The most dangerous time since the Civil War

[Kinser79]

(01-15-2018, 09:33 PM)pbrower2a Wrote: 1. Small businesses, especially in retailing, profit from inflation as they can add new price tags.

Actually changing prices is an expense in retail (and to a lesser extent restaurants). Furthermore inflation actually errodes the value of those profits even if they may be greater in nominal terms. The first and foremost function of money is to be a store of value. Facilitation of trade and being unit of account are secondary.

Quote:3. So long as inflation is low enough it little effects the high-turnover activities that dominate retail as in clothing and groceries.

Incorrect. While the prices of goods and services are far less sticky, wages are espeically sticky. Inflation actually deminishes the purchasing power of people's wages meaning that they actually have less disposable income which depresses discretionary spending. And when discretionary spending declines what is the first thing cut? Going out to eat. Next is buying conventional vegetables instead of the fancy pants heirloom super organic veg.

Inflation most strongly affects high turn over industries such as food service, general goods retail and grocers.

Quote:4. Manufacturers of big-ticket items with low turnover can usually get away with higher prices  as a capital cost for keeping such objects (vehicles, furniture, appliances) from  becoming loss-leaders.

Durable consumer goods in general have a larger price tag because they are durable. That being said, in large part once a plant is tooled prices of those durable goods can remain relatively stable as the only other variable expense is labor. As such inflation has less impact on the production of durable goods.

Quote:5. Although it is hard to see where inflation becomes high enough to become politically unpopular (probably when  people cannot use a savings plan to purchase something), and interest rates start to rise, disruptive inflation indicates a dishonest government that seeks to reward debtors and punish creditors.... or to repudiate debts without admitting to doing so. Even Weimar Germany eventually solved the inflation of the mark of the old German Empire.

Weimar Germany solved the inflation of the papiermark by bringing in Haljamer Schacht (who was a National Socialist and a major booster for Hitler). Further, he completely replaced the papiermark with the Reichsmark and maintained strict value controls until the start of the war with the asistance of Hitler.

Furthermore, inflation itself, eats into the value of savings. The rise of interest rates are a consequence of the declining value of those savings which are the basis of bank loans.

Quote:6. Inflation is not a problem so long as productivity and the money supply work in tandem.

True, but that rarely happens if a central bank can mark up their books by a few clicks of a few keys. The only reason why inflation hasn't become a problem in the US right now is because all that "free" fed money from QE Infinity has been used to de-leverage business and the rest has been put into the Wall Street Casino. Once it hits main street you can expect 50 dollar bread.