As part of my Unsubstantiated Claims post I said
Reihan: Reihan Salam has written a bunch of stuff I have been meaning to respond to but haven’t. The only point I want to address because its real quick is that inflation does not erode savings. It only erodes cash and the value of long bonds taken out before the inflation set in. However, the Fed is buying long bonds and propping their value. The only thing that is eroded in this scenario is cash. I have had this conversation with a number people and Ron Paul keeps saying this, so I think it deserves attention. Before I can get to that Google Fisher Effect and read a bunch of the piecemeal explanations. Lots of them revolve around equations but the upshot is that inflation is priced into assets including bonds and savings accounts. Only bonds issued before the unexpected inflation and maturing long after are affected.
My sloppy writing makes it sound as if I am saying Reihan should read up on the Fisher effect. What I mean to say is that Reihan brought up the fact that people fear inflation eroding savings. These fears are common. I have had many a Facebook debate over them. Indeed, Ron Paul has repeatedly pointed to this has his main reason for fearing debasement of the currency.
I think, but am not certain that fear of eroded savings is the central driver behind populist anti-inflation sentiments. This needs to be addressed and in my experience convincing people that inflation is priced into financial assets takes a long time and lots of charts and graphs.
However, I did not mean to suggest that Reihan doesn’t get the Fisher effect himself.