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

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

#371

Post by randomdata » Sat, Mar 23, 2024, 1:20 AM UTC

harimau777 wrote: post #362

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…

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.

> but if you look at things that are constant (e.g. housing) then it looks to me like people have gotten poorer.

If housing were constant then people would not be any poorer with respect to housing. They would be in the exact same position. But housing is not a constant. The average US house has have more than doubled in size over the past 50 years. The average US home also has one less person living in it as compared to 50 years ago. People today are way richer in housing.

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

#372

Post by kortilla » Sat, Mar 23, 2024, 1:26 AM UTC

wolverine876 wrote: post #193

cjbgkagh wrote: post #78

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. Just because the politicians and bankers failed to totally eclipse technology does not mean they are not a severe detriment.

> 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…

Technology is the only reason the economy could somewhat continue during the pandemic. Did you hear about working from home?

Technology is how we got a vaccine so quickly.

Technology is how we tracked the spread. Technology is how we notified of potential exposure.

Nobody with a humanities background did anything meaningful to help compared to the last pandemic. It was all technology, engineering, medicine, and science that let us approach this one differently.

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

#373

Post by hsjsbeebue » Sat, Mar 23, 2024, 1:30 AM UTC

npoc wrote: post #45

The more money the banks print, the richer they get, with the side-effect that prices rise (they make the monetary units less scarce and worth less). 2-3% just happens to be the most they can get away with in the long term without the population getting concerned. What the general population don't realise is that the value of goods and services are going down over time, due to efficiency increases, at a rate of aroun…

Those efficiency increases - aren’t they affected by supply chain shocks, covid, limits on natural resources etc.?

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

#374

Post by SubjectToChange » Sat, Mar 23, 2024, 1:32 AM UTC

jmclnx wrote: post #367

Inflation is a tax, since almost no government will raise taxes, inflation is a way to raise revenue without calling it a tax.

Inflation does not spare Government budgets. Just look at how inflation cuts into the DoD budget.

...inflation is a way to raise revenue without calling it a tax.

Wow, European governments must've made a killing off of energy inflation over the last few years. Hopefully OPEC decides on another embargo, it'd pair perfectly with a Panamanian banana virus. The resulting inflation would certainly fill EU coffers to the brink. Still, nothing will compare to the impending wave of mass retirement in the developed world, government revenues will greatly benefit from the resulting wage inflation.

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

#375

Post by cjbgkagh » Sat, Mar 23, 2024, 1:36 AM UTC

psychlops wrote: post #332

cjbgkagh wrote: post #59

Earlier quoted context omitted.

I see it as a wealth tax and I agree, 2% is roughly long term stable maximum returns that leaves enough on the table for the middle class to prosper. I think at 3.5% or whatever they want to up the target to be will not be long term stable. It’ll work for a little while as GDP increases with increased inequality but civil unrest will from said inequality will reduce efficiency as more will need to be spent on securit…

Inflation is absolutely not a wealth tax. You should spend some more time understanding the impact of inflation and I suspect you will come to the opposite conclusion and that it is a tax on the poor.

I agree that inflation hurts the poor which is the mechanism that exasperates the wealth inequality. But inflation coupled with capital gains tax becomes a wealth tax.

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

#376

Post by transcriptase » Sat, Mar 23, 2024, 1:38 AM UTC

throw0101d wrote: post #122

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…

> 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…

StatsCan under-reports to a hilarious degree.

Your rent went up by 30%, groceries went up by 20%, but fuel went down by 10% and a new TV went down by 30%. Also people stopped buying steak because it went up 50% so we'll drop that from the basket. Let's see... if we run the numbers by dropping goods that are experiencing rapid inflation, and then weight things in a way that has no correlation with the increase in cost of living experienced by 99% of the population we get... oh look at that! 4.1%! Great news for the person who buys a new TV with their groceries every week!

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

#377

Post by saagarjha » Sat, Mar 23, 2024, 1:39 AM UTC

afpx wrote: post #365

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…

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

A lot of people don’t have much liquid money they can afford to put in an ETF.

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

#378

Post by exmicrosoldier » Sat, Mar 23, 2024, 1:41 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

As someone alive 30 years ago, it isn't as clear cut as the biased graph.

Gasoline was roughly 1/3rd the price, but 4 years of state college was 20k, not 100k.

A house I grew up in, while 30 years newer, cost 80k compared to 300k now, even though it needs a lot more work.

Minimum wage there went from 4.25 an hour 30 years ago to 7.5.

Health care costs have gone up way more than double.

So maybe people make twice as much cash, but their costs for the things they actually need, without bullshit fake adjustments, cost 3 to 4 times more than they used to.

One could argue for better, lik how react is "better" than html forms. But it isn't really worth the cost to me.

Excite was about as good at getting me search results for what I am looking for as google has enshittified itself to now.

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

#379

Post by SubjectToChange » Sat, Mar 23, 2024, 1:42 AM UTC

dennis_jeeves2 wrote: post #266

Rather than haggle about inflation/deflating I don't see people arguing that the govt should have any authority to dictate what medium of exchange people should use.

Private money has a long history within the United States, cryptocurrency is just the latest instance of it. The US Government doesn't really care how anyone conducts their transactions as long as they pay their taxes in USD.

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

#380

Post by simonh » Sat, Mar 23, 2024, 1:42 AM UTC

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’re missing the ‘if needed’. The idea is not that wages will permanently lag inflation, we can see from the figures that this has not been the case. Workers know what the inflation rate is and what it means when they negotiate wages. It’s that if there is an economic downturn employers can mitigate some of the impact by freezing wages instead of having to sack employees (or as many, anyway). If needed.

This is also not the only reason for targeting inflation at some low but positive level. Another is that you _really_ don’t want persistent deflation, so aiming for modest inflation reduces that risk. Inflation also erodes unproductive savings, encouraging investment, which supports jobs and growth.