October 2, 2022

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Inflation, who wins and who loses? What will happen to retirees, employees and companies

There are those (like consumer associations) who value thousands and thousands of euros for the average family, and there are those (like producer associations) who “stop” at just over five hundred euros. Raising one’s head to the current levels of an “inflation monster” is sure to hurt everyone. To the average citizen who has to deal with crazy prices. But also for businesses, especially in situations like the one we’re seeing where price increases are primarily due to energy and raw materials. Thus, even the usual innovators – such as some traders who are quick to adjust price lists – do not have much to rejoice this time. There is not much to beat: Accelerating inflation at current rates (Istat + 7.9% in July) is not good for anyone. The danger is that everything stops and the economic system enters a recession.

Protected Categories: Retirees

The Draghi government has put in place a whole series of rules to help the most difficult families, starting with discounts on the bill, which do not completely cancel out the effects of the higher cost of living. Retirees will be the most protected and those to whom the automatic cost-of-living adjustment mechanism has returned this year. However, there is a double-edged mechanism: you start the year following the increments; The refund is one hundred percent only for pensioners who receive a monthly benefit of up to 4 times the social allowance (about 2,000 euros), for others, partial recovery will be on the basis of specific segments (pensioners who receive between 4 and 5 times the social allowance will have an increase of 90% for inflation; and retirees who receive more than 5 times the social allowance will be 75% more than for inflation).

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employees

The one who risks doing the most harm is the employee, who with his fixed salary and always the same must do balancing exercises to maintain the same standard of living. Those with some savings aside, can get paid by drawing on their “treasure”. For others, there is not much to do: in the long run, a high price will cause something to be sacrificed. Payback with contract renewal? In general, it is always partial and arrives in any case with a delay of at least four years. It is better not to trust too much. Traders were once said to have earned it because on the price tags, rise was always higher than inflation. But in reality, this is not the case with current levels: price adjustments that are too high have the effect of discouraging buying and losing customers. Indeed, in recent months, many large distribution chains have preferred to transfer only part of the price increases to prices, thereby reducing their profits.

Business

Producers are the first to lose, especially when high inflation depends, as now, on energy factors and raw materials. Higher bills increase production costs, but in general increases cannot be automatically and instantly transferred to price lists. Initially, therefore, the effect of inflation will be felt on profits.

Reviews

To combat the inflation monster, the most effective weapon is in the hands of central banks: increasing the cost of money, in order to get the system to spend more wisely. The increase in interest rates is clearly a detriment to those who have borrowed money at variable rates: companies for their investments, and citizens for the purchase of goods or real estate. It also hurts the Treasury, which will have to pay higher interest rates on its government bonds.

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good inflation

Inflation is not always bad. exactly the contrary. For the development and development of an economic system, an inflation rate of about 2% is needed. Staying below this level means that the system suffers, factories are cutting production because there is little demand for their products, and business is disruptive. Inflation at a very low level, with fixed or even falling prices, is apparently a benefit only to the accounts of households, and is in fact a symptom of the difficulties of the economic system moving backwards. In fact, falling prices leads to a vicious cycle harmful to the economic system: many companies are unable to survive in the market and close; Thus jobs are lost, family income falls and consumption is reduced; To be able to sell the surviving firms lower their prices further, they are forced to cut costs (including labor costs) and the cycle continues, while the country is getting poorer. When the economy, on the other hand, booms, people spend, businesses hire, and young people find work.

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