Inflation acts as a class-specific tax benefiting debtors over creditors

Evidence

One of the odd things about periods of inflation is that they are practically the only time that people far up the income distribution express solidarity with the poor en masse. Whenever inflation rears its head, we hear that it “mainly hurts the poor” since their incomes are low and they are more affected by price rises. This is at best half the story because inflation is perhaps better thought of as a class-specific tax. When “too much money” chases “too few goods”—an inflation—it benefits debtors over creditors since the greater the inflation, the less real income is needed to pay back the debt accrued. Since there are usually more debtors than creditors at any given time, and since creditors are by definition people with money to lend, democracy has, according to some, an inflationary bias. The politics of cutting inflation therefore take of the form of restoring the “real” value of money by pushing the inflation rate down through “independent” (from the rest of us) central banks. Creditors win, debtors lose. One can argue about the balance of benefits, but it’s still a class-specific tax. — Mark Blyth, Austerity, 46

Categorization

• XREF: The creditor-vs-debtor class framing connects to the anti-inflation politics of the independent central bank literature and Mattei’s analysis of monetarist austerity. — connects to: Inflation erodes the real cost of fixed-interest debt; Fighting inflation transfers wealth from debtors to creditors and is not value-free — Jessica Whyte, The Morals of the Market: Human Rights…, 339; How inflation ends depends on which class holds power over the others — Yanis Varoufakis, Technofeudalism: What Killed Capitalism, 527 (+7 more)
• QUESTION: The claim that democracy has an inflationary bias deserves scrutiny — how well does the empirical record support elected governments preferring inflation?
• SEED: A sharp angle: why the anti-inflation crusade is always dressed as protecting the poor while functionally restoring creditor wealth.

Broader Connections

• Inflation erodes the real cost of fixed-interest debt #corroborates (0.95)
• Fighting inflation transfers wealth from debtors to creditors and is not value-free #contradicts (0.93) — Jessica Whyte, The Morals of the Market, 339
• How inflation ends depends on which class holds power over the others #qualifies (0.90) — Yanis Varoufakis, Technofeudalism, 527
• Inflation is a political class-war flare-up rather than a monetary phenomenon #expands (0.85) — Yanis Varoufakis, Technofeudalism, 539
• Acceptance of debt and risk differs sharply by socioeconomic class #expands (0.80) — Neil Fligstein & Adam Goldstein, The Emergence of a Finance Culture in…, 120
• Fiscal and monetary austerity jointly transfer capital accumulation costs onto working classes #expands (0.80) — Clara E. Mattei, The Capital Order, 774
• Inflation threatens the contractual basis of capitalism itself #complicates (0.75) — Clara E. Mattei, Escape from Capitalism, 12
• Tax evasion, austerity, and loose monetary policy mutually reinforce each other #expands (0.75) — Nick Srnicek, Platform Capitalism, 38