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One of the biggest fallacies I see when talking about inflation in terms of savings debasement, and in particular, focusing on how it disproportionately hurts the lowest percentiles of income earners, is the fact that the lowest percentiles have no savings. That's what being poor is. If they had excess income, they'd have savings and assets. But they don't. And the poor never have! So the only meaningful way to judge if the poor are being disproportionately affected by inflation, is to compare their income across time, to prices across time.

When we look at income data from the past few years, it actually turns out, that the poorest Americans saw their incomes grow by over 20% since the pandemic.

The massive rise in wages for low-skilled workers was actually one of the major self-reinforcing drivers of inflation.

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Mike Brock 2y ago

Phillip Leslie 2y ago

calvadev⚡️ 2y ago

The keyword is “nominal.”

Water Blower 2y ago

Mostly middle class are hurt and most of us here are probably middle class otherwise we have no time thinking about theses things.

Mike Brock 2y ago

The middle class were squeezed in a cash flow basis the most, yes. But the top quintile saw their net worth's drop significantly as the wealth effects of ZIRP evaporated. Which explains why so many wealthy people have gone full populist in recent years.

Uvas 2y ago

The lowest percentile has almost all of its excess capital in cash. They are basically saving to pay their bills.

The higher up you go in percentiles, the more people have investments and property.

Which has nothing to do with the massive debts the government is monetizing.

Phillip Leslie 2y ago

there’s no monetary inflation in the system. Consumer price increases are from pandemic supply chain disruptions. Wage raises in response to consumer price increases are not only *not* inflationary, but are deflationary and will result in either wage decreases (as Walmart has already done) or cutting jobs via layoffs and reducing full time to part time as the worsening economy impacts employers.

Mike Brock 2y ago

Low-skill wages disproportionately rising is a definitely inflationary from a median frame of reference. It's a major form of cost-push inflation.

Phillip Leslie 2y ago

Exactly- it pushes costs so high no consumers can buy and because wages are so high whatever does sell yields no profits. Job loss at best and business closure at worst. Deflationary.

Phillip Leslie 2y ago

Or if wages get too high- bye job , hello robots

pam 2y ago

sounds like a simplistic envelope of "the poor" and perhaps the breakdown of the poor differs greatly in terms of states, urban/suburb/rural, gender, race, education level and more.

edouard 2y ago

They have no savings and no incentive to save as it would be a huge effort as they are making little money and have no available savings instrument simple and not dilutable

They have little ability to have access to credit as well which is also a huge disadvantage in a world where money is created this way

Mike Brock 2y ago

It's a major a fallacy that the poor tend to stay poor. We have longitudinal data on income mobility we can look at to see if this is really true. And it's not.

Based on long-term income mobility data, we can see that about 80% of the people who were poor in 2010, are no longer poor today. About 20% of them have moved into the top two quintiles for income.

So the argument that there's an intractable poverty trap that's been created by fiat currency just isn't true.

Mike Brock 2y ago

Most of the people who are poor -- young people, new immigrants, etc -- do not stay poor as they age. The cohorts are not stable across time, even though people seem to intuitively think it's true. It's not true.

Bek 2y ago

I disagree I've lived in poverty my whole life and today I'm experiencing the worst poverty I've ever been through at 34 years old. Even with early retirement and financial fitness education the money only lasts so long before you run out.

Phillip Leslie 2y ago

Yeah upward mobility been crashing for decades lol

H.M. Murdock 2y ago

The trap isn't poverty, it's lack of sovereignty.

And the sovereignty trap is intractable under a fiat system.

Mike Brock 2y ago

But that's starting from a libertarian frame. Which is a normative atgument. Which was my point all along.

Zach⚡️ 2y ago

Can you link to where you got this data from?

edouard 2y ago

Not saying the poor stay poor. Saying fiat is bad for them as

- they have no access to investments and keep the little they have in cash

- they have no access to credit

Then a lot of them get out of poverty through wages cause obv there is a generational and immigration aspect to it

But let’s say that for the bottom 80 pct of pop in terms of wealth fiat is bad, as it makes it more difficult for them to save and incentivizes to consume

hh 2y ago

What you describe, rather than "the definition of being poor", is the definition of STAYING poor.

Doesn't matter how you spin it, what you're "proving" is that inflation eats away saving. That is to say, inflation is keeping poor people poor.

Mike Brock 2y ago

People don't climb out of poverty by saving. They climb out of poverty by climbing the income ladder, and then diverting excess income into savings.

Ike 2y ago

They are the same - savings can only happen if your income is more than your expenses.

hh 2y ago

You literally said that the definition of being poor is to not have savings.

Mike Brock 2y ago

Yes. The definition of being poor is to have no excess income. Which, by definition, means no capacity to accumulate savings.

Poor people are not getting poorer because the cash under their mattress is losing spending power. This is just a wrong way to think about it.

Phillip Leslie 2y ago

Hahahahahhah

Merrcurr⚡️ 2y ago

How do you account for the fact that even if the incomes of the poorest Americans grew by 20%, the cost of essential goods and services may have increased at an even higher rate, negating the perceived benefits of that income growth and still leaving them financially strained?

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Landy 2y ago

He specifically doesn’t account for that, even after mentioning it. Wage growth isn’t an inflationary metric when it is outpaced by currency debasement

Mike Brock 2y ago

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Phillip Leslie 2y ago

“At different times in our history a varying set of simple indicators seemed successfully to summarize the state of monetary policy and its relationship to the economy. Thus, during the decades of the 1970s and 1980s, trends in money supply, first M1, then M2, were useful guides.”

“Unfortunately, money supply trends veered off path several years ago as a useful summary of the overall economy.”

Greenspan, 1996

https://www.federalreserve.gov/boarddocs/speeches/1996/19961205.htm

Phillip Leslie 2y ago

Greenspan admitted what the fed one for decade, that they could not with any accuracy, perceive what the money supply was. So they really couldn’t discern how markets were behaving, if they were “irrationally exuberant” or not.

Inflation is a monetary phenomenon. It’s downstream of money creation, which hasn’t been functioning since 2008 when it broke.

Phillip Leslie 2y ago

Fed knew* for decades *

Landy 2y ago

This isn’t even a direct argument to my comment, if you think this quote-note is a rebuttal then I’m assuming you didn’t even read it properly

Ike 2y ago

"...The massive rise in wages for low-skilled workers was actually one of the major self-reinforcing drivers of inflation."

Do you mean the benefits and stimmies for NOT working during the biggest monetary inflation in history when you say "rise in wages"?

Which market goods do you think suffered price inflation most due to the poor's " rise in wages"?

Mike Brock 2y ago

Wages are literally the biggest driver of the PCE. By far. This is not breaking new ground, here.

Phillip Leslie 2y ago

My wages haven’t gone up in over 2 years lol anecdotes don’t work apparently but they are reality