Unit 2 · Level 1 · Inflation
Winners & losers
Inflation isn't just 'everything gets worse'. It quietly moves wealth from one group to another: from savers to borrowers, from lenders to debtors, from fixed incomes to indexed ones. Understanding which side of the transfer you're on is half of personal macro.
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What you get asked
Who quietly wins during a burst of unexpected inflation?
Their debt stays fixed in euros while wages and prices rise around it, so the burden shrinks in real terms.
Inflation runs at 10% for a year. Roughly how many euros of purchasing power does €1,000 kept as cash lose?
About €100, or 10% of €1,000. (Purists compute €1,000 − €1,000/1.10 ≈ €91; either way, close to a hundred euros of real value gone.)
Match each player to their fate when inflation surprises on the high side.
Every borrower's win is a lender's loss. Inflation redraws the deal after the contract was signed.
Unexpected inflation quietly shifts wealth from savers to ___.
Debts shrink in real terms while cash savings do too: same force, opposite sides.
A government carrying huge debt may quietly tolerate some inflation because…
Governments are the biggest fixed-rate borrowers of all. Economists call this quiet debt-shrinking 'financial repression'. Savers foot the bill. 🐜
The rest of this unit
Why prices rise, who wins, who pays, and what happens when money dies.