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Why the 2% inflation target? (2023)

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

#251

Post by wolverine876 »

NikolaNovak wrote: post #242
pdonis wrote: post #208

Earlier quoted context omitted.

> So what do you use that's better? If the government would stop trying to micromanage the economy, then it wouldn't need to find some aggregate statistic to use, no matter how misleading or counterproductive it was.

>>government would stop trying to micromanage the economy Right, but some of us are not religious, so proposals needs a little bit more than the blind faith of "take your hands off the wheel and I'm sure everything will magically be better for everybody, particularly the poor".

It worked really well historically, before central banks, Keynes, Friedman ...

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

#252

Post by hammock »

esoterica wrote: post #223
spaceman_2020 wrote: post #143

Earlier quoted context omitted.

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.

The lowest income workers have seen the largest wage gains over the course of the pandemic.

Have they? Or are they all just taking on multiple part time jobs?

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

#253

Post by mcmoor »

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.

I guess it would be less messy if we just enact wealth tax and aim for 0% inflation. This way government won't be able to justify printing excessive money anymore.

Coincidentally my religion enforce around 2.5% wealth tax which sounds almost exactly the inflation target.

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

#254

Post by wolverine876 »

cjbgkagh wrote: post #213
wolverine876 wrote: post #193

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. 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.

So no debate on the merits? We agree! :)

Feel free to laugh, if that's what makes you happy.

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

#255

Post by lebean »

apelapan wrote: post #202
smegger001 wrote: post #187

Earlier quoted context omitted.

and we didn't even get the productivity increase, if we had the computer revolution should have massively increased everyone wages due to increased efficiency.

Did the computer revolution really make things that much more efficient? Great savings and new possibilities on many fronts, but also enormous expenses and a whole lot of lost flexibility and individual agency. I'm sure it is an efficiency win on the total, but perhaps not as gigantic as often assumed.

I mean, how much we talking here? We're not in Atlantis with flying cars, but there's immense efficiency gains in logistics.

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

#256

Post by NikolaNovak »

wolverine876 wrote: post #251
NikolaNovak wrote: post #242

Earlier quoted context omitted.

>>government would stop trying to micromanage the economy Right, but some of us are not religious, so proposals needs a little bit more than the blind faith of "take your hands off the wheel and I'm sure everything will magically be better for everybody, particularly the poor".

It worked really well historically, before central banks, Keynes, Friedman ...

I genuinely don't know if that's extremely snarky sarcasm or extremely earnest opinion.

(if I said it it would be completely sarcastic, but some people do idealize the far past and probably mean it honestly, presumably because they mentally imagine / assume they wouldn't be in one of the sucky classes of society)

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

#257

Post by qwytw »

pdonis wrote: post #220
qwytw wrote: post #121

Earlier quoted context omitted.

> 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…

> Let me translate into actual plain English

Or "Let me leave out most of the details that matter"..

> quite a lot between 2000 and 2020. > From 2000 to 2020, the government was

So specifically between 2001 and 2011 governments have printed several times (~5x) more money than between 2011 and 2022? Because that's obviously not the case. In the first ten year period the price of gold increased fivefold during the second (despite growth in money supply only accelerating) it collapsed and didn't start recovering until 2019 (it's now worth only only slightly more than in 2011..). How does that fit in with the with whole printing hypothesis?

> In the early 1980s, by contrast, the government was destroying dollars

Just like after 2011?

> that dollars are volatile

It's not though. Generally the dollar depreciates at a fairly predictable rate. There is a spike here or there but it's nothing compared to the volatility of gold.

> houses

Yes. I certainly a agree that houses, food, cothers, cars etc. are much better units of measurement than gold (which is just commodity with a highly distorted/inflated price due to speculation..

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

#258

Post by npoc »

lupire wrote: post #179
npoc wrote: post #139

Earlier quoted context omitted.

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 - gene…

Capital gains taxes are discounted to compensate for inflation. (10-20% vs 30-40%). It's not perfect but it's an estimate. Also, capital gains are unearned.

CPI is a useless metric. It doesn't take into that goods and services are going down in value over time (at around 5% per year), and doesn't include hard assets that retain their value such as housing. It's a trick.

> Also, capital gains are unearned.

On average, capital gains aren't gains at all. They are simply the price of your asset going up, not its value. Housing is a perfect example - it increases in price at the same rate at which the dollar is devalued through supply increase.

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

#259

Post by throwaway14356 »

FactKnower69 wrote: post #237
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…

>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) This is EXACTLY the issue. The economy is rigged such that in the absence of any positive action, workers' purchasing power goes down over time by default. This obviously isn't a problem for the rich, whose money is stored almost entirely i…

I have this picture burned on my retina with the union reps toasting champagne after successfully negotiating 2% this while my rent went up by 5% using the same arguments.

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

#260

Post by graeme »

FactKnower69 wrote: post #237
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…

>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) This is EXACTLY the issue. The economy is rigged such that in the absence of any positive action, workers' purchasing power goes down over time by default. This obviously isn't a problem for the rich, whose money is stored almost entirely i…

You haven't understood the issue. If a firm needs to lower costs, the alternatives to mild inflation are:

* Negotiating actual salary cuts, or * Job losses

Ideally in a market, prices adjust up and down freely. Obviously this is not a sensible approach to salaries. Given the bias towards loss aversion, having mild inflation make mild losses is preferable to having, say: 5% deflation, 7% salary cut.

This concept is from Econ 101. And it doesn't mean everyone's wage drops. It means struggling firms can adjust wages less painfully.

Your alternatives to 2% are:

* active deflation, with actual wage cuts

* higher inflation, where you have active salary negotiations each year to predict inflation and negotiate higher or lower than inflation, like in the 70s

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