"Further, lower-income people often have debts, which is reduced (relatively) by inflation."
It is, indeed, true that inflation can "melt away" existing debts by devaluing both the principal and the interest payments. There is historical precedent of large, debt fueled investments being inflated away:
"Anyone with debt benefitted as debts were inflated away to nothing under hyperinflation. For example a Pomeranian landowner took out a loan to purchase a property in February 1922 and repaid it in the autumn from the sale of less than half the crop of a potato field."[1]
However, this only occurs with fixed rate loans. Lower income people (US mortgage debt notwithstanding) do not have the opportunity to borrow at fixed terms and it would be very difficult and expensive to incur large debts, for any purpose, at fixed rates.
The floating rates that lower income people would, undoubtedly, borrow at would not protect them from inflation.
I don't think I have ever gotten a floating rate loan in Germany. Are there specific countries or types of loans where these rates are common? Are you talking about credit cards?
Most of my experience is in the United States, where I live. In the US a "normal" mortgage typically has a fixed rate.
However, any kind of unsecured loan will have a floating rate. Certainly that includes all credit card debt and any kind of short term business financing like paypal offers.
Further, if you have a poor credit score it is likely that your car loan(s) will have a floating rate and that you will be aggressively steered into a floating rate mortgage (an "ARM"). This will be presented to you as a benefit in the form of lower monthly payments (for now).
It is, indeed, true that inflation can "melt away" existing debts by devaluing both the principal and the interest payments. There is historical precedent of large, debt fueled investments being inflated away:
"Anyone with debt benefitted as debts were inflated away to nothing under hyperinflation. For example a Pomeranian landowner took out a loan to purchase a property in February 1922 and repaid it in the autumn from the sale of less than half the crop of a potato field."[1]
However, this only occurs with fixed rate loans. Lower income people (US mortgage debt notwithstanding) do not have the opportunity to borrow at fixed terms and it would be very difficult and expensive to incur large debts, for any purpose, at fixed rates.
The floating rates that lower income people would, undoubtedly, borrow at would not protect them from inflation.
[1] https://www.stewartinvestors.com/all/insights/stap/hyperinfl...