This mechanism is potent, but it assumes that real wages keep pace with inflation. Right now real wages are falling, and with higher inflation may continue to do so. Furthermore, many poor people roll over their debts for longer periods of time. Repaying those debts will eventually be cheaper in inflation-adjusted terms, but not anytime soon.
I’ve been focusing on the U.S., but elsewhere in the world the general correlation is that high inflation and high income inequality go together. Correlation is not causation, but those are not numbers helpful to anyone who wishes to argue that inflation is a path to greater income equality. Have very high levels of inflation done much for the poor in Venezuela and Zimbabwe? And if you ask which group would benefit from an improvement in living standards prompted by higher rates of investment, as might follow from a period of stability—it is the poor, not the wealthy.
The effects of inflation are numerous and complex. It cannot be said definitively that inflation hurts some income groups more than others. Yet it’s clear that, for the poor, inflation is no trivial matter.
Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include The Complacent Class: The Self-Defeating Quest for the American Dream.