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Through all historical periods of inflation, assets inflate first, then consumer prices inflate and then, eventually (if ever), wages inflate. When assets inflate but wages stay stagnant, investing in markets becomes more inaccessible to everyday people, but the rich get richer as stocks rocket to the moon. When consumer prices go up but wages stay stagnant, the least wealthy suffer the most. The dollars they’ve saved up little by little buy them fewer goods and services.

Inflation isn’t a way to take from the rich and give to the poor, it’s quite the opposite. Inflation makes rich people richer through asset inflation, and makes poor people poorer through consumer price inflation.

So, What Actually Happened In The 1970s?

Bringing this back to the example Chamath initially brought up: the 1970s, aka, Stagflation.

Consumer price inflation spiked up to 20 percent annually in the ’70s for two reasons. First, geopolitical events related to the oil crisis caused a supply shock. Second, we abandoned the gold standard and established the fiat standard, which gave central banks around the world the ability to create unlimited amounts of money, causing inflation.

Inflation was high, and wealth inequality was relatively low, but the former didn’t cause the latter, and even if it did, it certainly wasn’t a good thing. The reason wealth inequality was low was because everybody was having a tough time. The ’70s had one of the highest rates of unemployment in recent history, and prices rose significantly while growth and wages stayed stagnant (stagnation + inflation = stagflation).

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To combat this, former chair of the Federal Reserve Paul Volcker raised interest rates to 20 percent at the end of the decade, sending the country into a recession. Equity prices went down as treasury yields rose, and most people who owned stocks suffered. And everyday folks, out of jobs with little in savings, suffered far more as their money had less value and purchasing power.

Stagflation was a miserable time for most Americans. To imply that both wealthy and poor people suffering is good because they’re somewhat equal is preposterous. Perhaps Chamath knows all of this, and chooses to misinform his 1.4 million followers? Given Chamath’s exposure to both bitcoin and his heavy involvement in U.S. equities, both of which would benefit from inflation, this could make sense. Regardless of his motives, Chamath’s comments on inflation and wealth inequality are wrong. Inflation causes wealth inequality. Well… what now?