Topic: Inflation and social mobility - there has to be a relation (Read 265 times)

For business actors, inflation cannot be avoided and this happens because of the carelessness of humans themselves who are not careful in taking into account aspects of their business so that they are in debt or for other reasons. so that we can get out of this, we must have other savings/investments that are minimally risky for inflation such as gold or bitcoin even though they are risky but the inflation is not too high and holding it makes us holders in the future; My own menu

This is an interesting perspective, it is known that despite the Great Depression generating so much devastation around the world more millionaires were created in the US that in any time in its previous history, which reminds me of the old phrase that says ‘you must invest when there is blood on the streets’ however while social mobility caused by this will not be possible in bitcoin in the case bitcoin became the dominant currency of the world it can still be achieved by working hard and creating your own business.

I assume you mean that opportunity comes from average folks to get out of cash and into investments to either protect against inflation or to straight-out grow the value of the money they put into those investments. 

If that's the case, I can see where you're coming from but from all that I've seen in life, people are addicted to debt.  They tend to live way beyond their means, with maxed-out credit cards and loans of all sorts.  Even in the US, one of the richest countries in the world, most people don't have any money put aside in case of emergencies--and that's not because it's all invested in the stock or crypto markets; it's because they're living paycheck to paycheck because they wanted to buy a fancy SUV or wear nice clothes (or you name it). 

I'd also argue that inflation doesn't just hit the things we buy in stores.  It also affects things like stocks.  Take a look at how overvalued stocks are right now--we've been in a raging bull market for well over a decade now, and prices of stocks have become so inflated that it would be crazy to jump into the market right now.  And as far as bitcoin goes, I don't even know how to put a fair value on it, so I can't say whether its price is inflated or not, except for the fact that it's much higher than it was pre-COVID.

All in all, I really don't think inflation helps anyone in the lower tax brackets with social mobility.  I suppose it could, but in reality it doesn't.

No, not everyone and not every life, simply new chances would appear for mobility but not everyone will grab these.
When a crisis happens, not everyone gets a worse life. Some people actually profit from it and where there is crisis, there is opportunity.
No, the premise of money being 100 dollars and staying that way is not true and anyway mobility is not about the total amount, is about the wealth being transferred.

In the weaker societies there are things that encompasses the value of cash itself. There is more probelms honestly. There are mafias etc.. therefore both ways you would have to suffer thoroughly.

Inflation is something that is definately needed in small amounts. It's healthy for the society but inflation now a days have drastically changed due to probelms like the COVID.

There are places where your Month's salary will just get you a toilet paper, there are places where a dollar will buy you a three time meal.

It's something that is global and at the same time experienced differently according to your living conditions and financial stability. At the same time undoubtedly it is only good when accompanied with increase in prices of salary too , which is not usually seen. Then the poor man succumbs to the society and everything goes bad.

Sure, inflation causes fiat to lose its value. But even at that, fiat is not the only money that loses value. Even assets that you invest in can also lose value. That’s where diversification comes in; you have to diversify your investment, it can be in cryptocurrency, lands and other properties, and even stocks. That way you will be able to keep retaining the values at most times. But fiat is the usually worst place to try and save your value, though we still need it for a lot of things, but we should try to bring out money for investment purposes as well.

I have steady been investing in cryptocurrencies and it has really helped me save value, after the coronavirus and a lot of things that has happened in my country, the country’s currency value decreased, and luckily for me, since I have stacked up some USD and also cryptocurrencies, I was able to save value for myself.

well if the value of your money deflates then you won't be able to buy assets like the wealthy people who can afford to buy real properties and gold when inflation comes. this is currently what is going on in the US actually that is why the wealthy individuals are buying real estate properties even when its price is becoming so high, they still buy the house because they know the money they have will have lesser value in months to come.

If you have no assets today because the money you have in BTC is also declining, it's not the ideal asset to hold. I guess this is maybe the real why the price still is dipping. When there is war, it's a different story, I guess BTC will be more valuable.

I am repeating myself again but imo, there is no direct relationship between these two.

The way i see social mobility, it seems to be a result of several factors related to quality of life and access to opportunities. In a country or society, these things are decided by the socio-political system. For example, a judicious mix of fair capitalism and welfare state is the kind of system that provides maximum social ability.

Inflation does many things but it is chiefly an economic parameter that measures the rate of deprecation of money, in this case, fiat. Inflation directly affects businesses, wages, consumer behavior and most importantly, entrepreneurship. Those things in turn, can result in better or worse opportunities and thus social mobility.

Saying that inflation directly affect or ensures social mobility is taking the argument too far. The example of Venezuela isn't apt. In case of hyper-inflation, everyone is worse-off. Its a crisis situation and no measures of social mobility would apply. If an individual suddenly comes across a profitable enterprise due to a war (say, supplying water to both sides), it doesn't mean that war affecting social mobility can be a thesis..

In that case could we say that when a financial crisis happens in the world we see a huge shift in the lives of people all together? Not that it would be a shocking result because we all know that is the situation but I feel like that is removing one aspect of the economy, there is a finite amount of money, let's say 100 dollars is all the dollars available, then when a crisis happens everyone gets a worse life right? Where is that 100 bucks?

If "everyone" is living a bad life because of the crisis there is two explanation, either that 100 bucks went to richer people and they are doing better and regular people have less portion of that, instead of having 50% of it they now have 40% and rich people have 60% instead of 40%, or the other explanation is the money went nowhere, but it was fake all along? I mean if we have finite amount, then there shouldn't be life crisis' this frequently, it where does this money go to?

