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Interesting graph with quite good correlation.

The question is how would it extend to values of inflation outside the boundaries of the graph – to rapid deflation or even prolonged deflation on the one hand or to chronic inflation or hyperinflation on the other?

The US has never had chronic inflation or hyperinflation, but both those phenomena may be a political consequence of extreme wealth concentration – I recall reading that there have been countries where the top one percent received as much as 56 percent of all income. Class envy under such a situation is very likely to cause chronic inflation, as it is more acceptable to the super-rich than the complete expropriation advocated by groups like the Socialist Equality Party.

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We don't really have enough data for deflation, but in terms of hyperinflation, the chart is based on data that includes also the hyperinflationary periods of the 1920s and 1940s. In essence, hyperinflation leads to lower income shares of the top 1%. The main driver is that in a hyperinflation capital gets destroyed while the value of real assets such as houses, labour, farmland etc. grows rapidly. And since farmers and the middle class tend to have a higher share of their wealth in land and houses, they tend to catch up with the top 1%.

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Thanks, Joachim.

What would the effect of hyperinflation (and chronic inflation) for the very poor – whose assets are usually negative – be.

One would expect hyperinflation or chronic inflation would be a boon to the very poor with negative assets as their debts become valueless. This is no doubt why hyperinflation has been typically associated with periods of radical left-wing politics where the working class is highly united and seeking to expropriate the rich to the last cent. Chronic inflation, in contrast, is typically associated with detente in the class war.

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