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

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

#211

Post by ejb999 » Fri, Mar 22, 2024, 9:57 PM UTC

madsbuch wrote: post #75

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.

That is such a bizarre statement I have a hard time believing you actually mean it. I think you would be hard pressed to find any/many 'working class' people who enjoy watching the cost of goods and services go up faster than their salaries.

The rich benefit from inflation - especially if they have lots of assets like real estate that have increased dramatically in value.

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

#212

Post by pdonis » Fri, Mar 22, 2024, 9:57 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…

> So you're implying that there was no inflation between 2011 and 2022 (gold prices were basically the same)

He doesn't mean the price of gold in dollars, he means the price of houses in gold. In dollar terms, he's just saying that the price of gold and the price of houses have inflated by the same amount.

> 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.

Not as absurd as printing money and then spending it on things that nobody wants, and then claiming that that "stimulates the economy". Which is what our current monetary regime has been doing for decades now.

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

#213

Post by cjbgkagh » Fri, Mar 22, 2024, 9:59 PM UTC

wolverine876 wrote: post #193

cjbgkagh wrote: post #78

Earlier quoted context omitted.

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 a…

I can't tell if this is satire, either way I had a good laugh.

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

#214

Post by mrkstu » Fri, Mar 22, 2024, 9:59 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".

That only works if it is a global change in work practices.

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

#215

Post by pdonis » Fri, Mar 22, 2024, 9:59 PM UTC

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…

> It's essentially a stealth transfer of wealth from the people to the banks and it's been going on for decades/centuries (before fiat, it used to take the form of coin shaving, impure metals etc).

I wish I could upvote this more. If enough people understood that this is the root problem, we might have a chance of actually fixing it.

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

#216

Post by throw0101d » Fri, Mar 22, 2024, 10:03 PM UTC

lupire wrote: post #186

throw0101d wrote: post #158

Earlier quoted context omitted.

> food became cheaper because it became cheaper to produce. Which was caused by technological progress which is the key source of de flation (being able to buy more with the same amount of money). It is de flation is happening regularly: > But Inflation is not inevitable. There are numerous countervailing forces that have been at work for much of the past 50 years. The three big Deflation drivers: 1) Technology, whic…

This is a (possibly) intentional (not by you) abuse of language in order to to rip people off. Inflation/deflation is decrease/increase in the value of money, separate from technological progress or supply and demand of real products. It's impossible to measure this directly, so dishonest people pushed to simply measure price increases/decreased, ignoring technologocal progress, so that powerful interests good steal…

> Inflation/deflation is decrease/increase in the value of money, separate from technological progress or supply and demand of real products.

If $1 gets you X capabilities, but the same $1 gets you X-1 capabilities later, is that not inflation? The same $1 gets you less. Whereas getting X+1 for $1 is deflation: the $1 gets you more.

The capability is how many calories you can get (Food), how much space you have to live (Shelter), how far you can go (Transportation: $y gets you z litres).

In the Radio Shack example, $1600 got me some capabilities in 1991, and some other capabilities in 2024: am I getting more, or fewer, capabilities? Further, how many hours would I have had to work in 1991 (e.g., minimum wage) to make that $1600 versus the hours I have to work in 2024?

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

#217

Post by esoterica » Fri, Mar 22, 2024, 10:04 PM UTC

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…

Why are inflation truthers so resistant to spending even the tiniest amount of time learning how inflation is computed instead of repeating nonsensical conspiracy theories that match their ideological priors? Replacing porterhouse with hanger steaks in the basket simply means giving the change in price of hanger steaks a higher weight than the change in price of porterhouse steaks in the basket. It does not mean recording the difference in price between a porterhouse and hanger steak as a decrease in the price index. If porterhouse and hanger steaks both go up by 5% then switching from porterhouse to hanger steaks will not lower inflation, even if hanger steaks are cheaper. And of course that’s the correct way to compute inflation, if people stop using typewriters and start using computers why would you still include typewriters in the consumer basket.

It’s not even true in general that the trend has been switching towards lower quality products. Despite all the ahistoric whining about how much better the old days were, Americans have gotten richer over the past several decades and have been buying bigger cars, dining out instead of eating at home, spending more on travel etc.

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

#218

Post by klodolph » Fri, Mar 22, 2024, 10:04 PM UTC

WalterBright wrote: post #164

klodolph wrote: post #150

Earlier quoted context omitted.

> It's all disinformation, and rather easy to refute. For example, if oil price hikes cause inflation, why do we not have corresponding deflation when oil prices go down? What’s the logic here? Are you saying that if oil prices going up caused inflation, that oil prices going down would cause deflation? That a nice intuitive leap, but you haven’t actually provided the reasoning for why that would be true. It’s kind o…

> Are you saying that if oil prices going up caused inflation, that oil prices going down would cause deflation? That's right. Where does the extra money come from to keep prices high after the oil prices drop? In order to have a general price increase, there must be more money in the economy to sustain it.

> In order to have a general price increase, there must be more money in the economy to sustain it.

I would describe this as “categorically incorrect”.

The law of supply and demand normally has two sides—supply, and demand. It’s simplistic way of looking at it, but it’s enough to explain why prices of a product can increase even if there isn’t more money.

If you focus narrowly on the supply on money, like it’s the only variable, you won’t end up with a satisfactory explanation of inflation. It’s like trying to understand the world by looking through a peephole.

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

#219

Post by wolverine876 » Fri, Mar 22, 2024, 10:06 PM UTC

fuoqi wrote: post #26

Higher inflation levels in the upcoming decades are effectively inevitable with the parabolic public debt levels and zero political appetite for reducing budget deficits. Things like quickly approaching insolvency of the Social Security program only make the situation worse. As soon as the public debt market (including repo) will see any issues the Fed will quickly ride to the rescue, inflation be damned. We've clear…

Low-tax / small-government advocates (by which they mean 'lower my taxes', and 'spend money on me only') have been arguing forever that deficits will bring economic doom. They just want to cut spending and government.

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

#220

Post by pdonis » Fri, Mar 22, 2024, 10:06 PM UTC

qwytw wrote: post #121

npoc wrote: post #96

Earlier quoted context omitted.

> 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 Look at how the price of gold changed between 2000 and 2020. It's not at all constant (it's actually more volatile than the dollar) > I'd argue that using the dollar as a measure of value would be absurd, Perhaps. Still less absurd than using gold for that. > When they t…

> Look at how the price of gold changed between 2000 and 2020. It's not at all constant (it's actually more volatile than the dollar)

It's pretty rich for you to be using the word "absurd" to describe what other people are posting, when you come out with this.

Let me translate into actual plain English: the price of gold in dollars has gone up quite a lot between 2000 and 2020. (But note that it still hasn't reached the peak value it reached around 1980, after the huge inflation of the 1970s.) That is not because anything about gold has changed: it has the same industrial and other uses (such as jewelry) as before. The reason the price of gold in dollars has been so volatile is that dollars are volatile--because the government keeps monkeying with them. From 2000 to 2020, the government was printing dollars. In the early 1980s, by contrast, the government was destroying dollars (under Volcker), and the gold price in dollars dropped significantly.

Not only that, but this observation isn't limited to gold. It's true of, well, basically everything that isn't money. For instance, houses, as npoc observed. And cars. And food. And clothes. And...

The obvious conclusion from observations like this is that what is absurd is using dollars as any kind of measure of value, because the thing they are actually measuring has nothing to do with value to us, producers and consumers, and everything to do with how the government is messing with the money supply. Any commodity that has an actual use independent of government manipulation of the money supply--gold, wheat, whatever--is a better measure of value than money.