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Why the 2% inflation target? (2023)

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

#361

Post by throw0101c »

spaceman_2020 wrote: post #143
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…

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.

> All the younger people I know in less than stellar jobs are really hurting.

And? It has always sucked to be poor / have less. That doesn't mean that the measurement of prices via CPI is inaccurate.

The fact that capitalism has run amok and income inequality is growing doesn't mean the statisticians at the BLS are wrong or are cooking the books.

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

#362

Post by harimau777 »

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…

While society has gotten wealthier, have average people, at least in America, gotten wealthier? Technology has advanced so there's things that people can own now that they couldn't before, but if you look at things that are constant (e.g. housing) then it looks to me like people have gotten poorer.

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

#363

Post by SubjectToChange »

mcmoor wrote: post #253
SubjectToChange wrote: post #35

Earlier quoted context omitted.

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.

I guess it would be less messy if we just enact wealth tax and aim for 0% inflation.

0% inflation would still be undesirable. First of all, introducing any sort of deflation is undesirable and dangerous. Second of all, there are so many causes of inflation that it's practically impossible to control them. But fundamentally there is an issue of time and labor. For instance, a landscaper doing work on my property this week is providing me with far more value than the landscaper who did work for me 20 years ago. Likewise, a car right off the production line is more valuable than an identical model that has been sitting in storage for a decade. Simply put, the value of labor cannot be separated from the time in which that labor was performed. Over a long enough period of time, the value of any labor becomes practically nonexistent. Therefore, even if it were possible to maintain a 0% inflation rate, doing so would be distorting the market.

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

#364

Post by throw0101c »

FactKnower69 wrote: post #240
wolverine876 wrote: post #200

Earlier quoted context omitted.

So what do you use that's better? Your personal experiences don't tell us much about the other 320+ million people.

Who are you gonna trust: the government report, or your own lying eyes? No one I know outside of tech will ever be able to afford a home, but the TV says things are fine, so...

> Who are you gonna trust: the government report, or your own lying eyes?

The CPI is a national average for an average basket of goods; your local conditions may be different. It has zero connection to your personal budget.

In Canada the headline national number was 2.8%, but the province of Alberta (as a 'whole') had 4.2%, while Manitoba had 0.9%:

* https://www150.statcan.gc.ca/n1/daily-quotidien/240319/dq240... (Chart 5) * https://www150.statcan.gc.ca/n1/pub/71-607-x/2018016/cpi-ipc... * https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=181000... (searchable by province)

StatCan has a "Personal Inflation Calculator" where you can enter your own numbers/budget and find a number that may be closer to what's happening around you:

* https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020015...

Remember: the CPI is a model of reality, and not reality itself. It is used as a guide, and to use the words of [Alfred Korzybski](https://en.wikipedia.org/wiki/Alfred_Korzybski):

* [The map is not the territory.](https://en.wikipedia.org/wiki/Map–territory_relation) * https://fs.blog/map-and-territory/

Or those of statistician George Box:

* [All models are wrong but some are useful.](https://en.wikipedia.org/wiki/All_models_are_wrong)

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

#365

Post by afpx »

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…

Just put most of your liquid money in a gold ETF.

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

#366

Post by OnlineGladiator »

throw0101c wrote: post #360
OnlineGladiator wrote: post #294

Earlier quoted context omitted.

> 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 over stated.

A lower CPI is better for the government because it makes it look like inflation is a smaller problem than it is. So you're agreeing with me - they changed it to make the numbers look better.

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

#368

Post by mitthrowaway2 »

vkou wrote: post #350
mitthrowaway2 wrote: post #118

Earlier quoted context omitted.

> Store shelves would be empty Doesn't that result in scarcity and thus rising prices? A bit of a contradiction.

Scarcity because nobody is working. It's not a contradiction. Inflation encourages economic activity - work. Deflation discourages it.

I think you're being downvoted because you haven't explained why the store wouldn't raise prices before the shelves go empty.

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

#369

Post by spaceman_2020 »

wolverine876 wrote: post #200
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.

So what do you use that's better? Your personal experiences don't tell us much about the other 320+ million people.

My personal experience makes me miserable because I see so much misery around me

I couldn’t care less what’s happening in some government statistical bureau. That doesn’t affect the quality of my day to day life.

But when I catch up with old friends, see young colleagues, talk to cashiers at the store, and they all have tales of misery, I feel miserable.

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

#370

Post by spaceman_2020 »

throw0101c wrote: post #361
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.

> All the younger people I know in less than stellar jobs are really hurting. And? It has always sucked to be poor / have less. That doesn't mean that the measurement of prices via CPI is inaccurate. The fact that capitalism has run amok and income inequality is growing doesn't mean the statisticians at the BLS are wrong or are cooking the books.

That would have been true if CPI was a purely economic issue. But it’s also a political issue and once politics is involved, there is vast incentive to fudge and massage the data to fit a narrative.
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