Those people who are borrowers typically are helped unless you have an adjustable rate mortgage where the interest rises with inflation. Those who have to fixed rate morgages are paying back borrowed money with money that is worth less. Those who are retired or with no new income are hurt by inflation. Their fixed income is not being adjusted to keep up with inflation. They are making money based on years past. Banks who give out fixed rate mortgages are hurt because they are being paid back with money that is worth less than what they paid with.
People who borrow money from a bank with a fixed-rate loan gain from inflation. In this instance inflation is not bad because the dollar amount people will be paying back is less than what they borrowed. Retired people are hurt by inflation. They have to live with money they made before the dollar amount decreased. Debtors usually gain from inflation while retired people usually are hurt.
Helped: Government Officials, because inflation increases the revenue generated by taxes.
Union Members (with COLA), because they can negotiate for raises and cost of living adjustments to their salaries.
Speculators, because they borrow money and pay it back after a given period of time with money that is worth less.
Foreign Business Owners, because they can arrange to get a fixed rate on an American good or service, which costs less for them because they aren't undergoing the same inflation.
Hurt: Business Owners, because the wholesale cost of merchandise, as well as the salaries of employees, increase with inflation.
Savers, because the money they have saved is worth less the longer they wait to spend it.
Union Members (w/o COLA) or any other workers, because they are most likely not getting raises that keep up with inflation.
Lenders, because fixed rate loans don't adjust with inflation, so loans are paid back with money that is worth less.
Potential Borrowers, because some borrowers might not qualify for a fixed rate mortgage, so their rates would increase with inflation and their payments would rise.
Helped: Government Officials- They get more money from taxes because of inflation
Union Members with COLA- They can negotiate for higher wages and cost of living adjustments
Speculators- The money the pay back is worth less than the money they borrowed
Foreign Business Owners- They can get fixed rates on American goods and services, which costs less for them because they aren't experiencing the same inflation
Hurt: Business Owners- The cost of purchasing the merchandise goes up as well the salaries of workers
Savers- The money the save is worth less each day the longer they save it
Union Members without COLA or any other worker- Their salaries do not increase with inflation
Lenders- They get paid back with money that is worth less than the money given out
Potential Borrowers- Some people may not be able to afford a loan with the increased intrest rates
Basically, those who do not recieve NEW income are hurt, those who have saving accounts with fixed-rates of interest are hurt, and those who have new homes with adjustable-rate mortgages are hurt. As inflation rises, these people are getting paid less or the rates cause them to lose money. Those who are helped are people who recieve incomes that match inflation as well as people with fixed-rate loans that must be repaid over-time. As inflation goes up, they get paid more and the borrowers have the chanceofpaying back less.
People that lend money are hurt by inflation because the money they are paid back with is worth less than the money they lent out. Savers are hurt because their money becomes worth less. Retired people are hurt because the money they earned is worth less now then when they earned it. Borrowers are helped by inflation because what they pay back is worth less than what they took out. People in the government are helped because they will be able to gain more revenue from taxs and its cheaper to back back their debts.
Their are many groups that are harmed and helped by inflation throughout society. Savers are hurt by inflation if interest rates are fixed. Many a times inflation is directly based on the worth of the dollar itself. An example for a person who is helped in this situation would be for instance a foreign ambassador. Other individuals who are helped are Union Members and Government Officials such as a mayor or congressman. Other people who are hurt by inflation are Lenders and business owners.
miket Most of all, the elderly are hurt by a rise of inflation. For the single reason of a set rate of money every week or whatever. Lets say that retired person saved $100,000 and he figured he'd live about 10 years. Thats $10,000 a year. But after a while inflation kicks in, and with that $10,000, you can only by 75% of what you used to. There are some however that are helped by inflation. People who, say, took out a $250,000 fixed-rate loan on a house in 1990. They slowly pay it back. But as time goes on, their money is worth less, however since it is a fixed rate loan, they pay the same amount, therefore they are not losing money, like those who took out adjustable.
Inflation, like anything else, has a wide range of effects. Borrowers are typically helped since they can repay with money worth less than it originally was. Also, the government obviously benefits from the revenue, and foreign businesses can buy things that are essentially worth less. Almost anyone relying on a frixed-rate (giving or receiving) is hurt by inflation simply because the value of their money diminishes with time. Businesses are also hurt because they have to keep up with price increases as well as the demand for wage increases of their workers. [pretty much what ryan and sean said]
Inflation has a varied effect on the economy. Some benefit from it while some lose. For example, banks with fixed rate loans lose money because the value of their loans decreases as inflation rises; however, banks with variable rate loans gain because their rates match that of inflation. Aside from banks, homeowners, workers, sole proprietors, teachers, etc are generally hurt by inflation because it will decrease the value of their income. For sole proprietors, they want to maintain competitive prices to improve sales, but must also accommodate the increase in wages from their workers. But for people who are deep in debt and must pay back loans or are borrowers/speculators, inflation is ideal for them. Inflation allows borrowers and debtors to pay back their loans while gaining off of them (the money they pay back has diminishing value). Also, workers who have COLA and are part of a union greatly benefit from inflation. With their COLA, their wages are guaranteed to keep up with the inflation rate and they get an annual raise. Therefore, since there are many people who gain and lose, it's difficult to determine accurately and justly whether or not inflation is bad.
Inflation helps those who have a COLA as part of their salary plan. It also helps banks who do not extend a fixed rate income through loans and mortages. On the flip side, inflation hurts those who do not have a fixed rate. It also hurts retirees who cannot keep up with the cost of living.
