If money should never become an asset worth holding, how can inflation be better than deflation for the working class?
It’s deflation that turns money into an asset worth holding and thus slows down economies. Too much inflation isn’t good either, for different reasons. A slight and stable inflation is the sweet spot.
Proportionately, the rich hold a lot more money assets than the poor, who generally don’t hold any or very little.
Indeed, the rich do proportionately hold a lot more money than the poor, but it isn’t much. The rich mostly have shares in corporations, bonds and real estate.
Inflation is generally worse for workers than for the rich because the latter have more pricing power. If both your living expenses and your income after taxes increased by 20%, you’d even end up with more money than before, assuming your living expenses were a fraction of your income. Unfortunately, prices haven’t risen equally; the cost of living increase has generally outpaced real wage growth. The rich have been able to set higher prices; workers haven’t been able to extract high enough wage raises.
Neither high inflation nor deflation are good for workers. What workers need is pricing power through strong unions and political support.
My understanding is that a slight and stable increase in the money supply is beneficial regardless of the monetary system in use, because it incentivizes economic activity. That said, I’m only somewhat familiar with our current fractional-reserve banking system and don’t know enough about other systems, historical or hypothetical, to present my understanding as fact.
It’s deflation that turns money into an asset worth holding and thus slows down economies. Too much inflation isn’t good either, for different reasons. A slight and stable inflation is the sweet spot.
Indeed, the rich do proportionately hold a lot more money than the poor, but it isn’t much. The rich mostly have shares in corporations, bonds and real estate.
Inflation is generally worse for workers than for the rich because the latter have more pricing power. If both your living expenses and your income after taxes increased by 20%, you’d even end up with more money than before, assuming your living expenses were a fraction of your income. Unfortunately, prices haven’t risen equally; the cost of living increase has generally outpaced real wage growth. The rich have been able to set higher prices; workers haven’t been able to extract high enough wage raises.
Neither high inflation nor deflation are good for workers. What workers need is pricing power through strong unions and political support.
Only if you enjoy living on debt.
My understanding is that a slight and stable increase in the money supply is beneficial regardless of the monetary system in use, because it incentivizes economic activity. That said, I’m only somewhat familiar with our current fractional-reserve banking system and don’t know enough about other systems, historical or hypothetical, to present my understanding as fact.
The problem is “incentivizing economic activity”… Economic activity, honestly, shouldn’t happen unless it’s somehow benefiting human life.
Sectors like banking and ad tech do nothing to benefit human life. They serve to extract resources from people, and thats all.