Yes, you're right in your conclusions, high inflation causes the transfer of purchasing power from rich to poor (in terms of lending and borrowing), thus, reducing the gap between these two groups. It's actually a pretty well-studied phenomenon, if you want to read more research about it try googling "distribution effects of inflation", there's a number of studies devoted to that.

Yes that is the interpretation in simple terms. Social mobility is how much people can change their livelihood and the assets they own in the course of their own life. There are many factors that are well known to affect social mobility such as free or cheap yet high quality education, culture and politic systems (think of the middle ages, social mobility near zero), corruption and nepotism, rule of law,...

My thesis is that inflation can be a precursor of opportunity and that carries a chance for individuals to move socially. It also diminishes debt, which may be a factor as well.

Uncontrolled inflation is something that worries the rich, but as long as the central bank has clear plans, inflation works in their interest as interest rates will cover the effects of inflation (interest rates at 6% and constant inflation between 1-3%)
What do you mean by deflation? Does Bitcoin mean scarcity? Remember, there are not 21 million bitcoins and each bitcoin is divided into 1.00 BTC = 100,000,000 SATS, so deflation is not the problem.

Only with negative real interest rates (when interest rates are lower than inflation). Its not that its something normal. Current market situation (negative real interest rates) is not normal. Its not like its been like that for ever.


https://www.longtermtrends.net/real-interest-rate/

As you can see blue line (real interest rates) is mostly above 0%. Means that you give back your loan in depreciated asset but you have to give back much more than you have borrowed.

To take your thought further, the question to ask is; If the rich invest in new assets to counter inflation, what opportunities do you think it creates for the poor? IMO, Investing in fixed assets by the wealthy to safeguard their wealth is not the same as entrepreneurship. Enterprises generate the opportunities that enable Social mobility. An enterprising person with or without wealth will do so without any restrains from inflation.

In fact, when inflation is high (hyperinflation), the cost of doing business is higher. This restricts entrepreneurship and thus, will hinder social mobility. On the other hand, with balanced inflation and deflationary emission, like Bitcoin, the entrepreneur would be much more confident to take risk and generate opportunities.

There is definitely a balance there somewhere which creates more opportunities for the economy as a whole. Though if you consider just the Bitcoin economy, I can definitely agree that Bitcoin being deflationary encourages people to Hodl rather than invest, thus decreasing opportunities within the Bitcoin ecosystem.

But when the inflation strikes up like what happened in Venezuela, the loan payment can be paid easily but their day to day life will become difficult so a common man will give importance to their survival instead of the loan then the lender will seize the property which was given as security.

Obviously, inflation powerfully affects the quality of life of citizens in any country. And if we talk about the social mobility of Venezuela, we could think that it has received a negative impact due to the current situation.
As education is the way that children need to rise to the higher socioeconomic levels, the percentage of decline due to social mobility is evident. Due to this situation, it has given rise to the migratory crisis in Venezuela.

I think you answered your own question above between both bolded portions.

The logical solution is to be a debtor. One who owns banks, which in turn owns many assets. Or for those who believe central banks are privately owned institutions. The best arrangement, in theory, is to own a (privately owned) central bank. Its even better, if your central bank expands its balance sheet under economic stimulus. Buying up large portions of national assets and debt. If you manage to own a significant segment of the national debt, its almost as if you yourself own the country.

In times of high inflation, if possible: own a bank. If not, perhaps the best option one can hope for is to own bitcoin, and be ones own bank. It would seem that inflation protected assets are becoming more difficult to acquire by the day.

Based on a report from the World Economic Forum (WEF) it turns out that the social strata of society in the US generally dominate the level of interest in crypto than men.
Responding to the current economy, I still need an applicable strategy to find out the behavior of the people in the midst of an epidemic that doesn't know for sure (it's a bit offensive to UEFA EURO this year's policy is very surprising) uuppppsss LOL 

I don't see why there should be a relationship between inflation and social mobility. Or I don't know if I'm understanding you correctly.

 My understanding is that social mobility occurs in open societies with open economies. There someone born into a poor family can end up a multimillionaire and conversely, an imbecile who squanders a multimillionaire inheritance can end up broke and homeless. There are always those who complain that the children of the rich have an advantage, and it is true, but it is a much better system than the caste system of India or the medieval society of the Middle Ages.

As for inflation, it is true what you say, it causes money to be worth less and less and those who have money have to take risks by buying assets, but it is a controlled risk. Those who have great wealth and buy prime real estate assets and blue chips risk less than it might seem at first glance. Someone who does not have as much money but is not poor can do the same but on a small scale. I would say that this type of investor tends to risk more because he doesn't have a large patrimony to protect, and I don't know if that's what you're saying.

However, if we look at the extreme cases of inflation or hyperinflation, as in Venezuela, I see even less social mobility because what happens there is that almost everyone gets poorer except those in power and the few that are left with some money leave the country.

This sounds like modern world problems created by inflationary fiat systems.
If you use a scarce/hard money, it will likely be use as store of value by people from any social/economic status.  Doesn't prevent them from buying assets within the economy using the scarce money. And it will definitely help make the scarce/hard money more valuable and increase its price... than say using mostly foreign currencies in thesame economy.
So, Bitcoin needs to have a strong and thriving economy, preferably decentralized economy, and people will keep climbing the status ladder, if that's what you want.