So, yeah, it’s a big complicated mess of a topic with many intersecting elements and no clean through line.
And the effects are not clean in any way, with lots of counter intuitive interactions.
So let me put the baseline like this. Low inflationary targets prioritize capital and investment income over labor. This is because low inflation means greater realization on gains from capital investment. To pick arbitrary examples, if inflation 0% then you require a lower rate of return on investment capital than if inflation is 10%. At higher inflation rates then the rate of return must exceed that inflation more, otherwise it makes more sense to park money in bond markets than capital infrastructure.
Continuing on from that at higher inflation rates the future value of current debt is relatively lower. Now interest rates and borrowing rates do impact this here, but at a very basic level, if an debt of $10k is owed, then the future value of said debt at 10% inflation is relatively less. In a theoretical example where someone’s income tracks to inflation, higher inflation means they are able to pay back the debt sooner and more easily, as their income increases relative to the debt more.
It also has impacts on the long term relative value of held assets. Again another big kettle of fish, and the system has feedback loops that push both ways on this, but broadly there is a depreciative effect on large capital holdings.
Another factor is stock market prices. There is an inverse relationship between stock market prices and inflation. Higher inflation causes drops in stock prices, while lower inflation numbers goose the same. Similar to how better wage growth reports cause stock prices to crash, or better than expected job growth causes the same. Things that directly increase the amount of money given to labor versus capital have downward pressures on stock prices. If its good for the workers, its bad for the owners and all. Anyhow, lower inflation, for a whole host of reasons, makes stocks more attractive, which in turn raises their value. Simply put the lower interest and inflation are, the lower rate of return required to make profit on investments. And lower inflation rates tied to lower interest mean capital investments through bond selling, loans, etc. for companies are relatively cheaper, and so those sorts of investments become more common. Which in turn leads to greater outputs, etc. This all leads to higher stock prices.
But, again, complex noisy system, so it is not A-> B causal relationship, but more like broadly observable trends with significant variance.
So overall the economic impacts of higher inflation broadly benefit those with low, or negative asset wealth, while being detrimental to those whose wealth derives from held assets.
Now granted I am not an economist, and economists do not agree on this topic. Also noting that the economist class in the US is decidedly of a conservative (political) bent, and things like the Chicago school of economic theory bake in certain assumptions that are in dire need of examination and reassessment. So if you read 10 economists takes on the impacts of inflation you’ll likely end with 20 opinions on the downstream effects.
However over the course of my casual study and reading on the topic over the years, I have drawn the conclusion that broadly speaking low inflation rates disproportionately benefit those who draw most of their earnings from investment income, and financial sectors, as well as those who have large real estate holdings.
So the net effect is that, in overly simplistic terms, higher inflation is good for people who have less, especially those who have significant debts compared to their income. But significant caveats about wage growth and stagnation exist, such that it is possible for many people to experience losses to this as wages fail to keep up with price increases.
However you also already see this in the current low inflation rates of the last few decades as wages have not kept pace with inflation, and particularly slipped with relation to the costs of education and housing which are broadly not counted within the inflation numbers in any way that tracks to the real experience of the working classes (but how inflation is calculated is a whole separate and interesting topic!). So it is hardly a controversial position to stake that the modern incarnation of low inflation targeting being the driver of fed policy has negatively impacted the working class to the benefit of the capital class. We have decades of evidence to show that current policy directives cause direct harm to the actual working class, and so that current measures and metrics are not designed for the benefit of workers.
