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Why the 2% inflation target? (2023)

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

#321

Post by [deleted] »

graeme wrote: post #260
FactKnower69 wrote: post #237

Earlier quoted context omitted.

>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 fr…

[deleted]

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

#322

Post by ajkjk »

itsoktocry wrote: post #280
FactKnower69 wrote: post #237

Earlier quoted context omitted.

>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…

> 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 in assets which by definition rise in value with inflation. Look, I'm sensitive to the struggles of the less well off, and that we are in a particularly rough part of a cycle. I don't believe the economy is…

Their comment is about the math, which has to be true. There can still be countervailing effects, but the math still works out the way it works out.

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

#323

Post by npoc »

Wytwwww wrote: post #87
silent_cal wrote: post #52

Earlier quoted context omitted.

Good answer. Inflation is just a euphemism for stealing from working people.

Still preferable to deflation. At least the working class has something that can be stolen..

In a healthy economy, deflation (i.e. falling prices) is a good thing. Things get cheaper over time - it's the utopia we should be living in now.

We've made massive increases in production efficiency across the board over the years, but the banks and government have creamed off all those efficiency gains for themselves, by printing money, creating the illusion that everything is instead going up in value, and have made themselves mind-blowingly powerful.

As the world economies are so broken, if the money supply went down instead of up (i.e. deflationary supply), the real value of the already enormous debts would increase even if the nominal value didn't, causing the economies to collapse suddenly. By keeping the money supply increasing, the economies are collapsing slowly instead, ultimately ending in hyperinflation.

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

#324

Post by AtlasBarfed »

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".

Deregulation has not lead to a utopia of competition in free markets, rather virtually every market is a cartel or monopoly with heavy regulatory capture.

This is probably the best example of government lack of regulation, considering that their ample laws against monopoly's, cartels and duopolies from the days of Teddy Roosevelt's administration

They are effectively not enforced, or if enforcement is attempted corporate legal departments now have an effective means of defeating them since the Microsoft trial

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

#325

Post by killjoywashere »

dxbydt wrote: post #284
graeme wrote: post #260

Earlier quoted context omitted.

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 fr…

Econ 101: index to 2% inflation, tolerate mild losses. Elon 101: hire aggressively until product finds PMF, then fire aggressively.

It’s the old county fair analogy: the rich kids get shots on goal until they hit. Middle class kids get one shot. The poor get no shots, they’re working the fair. There are progressively fewer middle class kids getting their one shot. And some of them used to get two.

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

#327

Post by AtlasBarfed »

itsdrewmiller wrote: post #262
esoterica wrote: post #223

Earlier quoted context omitted.

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

I suspect the person you’re responding to is not really talking about truly low paying jobs - more likely entry level out of college jobs. (Not that I expect those are in aggregate underwater either.)

I remember from even better days than today, but the entry job out of college had become an unpaid internship.

Which effectively limited them to people that already had very stable and financially supportive family situations.

Part of the reason that class mobility is going down. Although I think most of the production in class mobility is due to the disappearance of the high paid blue collar job in manufacturing

Supposedly manufacturing will be re- onshored in the next decade depending on who you talk to. So the tide may be turning?

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

#329

Post by qeternity »

oblio wrote: post #305
itsoktocry wrote: post #280

Earlier quoted context omitted.

> 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 in assets which by definition rise in value with inflation. Look, I'm sensitive to the struggles of the less well off, and that we are in a particularly rough part of a cycle. I don't believe the economy is…

Are you talking about a timescale of 100 years or 30? People are poorer than they were in 1990, especially the mid to lower classes.

What data are you drawing this conclusion from?

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

#330

Post by kbelder »

itsoktocry wrote: post #280
FactKnower69 wrote: post #237

Earlier quoted context omitted.

>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…

> 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 in assets which by definition rise in value with inflation. Look, I'm sensitive to the struggles of the less well off, and that we are in a particularly rough part of a cycle. I don't believe the economy is…

Because there is no absence of any positive action. That's one of the main benefits of the free market.
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