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Fred learns how renting works
(lemmy.world)
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this post was submitted on 15 Apr 2024
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The actual thing that determines whether someone gains or loses from inflation is: are they a net debtor or lender?
Donald Trump has "money" but may actually benefit from from inflation if he's so highly leveraged that his net worth is negative. A relatively poor retired couple with no debt may be worse off, because they borrow no money and pay for everything with cash.
You're describing who benefits from changes in the rate of inflation. Someone with a lot of credit card debt is worse off from high inflation because the rate of inflation was already priced into the rate they were forced to accept.
So let's say we've got 25% inflation. The only loans you'll be offered will be at >25%. An increase once you've already gotten the loan helps reduce its real value, but that initial 25% is coming out of your paycheck.
This is because the lender can just invest in anything else, while you need dollars now - the burden falls on the less elastic side of the trade.
Yup, and also those furthest away from the source of the cash flow when new coins are minted (and the equivalent generation of money in fractional banking loans) also tend to suffer more from inflation while those closest often benefit. It's like being upstream vs downstream of a popular river as a fisherman.