[quote=FlyerInHi]CAr, If we have suddenly high inflation, the banks/capitalists would be hurt the most.
More inflation (not hyper inflation) generally causes people to work and invest more to generate the income they need to lead the lifestyles they want.
You seem to want near zero inflation (because you think purchasing power should be maintained over time) but you also want higher yields in savings accounts. It doesn’t work that way.
People opposing Yellen and the Federal Reserve, mostly Tea Party, don’t really know what they’re talking about.[/quote]
You have to realize that there are different types of “inflation.” Cost inflation, which is largely what we’ve been seeing, is good for capitalists (relative to those on fixed incomes and those who have fewer assets) and bad for workers and others on fixed incomes.
While bonds are often negatively affected by inflation,* other assets increase in value. Almost all wealthy people own these other assets — they own most of them, as a matter of fact.
Cost deflation is good for workers because wages tend to be stickier than prices of goods on the way down. This is what Janet Yellen has been focused on over the years. She wants to reduce the purchasing power of those on fixed incomes…increasing the purchasing power/relative wealth of those who already own assets.
During times of deflation, wage and income disparities shrink. This has always led to a stronger, more productive, and more sustainable economy. We are currently experiencing extreme wealth/income disparities because of the asset price inflation policies directed by the Fed (and also by legislative action).
We haven’t seen real wage inflation in this country in a long, long time. And, perhaps you’ve missed it, but we do not need people to work more (they can’t even find jobs if they try). As spdrun already noted, we’re working harder than most other people in the world, and losing ground with every step. We have **too much productive capacity,** both at the national and global level. What we need to do to increase the velocity of money (money that is traded for goods and services) is to shift more of the money — that’s been sloshing around the world in search of new bubbles because it’s been concentrated at the top — and direct more of it to those who are more inclined to spend it on goods and services. This will reduce the booms, bubbles, and busts that result from loose monetary policies that direct money toward the top; and it will lead to greater demand for more goods and services…and create more jobs as a result.
The problem is too much money at the top, and the Federal Reserve’s policies have only exacerbated the problem.
*edited to add: The way the Fed has been “inflating” over the past few years, even bonds have done very well as an asset class.
