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Inflation will help the rich

May 9th, 2021 by dk

I wonder if our national political conversation is wandering into a surprising sort of economic stasis. Lefty advocates for social justice are calling for massive new government spending. They would fund this expansion by taxing the rich and corporations or by deficit spending. The national debt is already at heights not seen since WWII.

Corporate America so far has been unfazed. The stock market in particular doesn’t seem bothered by proposals to increase capital gains and estate tax rates. The market is up more than 10 percent since the first of the year, and April was its best month yet in 2021.

It would be as lovely as it is unlikely that the One-Percenters were taking this leftward trend in stride, admitting to the rest of America that they have done obscenely well in recent years. Lovely but unlikely. So what explains this particular dog not barking?

The government is pouring money into Americans’ pockets. Direct stimulus checks have been sent. Monthly checks for young families are on their way. Increased subsidies for health care, child care, elder care, infrastructure repair, and Internet access have all been promised.

Pumping trillions into the economy so quickly brings one large risk. Inflation could awaken from its generational slumber. Consumer prices have been relatively stable since Jimmy Carter left the White House. Those who lived through double-digit inflation in the 1970s have forgotten how bad it was.

We bought things that we didn’t need because they would be more expensive later. Our paychecks got fatter but the money didn’t go further. It felt like we were running up an escalator heading down. Sustained efforts barely kept consumers even. Rental rates rose. Mortgages were expensive. Sticker shock was a way of life.

Who benefits most when the inflation dragon starts breathing fire under our feet? Those whose income doesn’t rely on their wages. The asset class sees their net worth grow while inflation shrinks the buying power of the working class. Stocks and equity become more valuable. They also become less attainable for those without them.

Interest rates rise when inflation returns. Banks pay higher interest to depositors who have and mortgages cost more for those who have not. The rich get richer and the poor get more numerous.

Our economic system has extended a new sop to the working class since 1980. Retirement funds and IRAs have invested heavily in stock market equities. Workers are now promised a slice of the equity pie, but it’s more like a few crumbs per person from the incredible wealth being created.

Say you get a whopping 10 percent raise at your job. How likely will your boss give you the same raise again next year and the year after that? Meanwhile, your landlord can increase your rent substantially, year after year. Wage increases don’t accrue easily. Asset values do.

Consumer spending reductions may be continuous, but asset appreciation compounds. Once inflation is added to our calculations, closing the wage gap may actually widen the wealth gap. Addressing this possible future inequity will require some bold new thinking.


Don Kahle ( writes a column each Friday for The Register-Guard and archives past columns at

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