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How come we experience so much more inflation than deflation? in other words, why does our buying power decrease far more often than it increases?
(lemmy.dbzer0.com)
this post was submitted on 22 Jul 2023
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This is because inflation isn't a bug it's a feature.
Anything that transfers wealth up the chain, from working class to middle class and from middle class to upper class, is a feature of the western economic system.
For example, in England and Wales the Bank of England is charged with keeping inflation at a target of around two per cent. This means that the pound in a workers pocket is supposed to devalue. The advantage is that the government borrows money in its own currency so inflation means that its debt goes down (in real terms) when inflation goes up.
There are a ton of issues with our economic system, and there are a ton of structures in place to funnel money up, but keeping a moderate inflation is not one of those things.
Inflation is a specific counter-measure against people who already have a ton of money. It provides a reason for them not to just "take their ball and go home" once they have a pile of money.
To shelter their money from inflation, they need to either risk it on the open market, allowing that capital to do things like pay worker salaries, or buy things like GICs which are essentially loaning money to the government so the government can do things like build roads or fund social programs.
In either/all cases, inflation is designed to do the exact opposite of funnel money upwards, it's a mechanic to wrench that money out of the hands of the wealthy.
If that's the reason for it it's not doing its job. Investments are much like savings to high net worth individuals and their investments are managed by someone else and they simply lay in the cut and collect dividends. Yes there is a risk to investments but if you're in a good wealth fund then over time you're almost guaranteed to win even if you have disastrous months here and there.
If they're invested in businesses, the capital gets recirculated in the economy and becomes someone else's income.