Stagnant Salaries vs. Inflationary Savings Tax

[Alphakilo]

Which of these economic situations would you prefer to find yourself in?

A- Your salary is stagnant but prices fall. Where this happens, your real purchasing power has increased.  It's called constructive deflation. And even if your salary falls, but prices fall faster, you are still ahead.


B- Having your savings taxed 2%+ a year by inflation.

Drop your thoughts

[Findingnemo]

Any day A would be the one I prefer and let me tell you the reasons.

I don't have debts that make me adapt deflation better and can gain financially with the more money I can save if the prices of goods and assets are falling but for the country's economy deflation isn't a good thing, it reduces the cashflow in the economy, strain in your debt payment so people in the middle class again will be struggling to pay their debts.

[Alpha Marine]

The first option is always the best option.
Right now, a lot of of young people make more money than their parents made at their age but they can't afford the things their parents could afford back in the day.
Having a stagnant income where price of goods keeps reducing is favourable to the salary earner, even tho it might have negative impact on the economy. It even favours those that save more. Their $1000 savings will be able to afford more things than it could a year ago in this scenario.

In today's world, I don't think there's any country where the prices keep falling. It's either the prices remain constant or the increase at very low percentage increases.
As much as inflation is bad for the economy, deflation is not any better. Deflation in an economy means that economy is stagnated and that has a lot of negative impacts.

[sunsilk]

Which of these economic situations would you prefer to find yourself in?

A- Your salary is stagnant but prices fall. Where this happens, your real purchasing power has increased.  It's called constructive deflation. And even if your salary falls, but prices fall faster, you are still ahead.


B- Having your savings taxed 2%+ a year by inflation.

Drop your thoughts

Obviously, choice A is the best option here. Anything that makes you have a stronger purchase power means that you're having a greater economy.

Whilst for B, you're being taxed and then you are having the lesser purchase power due to inflation. But the reality, no one can skip the inflation and everyone has to go through with it.

That's fine if you're having a stagnant salary and every commodities price are falling but, the reality isn't like that. 

[mindrust]

Which of these economic situations would you prefer to find yourself in?

A- Your salary is stagnant but prices fall. Where this happens, your real purchasing power has increased.  It's called constructive deflation. And even if your salary falls, but prices fall faster, you are still ahead.
B- Having your savings taxed 2%+ a year by inflation.

Drop your thoughts

A is impossible to have in practice. There is no such thing as constructive deflation. Human population is increasing so the money supply increasing as well and increasing the money supply drives the prices higher because the manufacturing can't keep up with the other two. As a result, somebody somewhere has to starve.

We are having the second option because we don't have other choice.

We you look at it we are exactly like viruses, consuming our host till there is nothing left of it.

[Upgrade00]

A- Your salary is stagnant but prices fall. Where this happens, your real purchasing power has increased.  It's called constructive deflation. And even if your salary falls, but prices fall faster, you are still ahead.

Do you mean my salary alone or the entire earnings of everyone remains constant against a drop in prices of goods? If it's the latter, it's not economically feasible.

Let's consider a factory for example which produces a commonly used commodity. If they keep paying their workers the same while the cost of the goods they are selling is dropping there will be an imbalance in their gross input and output. To balance it out they'll need to either raise the cost of goods or drop salaries.

[arallmuus]

Which of these economic situations would you prefer to find yourself in?

A- Your salary is stagnant but prices fall. Where this happens, your real purchasing power has increased.  It's called constructive deflation. And even if your salary falls, but prices fall faster, you are still ahead.


B- Having your savings taxed 2%+ a year by inflation.

Drop your thoughts

very ambigous situation here. Scenario A is basically a dream that everyone wants but it wont ever happen. Its simple math, demand and supply so the only way for scenario A to happen is if somehow a huge meteorite hits the earth then it kills like 3/4 of the entire earth population

as for scenario B, its quite ambigous because you dont mention about salary but just savings so Im assuming that if there is huge inflation in this scenario then the salary rate should increase rate so the ideal option to pick would be scenario B. Its more stable rather than having to worry about deflation like scenario A

[Faisal2202]

Of the options you gave, the first one is more good looking, because in your way of representing it we are still ahead of the economical finances. And that's gives us a good hand but many people would show frustration in keep getting a stagnant amount of salary as many people have growing minds, and they want progress they don't have stagnant minds that they can work with stagnant salaries.

So for those who want to earn more than what they need to survive would definitely go for the second option. Because there we will have time to learn and practice new skills and to become an entrepreneur but if in the first option we have enough time that we can do something else like with fixed corporate job with fixed salary, if we are able to do online work then definitely the fist option is better one.

[peter0425]

Which of these economic situations would you prefer to find yourself in?

A- Your salary is stagnant but prices fall. Where this happens, your real purchasing power has increased.  It's called constructive deflation. And even if your salary falls, but prices fall faster, you are still ahead.

Of course this one. Although I wouldn’t wish this on to my community because if I were to think of the people whose salaries are lower than mine they’d have a harder time surviving. It’s good for me but it will be hard for the rest.

