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Perhaps I am economically naive, but why does there need to be any inflation? Why isn't 0 a target?
At first glance, had no idea what I was supposed to do or how it worked. At second glance, it seems like you're just setting price inflation on a number of components, trying to get the weighted average to be 2%. Wildly overhyped "game"?
Earlier quoted context omitted.
To encourage spending
Inflation of zero is just as good for encouraging spending as small positive inflation -- the rate you'll get by low-risk investing will always beat inflation by a bit. But the moment inflation dips below zero it really starts discouraging spending. So I suspect it's about having a margin for error. Target zero and it will spend a lot of time negative, target mildly positive and it will spend most of its time mildly…
While this view is common, it is incorrect.
This is obviously evident when you consider the price of computers and other tech products over the decades.
Am I missing something here?
At first glance, had no idea what I was supposed to do or how it worked. At second glance, it seems like you're just setting price inflation on a number of components, trying to get the weighted average to be 2%. Wildly overhyped "game"?
Yeah, I don't get it either. I dragged each control to the maximum one by one, until I got to 2%. Then I clicked the button and won, even though I hadn't touched half of the controls yet. I assume there's supposed to be some underlying lesson in it....
The problem with that, and with health care especially, is that the 'native' price increase already far outstrips inflation. With that monetary policy, you've introduced an extra 5% tax on already quickly growing industry. So a family going through a health care crisis or crisis of changing insurance will be affected negatively, whereas a family only buying groceries and liquor will feel no undue changes.
So that's what I'm guessing the article is saying, where can/should/will the Fed attempt to affect American savings and purchases.
At first glance, had no idea what I was supposed to do or how it worked. At second glance, it seems like you're just setting price inflation on a number of components, trying to get the weighted average to be 2%. Wildly overhyped "game"?
Yeah, I don't get it either. I dragged each control to the maximum one by one, until I got to 2%. Then I clicked the button and won, even though I hadn't touched half of the controls yet. I assume there's supposed to be some underlying lesson in it....
Perhaps I am economically naive, but why does there need to be any inflation? Why isn't 0 a target?
Perhaps I am economically naive, but why does there need to be any inflation? Why isn't 0 a target?
http://www.federalreserve.gov/faqs/economy_14400.htm
Perhaps I am economically naive, but why does there need to be any inflation? Why isn't 0 a target?
Very theoretically it sets a "you must be this tall to play" floor on stock financed capital projects. So if inflation is 4% and you think new railroad locomotives will pay off at 5% average, then you do it, or if new locos only pay off at 3% then you don't because you'd get a sub-inflation rate of return on stocks or bonds.
Another argument is its essentially a long term debt jubilee, given the extremely optimistic assumption that wages rise with inflation (LOL, not so much since the 80s or so). So at both personal and corporate level, debts as a problem kind of go away with time. A decade of 70s style wage inflation would certainly help with the student loan crisis and the real estate price crisis.
Earlier quoted context omitted.
Yeah, I don't get it either. I dragged each control to the maximum one by one, until I got to 2%. Then I clicked the button and won, even though I hadn't touched half of the controls yet. I assume there's supposed to be some underlying lesson in it....
I'm guessing the 'lesson' from your iteration is that you increased prices most on a subset of goods- housing and utilities, health care, and financial services and insurance- while leaving the rest to track their industry. The problem with that, and with health care especially, is that the 'native' price increase already far outstrips inflation. With that monetary policy, you've introduced an extra 5% tax on already…