ECON 100 Inflation - Who Wins and Who Loses

St. Charles Community College
ECON 100   Survey Economics


Who Wins
Who Loses  
Reasons
 Holders of hard assets.
People without hard assets.
Generally, hard assets can be sold later for cash as prices rise.
Apartment owners. 
Apartment renters.
The landlord can always raise the rent.
Borrowers.  
Lenders. 
Unless the loan has an inflation –adjusted interest rate or payment schedule, the borrower is always paying last period’s payments with this period’s money.
People with jobs. 
People on fixed incomes (such as many retirees). 
Generally, wages catch up with prices.  Fixed incomes don’t.
People with jobs. 
The unemployed. 
Again, generally, wages catch up with prices.
People with minimum tax liabilities. 
People with high tax liabilities. 
Assuming that taxes are not indexed to inflation, the danger of “bracket creep” exists when wages catch up with prices.
Renters (households or commercial operations) with long term, fixed leases not tied to inflation.
Renters with short term leases or renters with leases tied to inflation.
Landlords or property owners will always try to raise the rent during periods of high inflation to cover their costs.

Suppliers with long term supply contracts tied to inflation. 
Suppliers with fixed, long term  supply contracts not tied to inflation, 
If they can’t include inflation cost phrases in contracts during periods of inflation, suppliers should negotiate short-term contracts.
Firms with pricing power. 
Firms operating in very competitive markets. 
Firms with pricing power can raise prices.  Firms in competitive markets can’t. 
Investors with short-term investments. 
 Investors who invest in long-term projects that do not have inflation protection provisions. 
Investors commonly decrease their investment levels during periods of high inflation.