Reply to Where exactly does all the inflation money go?

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[quote=Anonymous][quote=Anonymous]Hoping there's maybe an economist or something on this forum because I'm simply confused.

Groceries seem to be up 30% or so on average. Used cars are more expensive. Housing has appreciated (until recently) and the cost of housing has soared (40% increase in price plus rates ballooning from 3.5% pre-pandemic to 7-7.5% today.

Despite everything costing more, I can't for the life of me figure out where all of this money is actually going? Most people working in government, education, etc. have seen raises that significantly underperform "real inflation" metrics. Even friends in the private sector seem to be getting promoted, but their raises and promotes are hardly worth anything when you account for inflation (10% raise is eaten into pretty quickly these days).

Credit card debt is ballooning. The stock market is down 20% from ATH.

No one seems to be getting richer. We're all becoming remarkably more poor, but someone has to be winning right?

Is it old people collecting social security and a general loss of productivity due to aging demographics.

Is Russia eating our lunch?

Is the US diminishing in terms of power and I'm just paying more for food so someone disadvantaged doesn't have to?

Is the market down because its forecasting in interest rate hikes and the unwinding of the fed balance sheet?

Someone. Please. Help me understand?? I don't really buy this media narrative that feels spoon fed and maybe 3-6 months outdated by the time it arrives. I'm not sure I trust the cohort of journalism majors to really know what's happening as it happens...

So my question to whoever might be able to answer this is simply, "Where is all the cash going?"[/quote]

The cash goes to the entity where it finally comes to rest.  Say you make $100K (from $90K last year) and are left with $10K at the end of the year after ALL expenses.  That $10K goes to you.  The $45K car you bought (you would have spent $40K last year) will go to the dealership.  The additional $5K is due to inflation and will get split across the value chain - Dealership, salesman, manufactured, other staff, etc.

In this example, you and the car dealership value chain participants benefited from inflation - $5K each.  The discussion on "raises are not keeping up" is just mental masturbation, that only matters to those who live paycheck to paycheck.  if you are going to bank most of your raise, then it doesn't matter as much.  Sure it's less than otherwise but assuming you invest the $5K, the $5K will end up doing better due to inflation as well over the long term.[/quote]

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