Citizen G'kar: Musings on Earth

June 08, 2011

Contrary to Popular Belief: Inflation Hurts the Rich, Benefit the Debtor Middle Class, Retirees? Not So Much

Paul Krugman, as usual, has it right.

Social Security Poster: old manImage via Wikipedia
... who stands to gain from deflation, and lose if inflation is, say, 4 percent over a period of 10 years? Is it little old ladies living on fixed incomes, and salt of the earth workers who have scrimped and saved?
Well, no. There are, of course, some ordinary people who would lose a bit from higher inflation. But Social Security — the bedrock of retirement for most Americans — is indexed to inflation, and retirement accounts invested in stocks wouldn’t be hurt.
... Since I’ve been arguing that some inflation would help the economy recover, what we’re seeing in practice is that defending the interests of a small wealthy slice of the population takes priority over a possible recovery strategy.

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