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We googled'up correlations. It appears inflation is very bad when it turns to hyper-inflation, but mild inflation has little redistributive impact. It can be good for the middle class with easy access to credit, by melting the debt (it helped most boomers of the now-industrialized nations after WWII), but does nothing for the very poor.
Upon thinking about it a little more, I came to the idea that it's may be inequality to access to the money supply, the other armed hand of the central bank. Many say the present bubble stems in part from the fed "printing money", increasing M3, etc.. So once there's so much money, all asset classes spike up - which is actually inflation, except it doesn't impact the retail sector. But honestly, retail isn't the main budget item of the middle class, it's by far the rent/mortgage for the housing, followed by the more or less compulsory savings for retirement (except with those crazy americans) - and if the assed where you put you're savings are spiking, you effectively suffer from strong inflation.
So the "real" inflation in the past years, taking into account those bubbling assets, has indeed been very hard to the people, much more than core price index would say. Net wages have eroded even worse than you argued in many passed comments. But this is a side note, back to my money supply idea...
This supplied money is injected mostly on the state and corporate bonds markets, where banks loan all this cash they don't know what to do about. They have so much they make risky loans with very low rate premiums, to corporations/hedge funds primarily. Never to Mr. Average D. Joe. The supplied money does not trickle down, it stays in the asset bubbles. And benefits the investment bankers who take fees, the CEO with the options and golden parachutes, and corporations which can fund capital-intensive projects to eliminate workers at cheap rates, then buy back their shares (so the funds and fund managers benefit also).
When averaged over a longer period covering the 1992 crash, housing inflation in France is more moderate. But not everyone has the resource to hold on during the bubble years in a market with 15-year cycles.
I think the long term driver (averaging over a generation) cannot be anything else than demographics, hence the housing collapse in Germany. Spain, with its record low fertility rates, looks like the perfect hyper-bubble to me. Will burst when the retired Britons buying on the coast will no longer be able to "commute" their on low cost airlines...
That's part of the whole class war, and Trichet, who again dared say last week that he followed asset prices, was roundly condemned for outdated thinking.
Hang on to your euros.
In the long run, we're all dead. John Maynard Keynes
When you rent it is counted in inflation, but rent raises are controlled in most countries (like France) so this doesn't show up in inflation. And most people do not rent anyway so the weight in the inflation basket is not high.
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