It cannot be said enough. Inflation starts with the inflation of the money supply. From there, the excess money and credit chases consumer prices higher. So, too, it pumps up both stock and real estate market bubbles.
Rising prices then come with a wide range of effects. Asset owners are enriched as the nominal prices of the things they own inflate. This also reduces the relative debt burden of the borrowing used to purchase the assets.
Workers, having little but their labors to sell, are impoverished. Price increases for consumer goods vastly outpace wages. Retirees on fixed incomes also get shredded, as their monthly allotments do not go the distance.
Consumer debts become more and more difficult to service. As a greater portion of a person’s paycheck is used for food and shelter, there’s less money available to pay down debts. For some, debt piles up from month to month, as additional debt is used to make up the difference between wage earnings and rising prices. Continue reading