B- Having your savings taxed 2%+ a year by inflation.

I can’t see any reason how this is better though.

[Cryptomultiplier]

Which of these economic situations would you prefer to find yourself in?

A- Your salary is stagnant but prices fall. Where this happens, your real purchasing power has increased.  It's called constructive deflation. And even if your salary falls, but prices fall faster, you are still ahead.


B- Having your savings taxed 2%+ a year by inflation.

Drop your thoughts

To have my savings taxed, is one of the reasons why crypto currencies will remain prevalent in this current state and we may witness a time when banks would have to either expand to accommodate cryptocurrencies or diversify to provide other services that may not include holding funds directly.

Salaries may have to increase during inflation and although it might be a slow process, it is often a time when prices get fixed and never return and New initiatives form just to better adjust to the  current situation.

[goaldigger]

Inflation is inevitable so having a stagnant salary is not worth it especially if you don’t see any growth anymore with your current job better to look for other source of income to increase your savings and your buying power as well. If you are going to deal with the inflation using an investment strategy consider a less risk investment so you can have the assurance that you can actually beat inflation, though of course investing still have the risk and no guarantee with regards to profit.

[alastantiger]

As an individual with a unique economic situation from the next person, the first option is what I love. Note that the second option doesn't give an explanation for a lay person to understand. But as a human being with wants and needs , I like the price to fall even if my salary doesn't change. In this case, your budget will be perfect , your plans will be certain. It will be really cool.In short your plans would work and work effectively.

[oktana]

Who wouldn’t go with option A? I do not mind if my salary remains stagnant or even decrease slightly because my purchasing power will increase. I’ll be able to buy even more goods and services with the same amount of money. My financial status will increase even when the salary is stagnant. Unlike option B where (even if by 2%), inflation is affecting me and I would not be able to purchase more goods and services or even purchase the usual amount because the value of the money is reduced.

[Die_empty]

Which of these economic situations would you prefer to find yourself in?

A- Your salary is stagnant but prices fall. Where this happens, your real purchasing power has increased.  It's called constructive deflation. And even if your salary falls, but prices fall faster, you are still ahead.

The reason why people work is to survive. If I have a job that pays me enough money to take care of all my needs, that's okay for me. An increase in salary in a country suffering from hyperinflation is useless since the purchasing power of the currency will reduce. OP do you have any example of a country that has been experiencing option A, I wouldn't mind considering migrating to the place. This is because all through my life the price of goods and services has never gone down in my country. We have always experienced inflation which has consistently made money worthless.

[Poker Player]

I don't know why you are making such an unrealistic situation. It is clear that the first situation will not happen due to fiat monetary policy, but neither will the second because it is confiscatory. If you were taxed on your savings and not on their yield, people would either not save or would take their savings to another country, things like that. What a genius to come up with such examples.

[takuma sato]

Prices will always fluctuate as demand for something is not constant as well as supply, so these things vary with time beyond your control. You thus have to have assets that will trade higher than the rate your savings deteriorate, that is, that pay an income, like stocks, or that have stricly limited in amount and there is a demand for them (real state, bitcoin). That is all. The rest is in my view just economic theory but that is how it goes in practice. What I mean is that both scenarios are unrealistic thus not relevant for me to wonder about. You cannot guarantee permanently deflation or inflation at 2%.

[Helena Yu]

Your first option only for people who're working in first world country and live in a country that suffer crisis, while we know that's really hard to reach since people who live in a country with bad economy usually not have a good education and skills that can compete in international career.

No one want to choose the second choice, but anyone need to face it because that's the system.

I want to add the third option that I'm currently live with it:

C - Having to grow your salary by investing in Bitcoin even though you need to pay tax.

[hugeblack]

Employees will choose the first option. Everyone is looking for stability, a simple job and a salary sufficient for the basics with a percentage that can be saved. Therefore, the fact that the salary is sufficient for basic needs and the prices of rent, food, and personal expenses are always lower is a good option.
As for investors who run businesses and businessmen, they know well how to hedge against inflation, and therefore low taxes are an ideal option for them, no matter how painful inflation is.

[crwth]

I don't think that's going to be the case in every country but if it did, it can be helpful towards the people. Right now, I don't think that will be the case for the people. I believe that making your salary more and increasing your income in terms of multiple streams of it would be ideal. Increasing it would be the best way to approach this type of problem.

[bestcoins1]

Which of these economic situations would you prefer to find yourself in?

A- Your salary is stagnant but prices fall. Where this happens, your real purchasing power has increased.  It's called constructive deflation. And even if your salary falls, but prices fall faster, you are still ahead.

B- Having your savings taxed 2%+ a year by inflation.

Drop your thoughts

Actually, these two things are very difficult choices to choose, but because you only have these two options ready. So I will choose point A with a stagnant salary condition because there is still a salary that I can get every month. In fact, I can have a little freedom to do other things in order to increase my income so as not to be disturbed by real purchasing power which could tend to increase. Because for the second option in option B, of course this will be felt more by everyone even though it will be based on the amount of savings each person has.