Inflation is good for you

As inflation drives up consumer prices in the United States, people shop at an outdoor food market in Manhattan, New York, on November 5, 2021.

Photo: Spencer Platt/Getty Images

Important story On the New York Times this morning about inflation and it’s scary: “Inflation picked up in October, denting Washington’s hopes of slowing price gains.”

Washington Post Drove With a similar call for warning: “Prices rose 6.2 percent in October from last year, the largest increase in 30 years, as inflation weighs on the economy.”

Television, which certainly follows in the footsteps of the Times and Post as surely as death follows life, will now produce many strange clips such as CNN Failed Photography From the effect of inflation on a large family in Texas who buys huge amounts of milk.

Whenever corporate media moves collectively like this, it’s a good idea to slow down and think about what’s really going on and why.

The panic over inflation creates favorable conditions for weakening the power of workers.

And what happens is this: inflationary mania is all about class struggle. In fact, this may be the basic class struggle: the struggle between creditors and debtors, which has been going on since the founding of the United States.

This is because inflation often Hassan For most of us, but it’s awful for people who own corporate news outlets — or, say, start coal companies. The panic over inflation creates favorable conditions for weakening the power of workers.

Today’s Stories was created by Release inflation figures for October by the US Bureau of Labor Statistics. The BLS found that prices for all goods rose 0.9 percent in the past month. In other words, on average, products that cost $10.00 in September now cost $10.09.

Total prices are now 6.2 percent higher than they were a year ago. So the thing that cost $10.00 in October 2020 is now $10.62.

You will notice here that both the Times and Post have been misleading about this. The Post’s headline – “prices up 6.2 percent in October compared to last year” — makes it sound as if prices are up 6.2 percent in October, that is, in one month. Similarly, The Times has a graph with a poster saying that prices rose “6.2 percent in October.” This really would be a problem. Fortunately, it doesn’t.

Why has inflation captured the imagination of the corporate press? it is easy.

First, inflation reduces the real value of debt. In 2020, American families are around the corner 14.5 trillion dollars In debt from mortgages, credit cards, student loans and other sources. Inflation of 6.2 percent means that the real value of that $14.5 trillion is now just $13.65 trillion in last year’s dollars.

In other words, inflation over the past year has effectively shifted $850 billion in wealth from creditors to debtors. That’s a lot of money.

Most people are a mixture of creditors (for example, you have a bank account) and debtors (you have a mortgage and student loans). But all in all, that $850 billion produced a big check written by the highest income measure of anyone else. And as you’d expect, the people at the top don’t like this.

Second, inflation generally accompanies economic prosperity, when the unemployment rate is low and workers have market power to demand higher wages. Here’s what’s happening now: With prices rising 6.2% over the past year, ordinary people’s wages increased by 5.8 percent. In other words, inflation has hardly affected their purchasing power. and with Nearly 300 workers’ strikes In the US so far this year, workers are using their power to demand better compensation at historical rates. So, while inflation can be a huge problem for workers if they don’t recoup it at higher salaries, that seems unlikely today.

Then add to higher salaries the fact that the average American has had lately About $65,000 in debt. Inflation has reduced the real value of this debt by about $4,000 over the past year. With that added to the wage increases, most people advanced significantly.

Put these two things together – lower values ​​of their assets and higher wages for workers – and you can see why the rich who run the United States hate inflation.

However, there is one rock that can kill these two birds at the same time. The Federal Reserve can raise interest rates. This would slow the economy, increase the unemployment rate, and reduce workers’ bargaining power. Less bargaining power may mean fewer or no increases, which will eventually translate into lower inflation.

This is what all inflation panics today ultimately aim for: to create an economy with higher unemployment, lower growth, and more fearful workers. It remains to be seen if US creditors can achieve this, but we should have no illusions about what they are trying to do. And we certainly shouldn’t help them do that.

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