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Why the 2% inflation target? (2023)

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

#71

Post by noqc »

mberning wrote: post #57
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.

food became cheaper because it became cheaper to produce. Inflation is a very natural consequence of the fact that If I have money now, I can also very easily have that same money later, but the same cannot be said of having money later. Strategically, having money now dominates having money later, so money now is worth more than money later. How much? Who can say, but some.

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

#72

Post by borski »

laserlight wrote: post #54
borski wrote: post #33

Earlier quoted context omitted.

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.

You misunderstood, I think.

If the iPhone 5 is the latest and greatest this year and is $1000, next year it may be $600. But the iPhone 6, which only exists next year, will be at or around $1000.

Therefore, there is no benefit to waiting until next year, as it is unlikely that the latest device (which is the device most people buy) is going to drop in price.

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

#73

Post by atroxone »

hartator wrote: post #56
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.

In that case it's the government that decides who gets richer

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

#74

Post by ClumsyPilot »

vkou wrote: post #49
codetrotter wrote: post #43

Earlier quoted context omitted.

> if you're a worker, and you aren't saving (or trying to save) a pile of cash, inflation is net-zero for you But people should be able to save. So that they can buy a house or apartment for themselves and their family. Without having to take up a loan to do so.

> But people should be able to save. If everyone saves, the economy will collapse. Every dollar you save is a dollar that someone else doesn't earn. In an inflationary environment, people can still save by buying equities. This has tax and timing implications... But it's still possible. > Without having to take up a loan to do so. The existence of 25, 30, 35 year mortgages driving housing prices into the stratosphere…

> If everyone saves, the economy will collapse. Every dollar you save is a dollar that someone else doesn't earn

Where is the plan to make billionaires spend all their savings? That’s the money I personally didn’t earn!

Or is it saving for them, nothing for me?

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

#75

Post by madsbuch »

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…

quite the opposite. inflation is good for the working class. Housing prices are generally congruent to salary with interest rates as the coefficient.

personally I see inflation as the innovation dispersion factor - the rate we let the value of innovation disperse throughout the society.

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

#76

Post by [deleted] »

mberning wrote: post #57
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.

[deleted]

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

#77

Post by immibis »

SubjectToChange wrote: post #35
rvba wrote: post #7

Earlier quoted context omitted.

They could have chosen 0 or -2% but they like to reap that 2% free money premium..

Slight inflation encourages money to be put towards productive use and punishes hoarding. Choosing a deflationary monetary policy is unconscionable, just think for a moment what the consequences would be.

Disagree. A lot of people trot out the argument that you'd just save money instead of spending if there was deflation. But electronics are deflating, and how often do people save money instead of spending on electronics? People still buy electronics because, simply, they want the electronics. Purchases may be pushed back a little, perhaps until the next generation of device comes out, but this doesn't have much of an effect overall. The money still gets spent.

And in an inflationary world, you can just park your money in government bonds (effectively returning it back to the Fed) to beat inflation most of the time. Inflation doesn't force you to spend your money productively.

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

#78

Post by cjbgkagh »

rootusrootus wrote: post #70
jokethrowaway wrote: post #48

Earlier quoted context omitted.

I don't believe leading economists didn't see this coming. Even if they didn't originally, it's been clear now, for decades. This is the system working as intended, making government spending easy and gradually worsening poor's people lives.

Are poor people's lives objectively worse now than they were, say, 40 years ago?

Technology and innovation has made people’s lives better at the same time that politicians and bankers have made them worse. Just because the politicians and bankers failed to totally eclipse technology does not mean they are not a severe detriment.

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

#79

Post by mitthrowaway2 »

SubjectToChange wrote: post #35
rvba wrote: post #7

Earlier quoted context omitted.

They could have chosen 0 or -2% but they like to reap that 2% free money premium..

Slight inflation encourages money to be put towards productive use and punishes hoarding. Choosing a deflationary monetary policy is unconscionable, just think for a moment what the consequences would be.

... the consequence is that people would buy only what they need, when they need it? It sounds very good for the environment.

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

#80

Post by qwytw »

mberning wrote: post #57
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.

> Food for example, for a long time, became cheaper

Which certainly wasn't great if you were a farmer with a mortgage back in the 1800s and 1900s (it was grender if you were a lender, rentier or a British aristocrat). Governments back then kept increasing money supply at slower (sometimes by a lot) rate than the GDP was growing. That didn't really work that well (basically the economy was stuck in a permanent boom and bust cycle with pretty severe depressions by modern standards).

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