12 comments:
Those people who are borrowers typically are helped unless you have an adjustable rate mortgage where the interest rises with inflation. Those who have to fixed rate morgages are paying back borrowed money with money that is worth less. Those who are retired or with no new income are hurt by inflation. Their fixed income is not being adjusted to keep up with inflation. They are making money based on years past. Banks who give out fixed rate mortgages are hurt because they are being paid back with money that is worth less than what they paid with.
rachel t
People who borrow money from a bank with a fixed-rate loan gain from inflation. In this instance inflation is not bad because the dollar amount people will be paying back is less than what they borrowed. Retired people are hurt by inflation. They have to live with money they made before the dollar amount decreased. Debtors usually gain from inflation while retired people usually are hurt.
Helped:
Government Officials, because inflation increases the revenue generated by taxes.
Union Members (with COLA), because they can negotiate for raises and cost of living adjustments to their salaries.
Speculators, because they borrow money and pay it back after a given period of time with money that is worth less.
Foreign Business Owners, because they can arrange to get a fixed rate on an American good or service, which costs less for them because they aren't undergoing the same inflation.
Hurt:
Business Owners, because the wholesale cost of merchandise, as well as the salaries of employees, increase with inflation.
Savers, because the money they have saved is worth less the longer they wait to spend it.
Union Members (w/o COLA) or any other workers, because they are most likely not getting raises that keep up with inflation.
Lenders, because fixed rate loans don't adjust with inflation, so loans are paid back with money that is worth less.
Potential Borrowers, because some borrowers might not qualify for a fixed rate mortgage, so their rates would increase with inflation and their payments would rise.
Helped:
Government Officials- They get more money from taxes because of inflation
Union Members with COLA- They can negotiate for higher wages and cost of living adjustments
Speculators- The money the pay back is worth less than the money they borrowed
Foreign Business Owners- They can get fixed rates on American goods and services, which costs less for them because they aren't experiencing the same inflation
Hurt:
Business Owners- The cost of purchasing the merchandise goes up as well the salaries of workers
Savers- The money the save is worth less each day the longer they save it
Union Members without COLA or any other worker- Their salaries do not increase with inflation
Lenders- They get paid back with money that is worth less than the money given out
Potential Borrowers- Some people may not be able to afford a loan with the increased intrest rates
Basically, those who do not recieve NEW income are hurt, those who have saving accounts with fixed-rates of interest are hurt, and those who have new homes with adjustable-rate mortgages are hurt. As inflation rises, these people are getting paid less or the rates cause them to lose money. Those who are helped are people who recieve incomes that match inflation as well as people with fixed-rate loans that must be repaid over-time. As inflation goes up, they get paid more and the borrowers have the chanceofpaying back less.
Lisa B
People that lend money are hurt by inflation because the money they are paid back with is worth less than the money they lent out. Savers are hurt because their money becomes worth less. Retired people are hurt because the money they earned is worth less now then when they earned it. Borrowers are helped by inflation because what they pay back is worth less than what they took out. People in the government are helped because they will be able to gain more revenue from taxs and its cheaper to back back their debts.
Their are many groups that are harmed and helped by inflation throughout society. Savers are hurt by inflation if interest rates are fixed. Many a times inflation is directly based on the worth of the dollar itself. An example for a person who is helped in this situation would be for instance a foreign ambassador. Other individuals who are helped are Union Members and Government Officials such as a mayor or congressman. Other people who are hurt by inflation are Lenders and business owners.
miket
Most of all, the elderly are hurt by a rise of inflation. For the single reason of a set rate of money every week or whatever. Lets say that retired person saved $100,000 and he figured he'd live about 10 years. Thats $10,000 a year. But after a while inflation kicks in, and with that $10,000, you can only by 75% of what you used to.
There are some however that are helped by inflation. People who, say, took out a $250,000 fixed-rate loan on a house in 1990. They slowly pay it back. But as time goes on, their money is worth less, however since it is a fixed rate loan, they pay the same amount, therefore they are not losing money, like those who took out adjustable.
Jeff W
Inflation, like anything else, has a wide range of effects. Borrowers are typically helped since they can repay with money worth less than it originally was. Also, the government obviously benefits from the revenue, and foreign businesses can buy things that are essentially worth less. Almost anyone relying on a frixed-rate (giving or receiving) is hurt by inflation simply because the value of their money diminishes with time. Businesses are also hurt because they have to keep up with price increases as well as the demand for wage increases of their workers. [pretty much what ryan and sean said]
Inflation has a varied effect on the economy. Some benefit from it while some lose. For example, banks with fixed rate loans lose money because the value of their loans decreases as inflation rises; however, banks with variable rate loans gain because their rates match that of inflation. Aside from banks, homeowners, workers, sole proprietors, teachers, etc are generally hurt by inflation because it will decrease the value of their income. For sole proprietors, they want to maintain competitive prices to improve sales, but must also accommodate the increase in wages from their workers. But for people who are deep in debt and must pay back loans or are borrowers/speculators, inflation is ideal for them. Inflation allows borrowers and debtors to pay back their loans while gaining off of them (the money they pay back has diminishing value). Also, workers who have COLA and are part of a union greatly benefit from inflation. With their COLA, their wages are guaranteed to keep up with the inflation rate and they get an annual raise. Therefore, since there are many people who gain and lose, it's difficult to determine accurately and justly whether or not inflation is bad.
Inflation helps those who have a COLA as part of their salary plan. It also helps banks who do not extend a fixed rate income through loans and mortages. On the flip side, inflation hurts those who do not have a fixed rate. It also hurts retirees who cannot keep up with the cost of living.
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