If anything it increases inequality. It hurts the poor the most. The wealthy are more immune because they will have their wealth in things that go up with inflation. When it is caused by the government spending more than it takes in, it is effectively a hidden tax. NONE of these things are new concepts. Even the belief that the inflation won't hurt is new. Many other societies have blindly thought they were immune until they were not.
The article's point is that it doesn't hurt the poor as much, because more poor people can find jobs, pay off their loans more easily, and they do make more money.
Not to mention that the price of everything isn't going up a single number -- poor people can adjust their spending to account for the items that reflect the highest inflation, and focus on the goods that are least effected.
The article isn't suggesting there are no downsides to inflation, it's suggesting that there are substantial upsides that directly address some systemic inequality in global society.
Wages going up is not what the article is talking about, wages becoming available is what the article is talking about, as seen by our extremely robust jobs numbers.
But we are already at low unemployment before COVID and all the spending; we don't need inflation to drive jobs growth. It would be worth debating the tradeoffs if we were sitting at 10%+ unemployment with no path for improvement, but if anything, it is the job market starved for labor, not the other way around.
We may need inflation to drive job growth now, and we've definitely needed inflation to drive better job growth. An office job being created because a paper company can support an additional employee due to inflation is a better situation than continuing to work in a warehouse job. Inflation will eventually recede, but that new job will give opportunity to the worker.
Scale that up by a factor of millions across the country, and you've closed the income gap. That's the power of inflation.
The truly poor do not have jobs, nor much hope of one in future. They are on fixed state incomes at best, which if they are lucky may have a trivial rise some years after the fact.
We don't need to get terribly cerebral to note the basic mechanism of proportion, whereby $10 added to the daily food cost of a person who makes $50/day is vastly more impactful than the same $10 added to the daily food cost of a person who makes $500/day.
The whole point is that $10 added daily food cost results in the food producer being able to hire more employees, which means the person who makes $0/day can make $300/day now.
Also these numbers are super weird. It's probably more like $10 total daily food cost going up to like $10.30, and going from making $30/day (part time minimum wage) to $50 (near full-time minimum wage).
The numbers were symbolic to illustrate proportional effect.
I'm not seeing a great deal of causation in your theory. The same amount of food is being produced, thus the same amount of work is done - so extra employees are not required. If anything, in your closed system theory, the food producer is going to laugh and pocket extra profits.
This is partly true, but lower income individuals also tend to have a higher % of their net worth eaten up by debt (via credit cards, loans, mortgages, medical debt, etc). The burden of this debt decreases with inflation, since wages can grow to match inflation but past debt + fixed rates do not.
Combatting inflation by raising rates can also lead to more inequality -- wealthy investors can get higher return on "risk-free" products like treasuries and savings, which leads to lower investment in the economy, slower growth, and fewer jobs.
True, but I don’t see why that matters? They will still be paying higher rates, with likely lower incomes, and a principle whose real value does not diminish over time (since debts are held in nominal terms). If their debts were issued with fixed rates, then inflation would eventually reduce the Real cost of their interest as well.
When you say the wealthy are immune because their wealth is in things that go up with inflation, what exactly are you thinking about? Not stocks for sure. Maybe those who have money invested in property for hire, but even then whether your income goes up with inflation strongly depends on where you are location.
Interesting to know: in some countries (eg. Belgium) wages are automatically adapted to inflation, so "the poor" aren't hurt at all.
If they increase, it's despite of inflation - not with inflation.
Simplified example: the value of most stock companies depends on their projected gains in the next few years. A projected gain of $X in 5 years will devaluate over time as inflation increases, simply because $X in 5 years time will be worth considerably less than $X today. As inflation rises above a healthy 2-3%, it hurts the actual gains and thus the connected stock. You can counter such things by keeping interests low (as they've been doing for a while now) but that party has to end someday.
> ... in some countries (eg. Belgium) wages are automatically adapted to inflation
Only certain wages. Like public servant wages. Private companies paying normal people regular wages aren't forced to give them a raise. The minimal wage may inflate but if you're paid above minimal wage, there's no guarantee you'll see a raise.
No, not just minimal wage - that's my point. Almost all companies (that are big enough to have a union, or be part of a joint committee) are forced to give raises.
Inflation is actually terrible for stocks because inflation has to be earned via revenue which only applies to quality stocks. It's not the same as a bull market where everything goes up.
This lacks nuance. Who inequality "hurts most" depends on a huge number of factors. As I previously mentioned, there have been numerous historical instances in which inflation contributed to dramatic decreases in inequality. The fact is, though, inflation's relationship to inequality isn't simple, hence my characterization of inflation as a "blunt-force instrument."
