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Why the 2% inflation target? (2023)

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Re: Why the 2% inflation target? (2023)

#51

Post by dopylitty »

I would ask a different question. Why combine a bunch of prices into an opaque number and call it "inflation"?

I'd argue that doing so masks the true causes of price rises. Prices go up because companies make the choice to raise their prices. Sometimes this is because their own inputs became more expensive but in many more cases it's because the people running the company want to increase profits.

By hiding the choices made by people running companies behind this opaque number called "inflation" that people perceive as somehow controlled by the government we've allowed companies to get away with making decisions that increase profits for wealthy executives and shareholders at the expense of people who rely on the goods produced by the companies.

Re: Why the 2% inflation target? (2023)

#52

Post by silent_cal »

npoc wrote: post #45

The more money the banks print, the richer they get, with the side-effect that prices rise (they make the monetary units less scarce and worth less). 2-3% just happens to be the most they can get away with in the long term without the population getting concerned. What the general population don't realise is that the value of goods and services are going down over time, due to efficiency increases, at a rate of aroun…

Good answer. Inflation is just a euphemism for stealing from working people.

Re: Why the 2% inflation target? (2023)

#54

Post by laserlight »

borski wrote: post #33
hgomersall wrote: post #25

Earlier quoted context omitted.

Well clearly it doesn't, because people still need to live. We have many years of evidence that people still buy shiny tech gadgets despite knowing that in a year's time they will be much cheaper.

That’s not true. The issue isn’t that the same device will be cheaper in a year, but that the latest device will be the same or close to it. As a result, people are more likely to hang on to their devices (for example) if they assume that next year’s latest model will be cheaper than this year’s. A great example is the Apple Vision Pro. How many people didn’t buy it simply because the price is too high? Betcha they w…

> The issue isn’t that the same device will be cheaper in a year, but that the latest device will be the same or close to it.

I can't see how this is not a matter-of-degree of what GP comment said. If the latest-tech device is going to be cheaper next year, I will still have to use the old tech for another year before I upgrade. I don't think the equation changes at all.

Re: Why the 2% inflation target? (2023)

#55

Post by gretch »

taneq wrote: post #37
Workaccount2 wrote: post #11

Earlier quoted context omitted.

A pivotal moment in my career was realizing how much "winging it" was going on even at the highest levels of the craft. Yes, there is a lot skill and intuition behind it, but its still pretty off the cuff.

I had to double check to make sure this wasn't my comment because I'm getting amazing levels of deja vu right now. Everybody's winging it, nobody knows what they're doing, and the higher you climb the chain the more terrifying this fact becomes.

> Everybody's winging it, nobody knows what they're doing

I’ve seen this comment a lot in recent years and I think there’s a lot of nuance here that is unappreciated.

When taken literally, it is used as a weapon of anti-intellectualism e.g. the doctors don’t know what they are doing when it comes to vaccines.

What it actually should mean is that the experts know there’s only a small slice about the universe/society that we understand, and thus proposal represents the best of our knowledge. It cannot guarantee success. But by god, it’s a lot better of an attempt than the opinion of some guy off the street

Re: Why the 2% inflation target? (2023)

#56

Post by hartator »

npoc wrote: post #45

The more money the banks print, the richer they get, with the side-effect that prices rise (they make the monetary units less scarce and worth less). 2-3% just happens to be the most they can get away with in the long term without the population getting concerned. What the general population don't realise is that the value of goods and services are going down over time, due to efficiency increases, at a rate of aroun…

Yes, very good explanation.

Quantitative easing is just printing money with extra steps through the banks.

Re: Why the 2% inflation target? (2023)

#57

Post by mberning »

npoc wrote: post #45

The more money the banks print, the richer they get, with the side-effect that prices rise (they make the monetary units less scarce and worth less). 2-3% just happens to be the most they can get away with in the long term without the population getting concerned. What the general population don't realise is that the value of goods and services are going down over time, due to efficiency increases, at a rate of aroun…

Many people take inflation as an immutable law of nature, but that has not always been so. Food for example, for a long time, became cheaper. Computers and technology as well. Think how nuts it would be if you could get a better house for less money every few years.

Re: Why the 2% inflation target? (2023)

#58

Post by laserlight »

jncfhnb wrote: post #34
hgomersall wrote: post #25

Earlier quoted context omitted.

Well clearly it doesn't, because people still need to live. We have many years of evidence that people still buy shiny tech gadgets despite knowing that in a year's time they will be much cheaper.

Consuming is not investing

Can you elaborate how they are different?

Re: Why the 2% inflation target? (2023)

#59

Post by cjbgkagh »

npoc wrote: post #45

The more money the banks print, the richer they get, with the side-effect that prices rise (they make the monetary units less scarce and worth less). 2-3% just happens to be the most they can get away with in the long term without the population getting concerned. What the general population don't realise is that the value of goods and services are going down over time, due to efficiency increases, at a rate of aroun…

I see it as a wealth tax and I agree, 2% is roughly long term stable maximum returns that leaves enough on the table for the middle class to prosper. I think at 3.5% or whatever they want to up the target to be will not be long term stable. It’ll work for a little while as GDP increases with increased inequality but civil unrest will from said inequality will reduce efficiency as more will need to be spent on security.
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