There are generally two groups –the gainers and the losers during the inflationary period.
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GAINERS · Businessmen –gain profits due to rising prices · Shareholders – higher profits made during rising prices hence higher dividends payout · Debtors or Borrowers– earlier utilized the loan when the purchasing power is greater. When there is inflation, the real value of money goes down. So the debtors need to pay less to creditors in real terms. |
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LOSERS · Fixed Salary Earners and Pensioners- their real income will be eroded by inflation.(refer article on nominal versus real income) · Creditors – the loan will have reduced purchasing power when it is repaid. · Savers – most hurt due to inflation as the bank’s official nominal interest cannot fight against the real interest rate( inflation rate) |
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