Inflation

[jacoavlu]

The meme- low inflation is good for US investors, high inflation is good for US investors too.

Wishful thinking I reckon.

Say you own a company worth $1m
Inflation is zero next year and you sell it for $1m next year: no CGT.
Inflation is 100% next year and you sell it for 2m next year and pay 25% tax on 1m.

It is the same asset/ company but due to inflation, the CGT is much greater under higher inflation.

I’d like to posit a shocking possibility: that high inflation in the US will be good for the 99% and bad for the 1%.

care to explain how inflation will be bad for the 1% ?

in accumulation phase i'm not planning to realize any gains

[CordMcNally]

The meme- low inflation is good for US investors, high inflation is good for US investors too.

Wishful thinking I reckon.

Say you own a company worth $1m
Inflation is zero next year and you sell it for $1m next year: no CGT.
Inflation is 100% next year and you sell it for 2m next year and pay 25% tax on 1m.

It is the same asset/ company but due to inflation, the CGT is much greater under higher inflation.

I’d like to posit a shocking possibility: that high inflation in the US will be good for the 99% and bad for the 1%.

I disagree about inflation being good for the 99% and bad for the 1%. Are you saying people who don’t own businesses should go as far as to feel lucky they don’t have to pay a capital gain tax on $1M of extra income? That would be a fairly out of touch statement. Your example makes no sense. In your no inflation example they sold their business for $1M. In your inflation example they sold for $2M and had to pay extra taxes on the EXTRA $1M. I would gladly pay extra taxes for even more extra free money. I don’t think the people who live paycheck to paycheck would agree that paying more for their gas and groceries is good for them on a personal level right now.

[jacoavlu]

yeah unless you're spending 100% of your income (which only poor people have to do) seems to me the example is kinda making my point

[F0017S0]

Dont_know_mind

I don’t like paying mor for stuff just because some economist says “well, statistically speaking, you can”. I dislike inflation to such a degree that after buying a new car and reading about egregious dealer practices in the WSJ, I got an almost $9000 refund (all of which was promptly paid towards the note) by bringing my issues direct to Toyota North America’s vice president for sales. So, is the inflated value the “true value” of a car (or anything else)? Will prices revert to their historical mean, or will inflation revert to the mean and just compound the inflated prices?

And inflation kills the little guy struggling to get by even more. So my issues pale in comparison…

[Tangler]

I don’t think the people who live paycheck to paycheck would agree that paying more for their gas and groceries is good for them on a personal level right now.

This is it exactly. Saying inflation is "good for 99%" is total nonsense.

Inflation hurts everyone. Some (the 1% = me and you and the WCI forum elite) are less able to be hurt by ridiculous economic policies.

We have saved way more than we need. We won't run out of money and we are working for fulfillment.

The blue collar dude with 6 kids or the single momma with 4 kids working cleaning toilets...........they are screwed.

They need gas to get to work (an EV costs 55k more than the old beater they got for 5k and they have no place to charge it) and they gotta buy food for the kids and pay rent.

Total disconnect to say "inflation is good"

It sucks.

Complete delusion to say: "inflation hurts the 1% and not the 99%" as the inverse is more likely true but still erroneous.

Inflation hurts everyone. Some can just stand the pain.

[jacoavlu]

This is it exactly. Saying inflation is "good for 99%" is total nonsense.

Inflation hurts everyone. Some (the 1% = me and you and the WCI forum elite) are less able to be hurt by ridiculous economic policies.

We have saved way more than we need. We won't run out of money and we are working for fulfillment.

The blue collar dude with 6 kids or the single momma with 4 kids working cleaning toilets...........they are screwed.

They need gas to get to work (an EV costs 55k more than the old beater they got for 5k and they have no place to charge it) and they gotta buy food for the kids and pay rent.

Total disconnect to say "inflation is good"

It sucks.

Complete delusion to say: "inflation hurts the 1% and not the 99%" as the inverse is more likely true but still erroneous.

