Is inflation really bad for most people?

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2. Inflation is complicated in practice.

In theory, it's pretty straightforward.

Those with fixed debt, such as many homeowners, win because it's easier to pay off the fixed dollar debt.

And of course, those who own the debt lose. This means the bank, but also investors in debt, which includes many seniors, and people on fixed incomes. Again, many seniors.

Everything that's not currency rises with inflation, so homeowners win again as the value of their house goes up in decreasingly valuable dollars.

That's the simplistic theory.

Where it gets complicated is that inflation isn't uniformly distributed across the economy and over time.

Meaning, your grocery and gas bill goes up immediately, but your wage or salary might not go up for a year (or maybe quite a bit longer)

And while many homeowners have fixed rate mortgages, many also have variable rate mortgages. So when interest rates go up to combat inflation, their monthly mortgage payment will go up as well. Their house may be going up in dollar terms, but they can't easily tap that to pay the higher monthly mortgage bill.

And then there's other complications like the amount of inflation in one industry or region might not be the same as in others, so your overall expenses might be going up faster than your income, and your situation might be different from someone else's.

Then there are annoying tax effects due to fixed dollar amounts in the tax code, which effectively means many people pay a bit more in taxes. Again, these thresholds and brackets get adjusted, but usually there's a big time lag.


So, yeah, some people gain, particularly homeowners who don't have a variable rate mortgage, and who have enough resources to pay higher grocery bills and so on. But many other people have problems making ends meet and losing the value in their retirement savings.