Blazin
Creative Title
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You're spot on that it matters less to service economies than it does to a manufacturing economy. The loss of purchasing power does trickle through the entire system. It can be very hard to not get lost in the woods on this because we want to try to focus on a particular factor and think of an individual consumer rather than the entire worldwide economic pool.
On one hand a devalued dollar is used to buy real tangible assets and these dollars are borrowed, so the loans will be repaid in the future with an even shitter dollar but we got to keep the real good. So we can then think "The US gains an advantage on other nations by buying their materials in exchange for a declining asset and we should do this as much as we are able"
So there is two rubs to the "are able" if we do it too much they will increasingly not want our dollars demanding more for their real stuff. The other is it devalues previous stored dollar stored wealth, and we as a nation then destroying prior effort. You worked hard and saved $100k and this behavior will now destroy your previous work.
How it directly related to inflation in the short term is very hard to predict the system is too complex. We only know the answer through the simple macro view. More dollars in the system that are not backed by productivity will erode the currency.
In your example the only way 10% /5% scenario can exist is for their to be tangible productivity , that we created more wealth via capitalistic expansion rather than simply leverage.
Right now I believe inflation is still too high, cheap oil is hiding this. And oil is finicky and is less in the control of monetary policy.
Do we want a strong dollar versus weak dollar argument is a folly. What we want is a stable dollar. Movement in either direction unabated in the short term is going to be a problem. What I mean by that is the dollar pretty much never stops losing value however we have found that in the magical pot of human behavior a 1-2% per annum devaluing is stable enough .
Right now the Treasury is not acting concerned but there will be magic barriers where it will revert to very concerned if they feel it's becoming untethered. They believe they have plenty of mechanisms to strengthen the dollar in a short period if they feel it necessary.
If you listen people like Jamie Dimon who believes we are heading towards a flash crisis in the dollar and our debt, where market forces will test this resilience. Monetary policy is clearly moving in a direction to see if they get away with a STABLE higher rate of inflation.
Sorry got long winded, circling back people with assets can fight this battle better, lower-middle income people have found their wages do not keep pace. Could have a discussion about what portion a $60k a year family spends on goods versus services compared to a wealthy individual with far more . In your example, if services don't increase in cost that is how the poor person gets paid, they will find buying goods harder and harder. Rich S&P 500 guy will see it as "what's the problem?" I'm getting wealthier faster than my costs are climbing.
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