Inflation. More expensive cost of living for your customers. Not a problem when your Apple gadget budget is a multiple of your food budget. But not everyone has this luxury. Protectionism in international trade will have similar impact. Tax chinese imports and suddenly walmart will hike their prices.
One thing that's worth noting is that we've had virtually no inflation for a very long time. The wealth class prefers it this way, but the worker struggling to pay off debts wouldn't mind a little inflation every now and then.
What kinds of debts are you thinking of? I don't know any workers with long-term debts which aren't inflation adjusted (even if indirectly).
The whole idea of inflation reducing the value of debts seems silly. "We'll trick those bankers with this well known, mostly predictable, small decrease in the value of money! They'll never see it coming!"
Mortgage loans, student loans, car loans, credit card debt, taxes paid in service to national debt, ...
> I don't know any workers with long-term debts which aren't inflation adjusted (even if indirectly).
Interest rates are somewhat inversely correlated with inflation.
Typically the only time you see high inflation and high interest rates together is when the economy is booming and people are willing to borrow despite the high interest rates. Then that borrowing, since banks create the money they loan you (they don't actually have all of it they just credit your account), causes inflation.
When inflation is caused by the government creating money, it causes interest rates to go down. Because the supply of money goes up so by supply and demand the price of money goes down. The price of money is the interest rate, therefore lower interest rates.
You would think banks wouldn't loan money if the interest rate is less than the rate of inflation, but remember again that they don't actually have all the money you borrow, they just credit your account and collect interest. Even if they had the money, it does them no good sitting in a vault depreciating -- 1% interest against 10% inflation is still more than the 0% they get by not loaning it to anyone.
The main problem is that the lower interest rates cause people to borrow more money, so the key is to combine the inflation with policies that would otherwise be deflationary. Increase the housing supply, eliminate mortgage and student loan interest subsidies for new debt, etc. Discourage new debt in general -- even tax loan interest on new debts. That allows the market to correct against historical bad policies without causing disastrous deflation.
If I have a debt at an interest rate of 4% and inflation is 5% my debt is worth less every year relative to the value of other things. If I have a debt at an interest rate of 5% and inflation is 2.5% the value of the debt is increasing. This effect is increased if only interest is being paid and the asset the debt is for does not increase in value (like a car).
Add to this that wages are relatively stagnant for most people outside of tech since the 80s in some countries and you have a problem. It can get even worse where wages are kept stagnant by government intervention and inflation goes up faster than 5%.
Now, you could argue that the expectation of future inflation is built into the mortgage interest rate at the time you obtain the mortgage. And you'd be correct. But once you have the mortgage, then inflation helps you. Or rather, it helps you when your wages rise in response to inflation.
Ignore Tucker Carlson, economist Mark Blyth got famous recently for being virtually the only economist who predicted Trump's win. https://www.youtube.com/watch?v=h-hV_XS8dH4
Not necessarily - there can be inflation without worker's pay increases, and inflation leads to more costly credit - so someone in that situation is twice as worse-off as before.
