Victims and Profiteers of Inflation

Hermann Simon and Adam Echter
Additional contact information
Hermann Simon: Simon-Kucher & Partners
Adam Echter: Simon-Kucher & Partners

Chapter 2 in Beating Inflation, 2023, pp 9-19 from Springer

Abstract: Abstract Inflation affects businesses, consumers, and the State; indeed every social group. There are victims and profiteers of inflation. Victims include holders of cash assets, savings accounts, fixed incomes, and fixed-income securities, as well as creditors. Profiteers include holders of inflation-resistant assets as well as debtors. A serious shortcoming is the lack of experience with inflation among the current generation of managers. The last inflation scenario similar to the current one occurred in the 1970s. Low-income consumers and those with unavoidable expenses such as commuters are hit hard by inflation. In response, consumers adopt evasive strategies such as not buying, substitution with cheaper products, accepting reductions in utility, or finding additional sources of income. Individual sectors encounter very different consumer reactions to inflation. The scope for price increases varies accordingly. In terms of their price behavior, consumers show an ambivalent reaction. On the one hand, they pay more attention to prices in order to still buy cheaply, so that price elasticity increases. On the other hand, constant and high price changes disrupt the reference price system, so that prices lose relevance. As a large debtor, the State benefits from inflation. This also applies to sales and income tax revenues.

Date: 2023
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-20093-9_2

Ordering information: This item can be ordered from
http://www.springer.com/9783031200939

DOI: 10.1007/978-3-031-20093-9_2

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().