Why Don't People Care About Inflation?

It ain't no use
We're headed for disaster
Our minds said no
But our hearts were talking faster
--Donnie Iris

In response to an Ask Fleck post yesterday, Fleck admits to wondering about this question often: Why don't people seem to care about inflation? It is perplexing. Because it reduces the purchasing power of money in people's wallets, inflation amounts to theft. One would think that people would be outraged about their property being ripped off.

But it doesn't generally work that way for several reasons. One is that low-to-moderate inflation rates can be difficult to notice in daily transactions. Only over large periods of time where the cumulative effects can be seen, or until the inflation rate really picks up, do people begin to notice. This is why inflation is sometimes called the 'invisible tax.'

Another reason is that government measures generally under-report inflation, which makes people think that their purchasing power is not being lost at rates as high as they actually are. Moreover, we are told that a 'little' inflation is generally good. People tend to believe this and forget how the compounding effect of even a 'little' inflation can erode purchasing power and wealth over time.

Most people are also debtors. Debtors generally welcome inflation because it allows them to pay back loans with money that is less valuable than the funds that they originally borrowed. For instance,  borrowing $100 dollars that can initially buy, say, 50 cans of soup can be paid back with $100 (plus interest) that can buy only 30 cans of soup.

Unfortunately inflation rates must often begin to go vertical before people wake up to the dangers wrought by their permissiveness. By that time the toothpaste is out of the tube.