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

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

#351

Post by lumost » Sat, Mar 23, 2024, 12:19 AM UTC

patmcc wrote: post #333

milesskorpen wrote: post #318

Earlier quoted context omitted.

This is not true: https://fred.stlouisfed.org/series/A939RX0Q048SBEA This is real GDP per capita

This doesn't address the claim oblio was making - 'People are poorer than they were in 1990, especially the mid to lower classes' - real GDP per capita could double but it all be captured by the top quartile, for example. (I think the claim is still wrong, and that all quartiles are doing better in real terms, but that's a tougher thing to measure)

https://wtfhappenedin1971.com/

Annual wages are about 15% higher today compared to 1971 in real terms. Real terms is a bit suspect in this case as wage earners are more likely to pay nominal rent then owner equivalent rent. It may well be accurate that the average wage earner is worse off today then they were in 1971.

I'd venture a speculation that this is reflected in media, sitcoms of the 70s rarely had roommates - and the 80s/90s poked fun of those who lived in their parents basements. Roommates are relatively common in shows today.

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

#352

Post by ncivkcndixbdbx » Sat, Mar 23, 2024, 12:19 AM UTC

rhelz wrote: post #295

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…

Well, no matter how the 2% figure was arrived at as a matter of historical happenstance, 2% is actually a very good number to shoot for. First of all, a rate of zero would be ideal, but, lets face it, like any measurement, this is going to have some error. So, if you are going to err, on which side do you want to err? In favor of a little bit of inflation, or a little bit of deflation? Well, inflation is painful, sur…

> if we had 50% deflation, your paycheck--the dollar amount you brought home--would be cut in half. However, your car payment, your mortgage, and your credit card bills would stay at the same nominal value.

Society doesn’t need to operate with so much debt. Usury is a financial tool that benefits the rich.

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

#353

Post by foobarian » Sat, Mar 23, 2024, 12:20 AM UTC

fwlr wrote: post #28

There are significant stabilization benefits to having a public (and binding) inflation target - all of the large economic entities / sectors like banking, government spending, corporations, etc., become more predictable to each other. For this reason, whatever number is chosen will tend to “stick”, regardless of how the actual number is chosen. Or alternatively: it is optimal to have an inflation target (compared to…

My intuition for this is to view the economy as a large number of interconnected gears driven by an input shaft. When the input is neutral (no inflation), the gears are slack and kind of spin back and forth with occasional whiplash. But with some token input spin (small inflation), the slack vanishes and all gears spin smoothly.

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

#354

Post by treyd » Sat, Mar 23, 2024, 12:27 AM UTC

milesskorpen wrote: post #318

oblio wrote: post #305

Earlier quoted context omitted.

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.

This is not true: https://fred.stlouisfed.org/series/A939RX0Q048SBEA This is real GDP per capita

GDP per capita is a poor measure of general wellbeing since it doesn't account for changes in the cost of living and is skewed by funny business in stock markets.

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

#355

Post by ianburrell » Sat, Mar 23, 2024, 12:29 AM UTC

FactKnower69 wrote: post #247

inglor_cz wrote: post #203

Earlier quoted context omitted.

"Housing" ... mostly a NIMBY problem. AKA not a small group of capitalists ruining it for everyone else, but a bunch of soccer moms who hate any densification and insist that their neighborhood must stay the same forever, weaponizing environmental laws to stop any development. Notably, cities that build nonetheless, be it Austin, TX, or Warsaw, Poland, buck this otherwise very widespread trend. "Education, healthcare…

At any given time of year there are ~23 empty housing units for every single homeless person in the US, even close to 3 per homeless person in Los Angeles and New York City; somehow the constant, coordinated line of "supply constraints" and "grr NIMBYs!" doesn't hold up to the actual data

Vacant doesn't mean available. Apartments that are being shown to renters are vacant. Houses for sale are vacant. Houses that have sold or rented but haven't been moved into are not available.

It would be impossible to house homeless in vacant houses. Sellers and landlords would never accept it because would make it hard to find people. The short-term rentals would be hard to mange, not good for the homeless to always be moving, and easily go wrong. Is the government going to compensate for damages? For delayed moving into new house? It is almost certainly cheaper to build the homeless housing.

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

#356

Post by ramblenode » Sat, Mar 23, 2024, 12:35 AM UTC

cjbgkagh wrote: post #104

agf wrote: post #91

Earlier quoted context omitted.

How is it a wealth tax? One of the things the wealthy do is hedge against inflation.

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.

Capital gains tax is just a % of your gains. So assuming the appreciation of your asset is due entirely to inflation, capital gains tax will be strictly less than the depreciation of the same amount of cash.

If it's a wealth tax, it is giving the best deal to the people with the most non-cash assets, i.e. the wealthy.

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

#357

Post by poorlyknit » Sat, Mar 23, 2024, 12:36 AM UTC

nemo44x wrote: post #199

immibis wrote: post #88

Earlier quoted context omitted.

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 g…

Except that you're not allowed to take out a mortgage and denied credit if you're poor, which means you're stuck spending your money for necessities and therefore being poor. The system works great for people who (or whose family, circle, etc.) are already not poor.

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

#358

Post by diego_sandoval » Sat, Mar 23, 2024, 12:36 AM UTC

rhelz wrote: post #295

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…

Well, no matter how the 2% figure was arrived at as a matter of historical happenstance, 2% is actually a very good number to shoot for. First of all, a rate of zero would be ideal, but, lets face it, like any measurement, this is going to have some error. So, if you are going to err, on which side do you want to err? In favor of a little bit of inflation, or a little bit of deflation? Well, inflation is painful, sur…

> your paycheck--the dollar amount you brought home--would be cut in half. However, your car payment, your mortgage, and your credit card bills would stay at the same nominal value.

Not necessarily. If the transition to a deflationary economy is slow and planned, then expected deflation would start to be considered in the interest rates of your car payment, mortgage, etc. i.e. interest rates would become negative not long after inflation becomes negative.

If employers are capable of negotiating deflation adjusted salaries, then market pressure is capable of forcing companies to adjust their prices and interest rates to deflation.

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

#359

Post by bradjohnson » Sat, Mar 23, 2024, 12:40 AM UTC

npoc wrote: post #323

Wytwwww wrote: post #87

Earlier quoted context omitted.

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 ma…

Deflation is not a healthy system under capitalism, where people must work to survive. In the ideal scenario the value of work would approach zero due to a reduction of money in circulation. Work done yesterday would always be worth more than work done today and generational wealth would eventually become necessary to not be locked in servitude to the wealthy.

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

#360

Post by throw0101c » Sat, Mar 23, 2024, 12:42 AM UTC

OnlineGladiator wrote: post #294

throw0101d wrote: post #122

Earlier quoted context omitted.

> Another interesting thing that happened under Greenspan is how inflation is computed (hedonics, replacements, etc... conceptually, think "if I can't buy a porterhouse steak anymore, I'll get the lesser hanger", meaning inflation is underreported). Inflation calculations (in the US) did not happen under Greenspan, or under any other Federal Reserve chair, because the calculations are not done by the Fed, but by the…

> One of the conclusions was (AIUI) that the CPI then-methodology actually resulted in numbers too high. How is this any different from saying they changed the methodology to make the numbers look better? In my opinion the old methodology was better, but I realize this is a complex issue and there is no "correct" answer.

> How is this any different from saying they changed the methodology to make the numbers look better?

Define "better": is a higher CPI better, or is a lower CPI better?

Because the Boskin Commission found that the CPI numbers out of the BLS were too high and they changed the methodology to lower them after the Commission's report. Pre-Boskin CPI was being overstated.