Who Are The Rentiers?

Who Are The Rentiers?

from Paul Krugman by By PAUL KRUGMAN

Following up on my rentier post and the eurocentric followup, a question: who are we talking about? That is, who stands to gain from deflation, and lose if inflation is, say, 4 percent over a period of 10 years? Is it little old ladies living on fixed incomes, and salt of the earth workers who have scrimped and saved?

Well, no. There are, of course, some ordinary people who would lose a bit from higher inflation. But Social Security — the bedrock of retirement for most Americans — is indexed to inflation, and retirement accounts invested in stocks wouldn’t be hurt.

If you want to see who really has a stake in the inflation dispute, go to Edward Wolff’s latest on the American wealth distribution (pdf). Here’s the takeaway:

Holdings of assets, by wealth class, 2007

Financial securities are overwhelmingly held by the rich — more than 60 percent by just one percent of the population, more than 98 percent by the top 10 percent. It’s true that middle-class Americans own significant shares of deposits, and that some part of their pension accounts would be in bonds. On the other hand, middle-class Americans owe the lion’s share of debt; relatively speaking, the wealthy have hardly any.

So if you think about the distributional consequences of the choice between a Japan-style lost decade of very low or negative inflation and a Mankiw-Rogoff strategy of higher inflation for a while, it’s very much about benefits to the wealthy versus benefits to the middle class. Since I’ve been arguing that some inflation would help the economy recover, what we’re seeing in practice is that defending the interests of a small wealthy slice of the population takes priority over a possible recovery strategy.

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This entry was posted in Background & Analysis, Corporations, Finance Capital, US Economy, US Electoral Politics. Bookmark the permalink.

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