Why the 2% inflation target? (2023) • Hacker News Board

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

#131

Post by the_gastropod » Fri, Mar 22, 2024, 9:02 PM UTC

npoc wrote: post #96

qwytw wrote: post #67

Earlier quoted context omitted.

> They are roughly the same price in gold as they were in the 1970s So you're implying that there was no inflation between 2011 and 2022 (gold prices were basically the same) or that prices increasing 8 times or so between 2000 and 2011 because gold got a lot more expensive? Gold is just a random commodity affected by market supply/demand just like every other commodities (or bitcoin). Implying it's some sort of a "h…

> Gold is just a random commodity affected by market supply/demand just like every other commodities (or bitcoin). Implying it's some sort of a "hard currency" or can be used to compare prices of goods/services/housing over long periods of time is just absurd. It's sensible to use gold or housing as a measure of value - they are both extremely mature markets with a relatively constant supply/demand ratio. It's no coi…

> It's sensible to use gold or housing as a measure of value - they are both extremely mature markets with a relatively constant supply/demand ratio. It's no coincidence that after 50+ years they are still the same value relatively to each other.

Have you actually examined these numbers? From my quick check, it doesn't seem to be anywhere near true. In 1970, Gold was $35.96/oz in 1970 USD. The average house was $23,400 in 1970USD. So 650 oz of gold would get you a house. Today, 1 oz of gold is $2,063.76 in 2024 USD. An average house costs $395,100 or 191 oz of gold. Houses are significantly cheaper with respect to gold today than they were in 1970.

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

#132

Post by Kranar » Fri, Mar 22, 2024, 9:02 PM UTC

ClumsyPilot wrote: post #74

vkou wrote: post #49

Earlier quoted context omitted.

> 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?

Billionaires have very little in savings relative to their wealth. Most billionaires have their wealth tied to ownership of a small number of companies, usually ones they founded.

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

#133

Post by paulddraper » Fri, Mar 22, 2024, 9:03 PM UTC

qwytw wrote: post #67

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…

> They are roughly the same price in gold as they were in the 1970s So you're implying that there was no inflation between 2011 and 2022 (gold prices were basically the same) or that prices increasing 8 times or so between 2000 and 2011 because gold got a lot more expensive? Gold is just a random commodity affected by market supply/demand just like every other commodities (or bitcoin). Implying it's some sort of a "h…

> Implying it's some sort of a "hard currency" or can be used to compare prices of goods/services/housing over long periods of time is just absurd.

It goes up and down, but it's the most stable denomination of value that exists. Yes?

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

#134

Post by neilwilson » Fri, Mar 22, 2024, 9:03 PM UTC

quickthrowman wrote: post #93

dools wrote: post #50

Earlier quoted context omitted.

The real problem is using monetary policy as a tool at all. We should have ZIRP forever and use fiscal policy to target price stability and full employment.

Using fiscal policy would require a functional legislative branch.

Not in the slightest. We have these things called “autostabilisers” that are temporally and spatially more precise than jiggling a single interest rate and indirectly hoping something moves in the right direction two years later

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

#135

Post by neilwilson » Fri, Mar 22, 2024, 9:04 PM UTC

cjbgkagh wrote: post #100

immibis wrote: post #83

Earlier quoted context omitted.

ZIRP is zero interest rate policy - were you perhaps thinking of zero inflation rate instead? Zero interest rate tends to create lots of inflation because borrowing money (i.e. banks other than the Fed creating money) is nearly free.

I’m pretty sure they mean zero interest ZIRP with regard to MMT. But people forget the second part of MMT which is confiscatory in effect even if not by name, it’s still your money but you are no longer allowed to spend it until inflation comes down, by which point your money is obviously worth less than it was and that value is in effect confiscated.

God knows where you got that from

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

#136

Post by jandrewrogers » Fri, Mar 22, 2024, 9:04 PM UTC

agf wrote: post #91

cjbgkagh wrote: post #59

Earlier quoted context omitted.

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 securit…

How is it a wealth tax? One of the things the wealthy do is hedge against inflation.

You are taxed on the "gains" from inflation.

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

#137

Post by medvezhenok » Fri, Mar 22, 2024, 9:04 PM UTC

codetrotter wrote: post #31

jxdxbx wrote: post #22

Earlier quoted context omitted.

Deflation has always been a disaster.

You don’t need inflation to solve the problems. Adjust the tax rates instead. Property taxes. Income taxes. Taxing people by the amount of savings they have. Importantly, don’t give the rich guys tax breaks. Give the tax breaks to the poor.

Solving NIMBY-ism and housing speculation would do much more for the poor than taxing the rich would. After all, you can't eat dollars.

And more dollars competing for the same goods would just drive inflation higher (the rich do not directly compete with the poor in buying things, other than potentially crowding them out of real estate investments - that is a legitimate societal problem. But so is NIMBY-ism - driven largely by the fact that racial covenants and crime-targeting became illegal in the 1960s-1990s). Although we haven't really come up with great alternatives (other than drive prices up because income tends to correlate inversely with propensity for crime).

Singapore-like enforcing of laws and harsh sentences could do it (the other low-crime countries are much more ethnically homogenous), but the trade-off there is much less freedom than in the U.S. - so it probably wouldn't be palatable here.

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

#138

Post by the_gastropod » Fri, Mar 22, 2024, 9:05 PM UTC

paulddraper wrote: post #133

qwytw wrote: post #67

Earlier quoted context omitted.

> They are roughly the same price in gold as they were in the 1970s So you're implying that there was no inflation between 2011 and 2022 (gold prices were basically the same) or that prices increasing 8 times or so between 2000 and 2011 because gold got a lot more expensive? Gold is just a random commodity affected by market supply/demand just like every other commodities (or bitcoin). Implying it's some sort of a "h…

> Implying it's some sort of a "hard currency" or can be used to compare prices of goods/services/housing over long periods of time is just absurd. It goes up and down, but it's the most stable denomination of value that exists. Yes?

As measured by what? Volatility? Absolutely not.

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

#139

Post by npoc » Fri, Mar 22, 2024, 9:06 PM UTC

cjbgkagh wrote: post #104

agf wrote: post #91

Earlier quoted context omitted.

How is it a wealth tax? One of the things the wealthy do is hedge against inflation.

You have capital gains tax on it eventually, much of that capital gains is from inflation. The only way for it not to be a wealth tax is if capital gains is indexed to inflation.

Capital gains tax is one of the more disgusting taxes. Most capital gains are simply due to the devaluation of the unit of account. The banks and government work hand-in-hand. The more money the banks print (as interest-chargeable loans), the more the government makes you pay in capital gains taxes. A win-win situation for them.

One way the wealthy get around this is by taking on debt against their hard assets - generally real estate. As the price of their assets go up, they take out larger and larger loans, each time paying off the old loan and pocketing the difference tax free. The money is devalued faster than the interest rate, so even after paying interest, they are left with free money (our money), tax-free.

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

#140

Post by neilwilson » Fri, Mar 22, 2024, 9:06 PM UTC

immibis wrote: post #83

dools wrote: post #50

Earlier quoted context omitted.

The real problem is using monetary policy as a tool at all. We should have ZIRP forever and use fiscal policy to target price stability and full employment.

ZIRP is zero interest rate policy - were you perhaps thinking of zero inflation rate instead? Zero interest rate tends to create lots of inflation because borrowing money (i.e. banks other than the Fed creating money) is nearly free.

ZIRP removes the artificial intervention in the market for money by unelected individuals with no accountability to the population for their actions.

The market for money then goes where it will according to free market principles and the autostabilisers operate in the market for labour instead.

No point giving free money to people who already have money.