Inflation hurts everyone. Some can just stand the pain.

maybe inflation hurts everyone but it definitely help some. do you think elon musk is more hurt or more helped by inflation? do you think that you are more hurt or more helped by inflation? bc I think there is a lot of inflation baked into asset price appreciation, which I am benefiting from (at least on a net worth level)

[Tangler]

I’d like to posit a shocking possibility: that high inflation in the US will be good for the 99% and bad for the 1%.

Wow.

You are often a very insightful and interesting forum member with good ideas.

Please educate us as to how:

1. high inflation is ever good for anyone?

2. high inflation is preferentially "good for the 99%"?

[Tangler]

maybe inflation hurts everyone but it definitely help some. do you think elon musk is more hurt or more helped by inflation? do you think that you are more hurt or more helped by inflation? bc I think there is a lot of inflation baked into asset price appreciation, which I am benefiting from (at least on a net worth level)

If your net worth will buy less then I think it is a bit of a wash.

Yes you have more, sure.....but it is worth less.

[F0017S0]

This topic reminds me of another thought I had at my old job: the drug I ran trials for was an essential hormone to be alive. As I recruited, I noticed that the folks who tended to enroll were those struggling with the price tag of affording said hormone. These families were getting killed trying to afford just a month’s supply of said hormone, and many had to ration it. So the six months of free hormone for doing the study was quite helpful to those families. But I wonder how many were “nudged” into participating due to the high cost, a cost which has exploded recently (though there are efforts to reign the cost in). Some wealthier families also participated, but most were really struggling to get by in 2020 to the end of 2021. I can only guess they are struggling even more…

Folks like most on this forum have the ability to smooth over these challenges, maybe grumble, and fight back when necessary (i.e. my car purchase). But most just get nuked.

[Random1]

I really cant understand why someone would think inflation would be ok.

Inflation devalues the dollar which makes purchasing power less, especially with buying foreign products

Usually something has to happen to decrease inflation, which means recession or worse recession with persistent inflation. Most physicians in the past have been somewhat immune to recession , because there really has not been a recession of "medical services" , just because it has not happened in the past it does not mean by some act of congress reimbursement gets trashed at the same time as a generalized downward economic spiral.

[Lithium]

I was wondering why the Fed targets low inflation and not zero inflation. Sounds like the economists disagree on this just like everything else, but what I took away from this is that it gives employers flexibility on wage adjustments. When there is middling productivity growth, employers can either keep wages the same (and decrease them in real terms) or only raise them by COL. On the other hand, if there is zero inflation, employers have to cut wages nominally to reduce costs, and supposedly this is more deleterious economically than just cutting them in real terms. There is less upward wage rigidity than downward wage rigidity.

I find myself listening to a lot more economics podcasts this year than ever before. Wish I’d taken a macroeconomics class in college.

[Random1]

I think at least in the past , they targeted full employment, for years they were trying to drive up inflation , finally they found something that worked.

[burritos]

Are high taxes and high prices a way to reduce consumption ie, the ultimate way top reduce carbon emissions, if you believe that's a problem?

[Tim]

I was wondering why the Fed targets low inflation and not zero inflation. Sounds like the economists disagree on this just like everything else, but what I took away from this is that it gives employers flexibility on wage adjustments. When there is middling productivity growth, employers can either keep wages the same (and decrease them in real terms) or only raise them by COL. On the other hand, if there is zero inflation, employers have to cut wages nominally to reduce costs, and supposedly this is more deleterious economically than just cutting them in real terms. There is less upward wage rigidity than downward wage rigidity.

I find myself listening to a lot more economics podcasts this year than ever before. Wish I’d taken a macroeconomics class in college.

https://www.coursera.org/courses?query=macroeconomics
Easily fixable.

[Tangler]

https://www.coursera.org/courses?query=macroeconomics
Easily fixable.

pretty cool!