Inflation Is Good for You

Source: The Intercept.

Every now and then you read a piece of journalism that is so ignorant you just can’t believe it. The instant article is one of those.

It makes an argument as follows:

  • Price inflation reduces the value of a dollar.
  • Debt is measured in dollars.
  • Therefore, price inflation reduces debt.

There are so many holes in this logic it is hard to know where to begin. For example:

  • When dollars lose value, people can’t buy as many goods.
  • Interest on debt offsets the loss of dollar value.
  • Price inflation may reduce past or existing debt in a way, but it increases current and future debt in the same way.

Bottom line, there is no good argument to make for the benefits of price inflation. The Intercept should know better, but since it is promoting a hoax we should question its motives. Perhaps it wants to prop up Stumble Joe.

13 thoughts on “Inflation Is Good for You

    1. Right. Which makes it doubly odd for the Intercept to claim inflation is a way for the middle class to get out of debt.

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  1. You may not agree with the various points made in the article, but it is not “ignorant.” It is absolutely a fact that it can be good or bad for you individually depending on your financial situation. As a lifelong saver and without a penny of debt, it is not particularly good for me and I want it to be considered when public policy is made. But, curbing it is not the only objective that has to be balanced. As the article points out, the specter of inflation is definitely overhyped by people who will run up massive deficits to cut taxes for the wealthy but balk at fully funded programs that benefit ordinary people. IMHO.

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    1. RE: “It is absolutely a fact that it [price inflation] can be good or bad for you individually depending on your financial situation.”

      That is the very premise I find to be in error. Since higher prices mean fewer goods in exchange, the only person who can avoid the harm of higher prices is the one who is able to create money. It is not hype to point this out, and it is not realistic to pretend otherwise.

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      1. “That is the very premise I find to be in error”

        It is not a premise. It is a fact.

        And, higher prices do not mean fewer goods. What mechanism are you even thinking of. There are 100 cars on the lot. Are some of those cars going to disappear if their price is raised? In fact, reality is the opposite of what you postulate. Higher prices stimulate the production of more goods. That is Economics 101.

        Nor do you do not have to create money to get more of it. You can demand a raise. Or sell your products at higher prices. And as your wages go up, paying off your mortgage gets easier and easier.

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        1. RE: “What mechanism are you even thinking of.”

          As stated, “Higher prices mean fewer goods in exchange.” When the price of beer, for example, goes up, the same sum of money buys fewer beers.

          I did not say, as you suppose, that price inflation causes a reduction in the general supply of goods, although it can.

          RE: “Nor do you do not have to create money to get more of it.”

          No, but you must be able to create money to avoid the consequences of price inflation.

          For these and other reasons, your premise is not factual.

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    1. The past administration is benefiting from being out of office and heckling. Aside from the fact that everything from Afghanistan to COVID to inflation to worker shortages would have posed very similar problems.

      The big difference is that we now actually have an infrastructure spending bill. Bipartisan, too.

      Uncanny how the Democrats are always saddled with cleaning up after the Elephants.

      Clinton took us out of a recession, raised taxes and balanced the budget. Obama took us out of the worst economic recession since The Depression. Biden is trying to navigate the worst pandemic in a century after the previous administration tried to ignore it and attacked the Capitol instead.

      Yeah, I made some sweeping generalizations, but there is little debate about Republicans leaving messes since at least 1992. Nixon and Ford didn’t do us any favors either.

      IMHANEO

      Liked by 1 person

    2. RE: “My take is that there is almost nothing that the past or current president could do to solve the global issues that are driving the inflation.”

      One thing a president — or at least his advisors can do — is recognize there are two types of inflation: Price inflation, which can have many causes, and monetary inflation, which is caused be creating more money.

      During periods of price inflation such as the one Virginia Mercury describes, an administration can scale back on monetary inflation by “printing” less money. If it doesn’t then the two trends may combine into something called an inflationary spiral, which is an uncontrolled and almost unstoppable rise in prices that affects more and more goods over time.

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