Inflation Is Stealth Austerity
Inflation Is Stealth Austerity by Charles Hugh Smith for Of Two Minds
Rather than decry austerity, which demands an open political discussion of trade-offs, we should decry inflation’s stealthy reduction of purchasing power.
Austerity–bad. Inflation–good. Oh wait–they’re the same thing: both are a reduction in purchasing power. The only difference is a reduction via austerity is upfront while inflation is a stealth reduction, obfuscated by “official” distortions and Federal Reserve mumbo-jumbo.
Consider $1,200 in wages, unemployment, stimulus, Social Security payment, etc. If this payment gets cut by 10%–$120–as a result of austerity, pay cut, reduction in hours worked, etc., recipients scream bloody murder.
But if inflation reduces the purchasing power of the $1,200 by 10%, nobody does anything but grumble that “prices keep rising while my income stays the same.” This is the classic boiled frog syndrome: inflation is like the heat being turned up so gradually that the poor frog doesn’t realize he’s about to expire.
Inflation is stealthy because the loss of purchasing power is difficult to monitor. Your $1,200 only buys what $1,080 bought in the recent past; 10% inflation reduced your income exactly the same as if austerity had subtracted the $120 upfront.
Governments and central banks love inflation because the theft goes unnoticed. The public tolerates inflation because it’s easy to passively accept this erosion in their standard of living and difficult to generate the political heat that an outright cut would spark.
Though it’s being openly engineered by the Federal Reserve, inflation appears to be a force nobody controls–unlike austerity which is so clearly a political decision. If Inflation robbed 10% of everyone’s income overnight, people might be roused from their passivity to protest.
But since the theft occurs slowly–what’s 1% a month?–and unevenly across a spectrum of goods and services, this theft doesn’t rouse the same political storm as upfront austerity.
Inflation is a form of sacrifice that few recognize as sacrifice. It seems like everyone’s income is eroded equally, but this isn’t true: the wealthy closest to the Fed’s money spigots are earning multiples of inflation from asset inflation, stock buybacks, etc. Inflation is a pinprick to the wealthy and a stilletto in the kidneys of the bottom 95%.