me:
>> But inflation would help the working class by erasing a lot of private
>> debts. <<
Lakshmi Rhone wrote:
> As long as the interest rate is not variable. And it's often variable on
> mortgages and credit cards. Overall inflation will probably help the more
> powerful borrowers who borrowed on more favorable terms, i.e., corporate
> sector, and hurt workers due to a higher rate of exploitation and people on
> fixed incomes. <
Good point! My experience with both variable-rate mortgages and credit
cards is that there are caps on the interest rates and even on their
increases (along with floors), so that working-class borrowers with
these mortgages would get some relief from inflation. My experience
may not be enough to generalize from, but there are also a lot of
people with fixed-rate mortgages or who avoid carrying large
credit-card balances. Likely these are in the more prosperous parts of
the working class.
Likely, the rich people and corporations would not be losers from
inflation. Banks, for example, tend to raise loan rates faster than
the rates they pay on deposits (though they may be punished as
depositors move to other financial institutions, as with the
disintermediation of the 1970s). Even if the spread stays the same,
they can adjust to inflation pretty quickly on new loans. The problem
is the legacy of old loans with fixed rates or imperfectly variable
rates. The latter have mostly been sold off, thanks to Fannie and
Freddie, but those who own mortgage-backed securities (i.e., mostly
rich people, I'd guess) would lose.
Note that the rich and powerful would gain from inflation in another
way: to the extent that inflation lifts the debt burdens of the
working class, it would reduce the bankruptcy and foreclosure rates.
The latter don't simply hurt the debtors, since they mean that
creditors "take a haircut" in real terms.
It's likely the small savers (and governments) who would lose, so that
inflation would help the debtors and hurt the creditors within the
broadly-defined working class.
> My guess is that exploitation-enhancing inflation along with a massive
> unemployment- generating consolidation of business is the best way to improve
> the balance sheets of the (surviving) corporate sector and revive
> accumulation. ... <
I don't expect any serious inflation in the near future. The high
unemployment (and the memory of high unemployment) keeps that from
happening, as do the increasing disorganization of the labor movement
outside of the government sector and the current direct attacks on
public-sector workers (including by Obama).
--
Jim Devine
"Those who take the most from the table
Teach contentment.
Those for whom the taxes are destined
Demand sacrifice.
Those who eat their fill speak to the hungry
of wonderful times to come.
Those who lead the country into the abyss
Call too ruling difficult
For ordinary folk." – Bertolt Brecht.
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