"The second method is much faster. ... Essentially, it consists of three components: inflation, a special tax on private wealth, and debt relief."
So Piketty is advocating a special tax on the poor. The group of people that can least deal with inflation, with no ability to shift assets or income to avoid it, nor deal with the increased cost of goods in relation to their debased incomes.
Qua? A 'special tax on private wealth' would presumably be a progressive tax, rather than a tax on the poor. And the tax would presumably be distributed amongst the richer countries of the EU to forgive the debt of the poorer country (Greece, in this case).
Meanwhile, inflation has been kept in check for many many years by the manipulation from central banks. Who does inflation hurt? Well, turns out it hurts people sitting on top of big piles of money, as their pile of money is worth relatively less. So generally, capitalists don't like inflation because it hurts their capital.
Inflation can also hurt the poor if their wages aren't on track with inflation, as has been the case in the US for quite a long time. Annual raises are supposed to offset the effect of inflation, though: The morale of the story is that if you have a politically weak labor sector, the 'cost' of inflation can be transferred from owners to workers. But on the whole, the main impact of inflation should be on the big piles of money, rather than the people with none.
> The group of people that can least deal with inflation
Inflation in the cost of goods and services = wages go up. If you're involved in any economic activity beyond hoarding cash, inflation isn't a bad thing.
>Inflation in the cost of goods and services = wages go up.
In theory, yes.
In practice, the poor also have higher job-switching costs (because of higher uncertainty that they'll find another one), which means their wages can be inflation-sticky upward as well.
Also, what little savings they have tends to be in cash and they find it harder to store it in inflation hedges.
>If you're involved in any economic activity beyond hoarding cash, inflation isn't a bad thing.
Hold on -- all usage of money involves some kind of hoarding, in the sense of "store money in liquid form for some unknown future need". But that's the entire freakin' point of money in the first place: that you don't have perfect knowledge of your future needs. (The coincidence of wants problem by itself doesn't include this -- far more important -- role of money.)
You can see this role during hyperinflation -- people are no longer able to indefinitely defer choosing where to spend their money, but must spend it immediately on something else that will hold some of its value or which sates a current need, and they bear a tremendous cost in having to choose this way.
Monetary policy must strike a balance between "no one spends ever" vs "everyone must spend now", and leaning toward one or the other bears some of the downsides of the extreme cases. Spending too soon and too late have their own costs. It's not as simple as "any storage/hoarding of money should be discouraged".
Inflation always hits the non-rich the hardest. The rich have countless options for avoiding inflation. Those that are primarily wage dependent, do not.
This is why the wealth gap has expanded so much in the US the last 15 years: the abuse levied on the dollar. Take a look at how nearly every single thing priced in dollars zoomed after 2001, including the GDP of every nation on earth and commodities - all went up simultaneously, often dramatically, and all stopped going up simultaneously. That was the dollar losing value, aka the non-rich in America having their standard of living hammered, while the rich were able to shield themselves from the damage, leading to a vastly expanded wealth gap.
Your first sentence makes some sense, but your second is way off base.
Over a time scale of generations the wealth gap is controlled by larger social/taxation/etc questions. (For one example, in the US more public money is spent educating a rich student than a poor one) However, in the shorter day-to-day or year-to-year time scales it's mostly just a reflection of equity values. The rich have a lot of their money in equities and the poor have none. If at the closing bell the stock markets are up then the wealth gap just increased that day; if they're down it has shrunk.
The "dollar losing value" argument is silly. The opponents of loose monetary policy (and especially gold bugs and bitcoin fanboys) have been predicting sky-high inflation. When it didn't show up on cue their line morphed into this wishy-washy claim that inflation is somehow secretly high. Believe me, when inflation is high its not a secret.
Inflation is a "tax" on those who have savings. In some cases (e.g. elderly retired) those who have savings are poor, but mostly if you have enough money left over after eating and keeping the lights on to save, you're not poor.
I guess inflation is tax on those who hold cash. Inflation is tax on people who hold cash (or are on a fixed income that will not go up as inflation drives prices up). My thought was that inflation hurts the poor the most. If someone is rich, they probably hold more than just bank notes and government bonds. They hold controlling interests in the markets. As inflation goes up, they will hurt but the rich will not hurt as much as the poor will.
The poor don't get taxed if the special tax is progressive (or non-existent at lower levels of income/wealth). Of course, the argument that such a tax being effective is impossible these days due to contemporary mobility of wealth may well be true. That still doesn't amount to a special tax on the poor, and I'm sure you realize Piketty wouldn't advocate for that, whether or not you agree with his positions.
So Piketty is advocating a special tax on the poor. The group of people that can least deal with inflation, with no ability to shift assets or income to avoid it, nor deal with the increased cost of goods in relation to their debased incomes.