whereas a another with a family cannot.
Neither "the rich" nor the "lower class" is a monolithic entity. The idea that they are monolithic allows for elites to disguise their selfish consolidation of power as evidence of being on the side of the people. For some obvious examples, Hitler successfully blamed the Jews for German hyperinflation, and Stalin successfully purged political enemies he deemed as "capitalist".
Godwin's law in effect in comment number two (at the time of writing). I see the sentiment you're trying to portray but maybe try and be a little more verbose so you don't have to name the 20th century atrocities. Something like:
Being deluded into thinking ["the rich" nor the "lower class" are monolithic entities] is a recipe for abuse by those in power.
Fair point. Edited. I do think the examples are still relevant because I don't think many people are aware of how this relates to antisemitism and the Soviet purges. I could bring up for a modern example, like Trump somewhat dismantling of the EPA, but that's requires more nuance to demonstrate my point.
I think you've got the wrong end of the stick. We're in this mess because of Thatcher, Reagan and TINA. Almost everyone now believes in capitalism in the same way that medieval peasants believed in the feudal system. That is, while they don't necessarily like it, they see no viable alternative.
It's possible to imagine circumstances in which the upper classes suffer proportionately more than the lower classes. We have, in fact, had these circumstances. Such as the impact of transition from land wealth to industrial wealth during the first couple of industrial revolutions that saw various nobles having to sell their ancestral estates and belongings. Meanwhile the lower classes gained jobs that allowed them to afford more than they could before.
It is said that inflation (caused by money printing at least) is a hidden tax on everyone, which definitely hits the poor more than a progressive tax scheme would.
I forget a famous economist (old British guy I think) who said that there is no more effective way to secretly and insidiously overthrow / disrupt a society as unchecked inflation.
(something similar to that, I'm probably paraphrasing badly)
Despite being a net food importer, the UK continues to allow relatively high levels of immigration. While there are multiple causes for food price inflation, having more people living there certainly causes some upward pressure on prices.
That’s not so - were it the case, food would be more expensive in more populous countries, and this is demonstrably not the case. If anything, a larger consumer base allows greater economies of scale.
This is a supply side issue, a labour issue, a border issue, and a stagnant economy issue. Productivity in the U.K. flatlined years ago, with the 2008 recession, and what is being experienced there remains the after effects of the bungled policy decisions at the time.
> A sad thought I have about inflation is the fact that it is, wittingly or not, a weapon wielded by the rich against the middle and lower classes.
I think you have it backward. I think the inflation is the byproduct of their ability to own and hoard assets like land and labor, and reap the most value from those things, while everyone else is unable to get a foothold.
Inflation is happening because everyone is making more money, and everyone got a bunch of during covid, and now a lot of people are having large swaths of debt cut from their lives (college loan forgiveness program), not because rich people own stuff. But poorer people also can’t get ahead because rich people own everything.
This is a capitalism problem more specifically than it is a rich v. poor problem. Make it illegal to own more than one property and you will instantly give the lower and middle classes a chance.
A sad thought I have about inflation is the fact that it is, wittingly or not, a weapon wielded by the rich against the middle and lower classes. In an inflationary economy, the winners are rich who have valuable assets whose value skyrocket - think real estate, businesses, etc.
The lower classes rely on A) proportionately much more on fiat, i.e. monthly paycheck going into current and savings account, and B) a blue-collar job, the wage of which always lags further behind inflation than white-collar jobs.
Those two factors combined means that the lower classes get absolutely battered, while the rich just sit gleefully as their asset values balloon and pass down wholesale price increases, etc.
It's the dark, sinister side of inflation, and I think we are all beginning to see the societal tensions that it is breeding, e.g. endless blue-collar UK worker union strikes, riots, protests, etc.
Not saying that it is only one class that is affected, but let's face reality here - the lower class suffers by far the most in this situation.