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

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

#191

Post by lupire » Fri, Mar 22, 2024, 9:47 PM UTC

linguae wrote: post #105

ClumsyPilot wrote: post #63

Earlier quoted context omitted.

> sensible/frugal ones who minimize their debt and accumulate some amount of savings What if this is wrong and being frugal is not sensible?

What happens when one gets laid off, disabled, changes careers, or faces some other circumstances that cause incomes to fall below what’s needed to service debt payments? That’s why living below one’s means and saving the rest is prudent. Unfortunately high inflation penalizes savers by eroding the purchasing power of savings, and it forces all workers on a treadmill where it seems that the cost of living rises faste…

"Paradox of thrift". Economic version of losing weight by cutting off your toes.

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

#192

Post by npoc » Fri, Mar 22, 2024, 9:47 PM UTC

lupire wrote: post #182

npoc wrote: post #159

Earlier quoted context omitted.

Although a great deal of smoke and mirrors is used when justifying the banks unique right to print money, and it's easy to miss the wood for the trees as you get lost in the details, the bigger picture is quite simple: 1) the banks print new money every time a loan is taken out and charge interest on that money 2) the amount of money loaned out is increasing every year 3) the total amount of money currently loaned is…

That created money is lent to borrowers, who in aggregate benefit from it more than the interest costs. The banks don't get to just spend the deposits. Lending out money at the rate of inflation is 0 profit after inflation.

All the fiat currency units in existence are a loan to a bank somewhere. That is over a hundred trillion dollars for the US alone. If you're receiving 2% of $100,000,000,000,000 each year, for money you printed out of thin air, you're not going to worry about the effects of CPI on your monthly budget.

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

#193

Post by wolverine876 » Fri, Mar 22, 2024, 9:48 PM UTC

cjbgkagh wrote: post #78

rootusrootus wrote: post #70

Earlier quoted context omitted.

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.

> Technology and innovation has made people’s lives better at the same time that politicians and bankers have made them worse.

That's the SV fantasy!: I'm awesome and a super-genius, everyone else is useless, dumb and annoying, and therefore I should be all-powerful!. It's like they're all still 13 year olds hacking on their computers, where they finally feel really powerful. It's almost as if they've never learned anything more about the world - humanities are just entertainment for the wealthy - leaving themselves vulnerable to the most obvious self-deception.

One might say that technology and innovation have turned our world into a hellscape, with massive social and political breakdown, massive mis/disinformation, and climate change. Maybe some innovation can build us new supersonic jets, better oil extraction, more effective automated online persuasion, or some snazzy financial tech - like CDOs, crypto, and private equity.

On the other hand, our political institutions did an amazing job of getting the US through a global pandemic without even a recession. There are serious problems, such as housing and education prices, but I don't think anyone could have predicted how well things went economically.

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

#194

Post by lupire » Fri, Mar 22, 2024, 9:49 PM UTC

semi-extrinsic wrote: post #92

SubjectToChange wrote: post #35

Earlier quoted context omitted.

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.

Is it unconscionable even in the context of having to halve our global emissions in the next six years? I think "postpone buying stuff because your money will be worth more in the future" is exactly what we should be doing at this point in time.

Your money won't be worth more in the future if production decreases.

You'll end up with stagflation -- prices going up but no one working tomorrow valuable stuff.

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

#195

Post by from-nibly » Fri, Mar 22, 2024, 9:49 PM UTC

lupire wrote: post #165

nicoburns wrote: post #142

Earlier quoted context omitted.

> women continuing to enter the labor force. One thing that's occurred to me recently is that demands for a 4 day working week seem entirely reasonable in the context that the labour force has, if not quite doubled, dramatically increased (due to more women participating) over the last few decades (and that time has been taken away from time that was previously available for the completion of domestic chores).

This is the solution to the "two-income trap".

Wouldn't a 2.5 day work week actually be the solution to the "two-income-trap"?

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

#196

Post by cjbgkagh » Fri, Mar 22, 2024, 9:49 PM UTC

bawolff wrote: post #175

cjbgkagh wrote: post #104

Earlier quoted context omitted.

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.

If we are talking about say a house, i think the poorer person who rents (and has rent increase with inflation) would be much more negatively affected over time, notwithstanding the extra capital gains tax the person who owns the house would have to pay upon sale.

I agree that it would increase inequality not decrease it like people would assume a wealth tax (inflation + capital gains tax) would do. The problem I see with the government having their revenue tied to wealth tax becomes incentivized to do things that will make the wealthy wealthier, like maintain a higher rate of inflation.

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

#197

Post by TehShrike » Fri, Mar 22, 2024, 9:50 PM UTC

jandrewrogers wrote: post #146

TehShrike wrote: post #106

Earlier quoted context omitted.

How would that be different from the people who buy the S&P500 instead of spending their money and generating economic activity?

If you buy the S&P500 then someone else sold the S&P500 for the same amount of money. The cash doesn't disappear, it just moves to a different person who presumably sold the S&P500 because they need cash to spend it. That is quite different than sitting on cash.

How is it significantly different than what happens when banks invest money that is left in checking/savings accounts?

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

#198

Post by ejb999 » Fri, Mar 22, 2024, 9:50 PM UTC

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?

People don't compare how well they were off 40 years ago vs today, they remember how things were in recent history - i.e. 3-4 years ago and then decide if they are better or worse off.

Inflation is a killer for the poor and most of the middle class - and a boon for the wealthy (who own appreciating assets) - everyone I know who is not wealthy enough to not care, is feeling it.

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

#199

Post by nemo44x » Fri, Mar 22, 2024, 9:50 PM UTC

immibis wrote: post #88

nemo44x wrote: post #81

Earlier quoted context omitted.

It's good for regular people too. Debt is a great thing to have in an inflationary economy, especially long term debt backed by an asset, like a home. In essence, we inflate debt away over time. In a deflationary economy debt is crippling and because we are a debt based economy we have a deadly fear of deflation and will do anything to prevent it. Hence why they desperately inflated the economy during Covid. The alte…

Forcing regular people to take out huge debt is not good for them.

Sure it is, especially when the interest rate is less than the inflation rate. But even when not, over a long enough period a fixed rate will be eclipsed by inflation making the actual cost of the debt significantly less. This is great as you’re holding an asset worth far more than what you owe and it can be used to finance more debt if you wish.

Some people take on too much debt. But overall asset backed debt is a great system that lets people build wealth.

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

#200

Post by wolverine876 » Fri, Mar 22, 2024, 9:50 PM UTC

spaceman_2020 wrote: post #143

sob727 wrote: post #5

Yellen supposedly told Greenspan & co in the mid 90s that 2% was a good way for companies to be able to adjust labor costs down if needed (if you don't give someone a raise when inflation is 2%, you're effectively lowering their salary). It was the only way to have some flexibility there. If you admit that this is a desirable thing, this is defeated by wage negotiations (or say, benefits) than tend to be indexed to i…

This is why I think CPI numbers are all hogwash All the younger people I know in less than stellar jobs are really hurting. These people were never well off but were comfortable before the pandemic. But now they’re making hard decisions for basic necessities and grinding down the quality of their lives.

So what do you use that's better? Your personal experiences don't tell us much about the other 320+ million people.