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

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

#381

Post by cjbgkagh » Sat, Mar 23, 2024, 1:43 AM UTC

ramblenode wrote: post #356

cjbgkagh wrote: post #104

Earlier quoted context omitted.

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.

The asset has a nominal increase in value but not a real increase. After paying the capital gains tax you end up with less than what you had. In real terms your wealth has diminished. I think people are conflating a speculative asset bubble with inflation on the basis that they tend to occur at the same time and for the same reasons - easy monetary policy. But it does not necessarily follow that if you have inflation you also have a speculative asset bubble.

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

#382

Post by gamepsys » Sat, Mar 23, 2024, 1:45 AM UTC

cjbgkagh wrote: post #196

bawolff wrote: post #175

Earlier quoted context omitted.

If we are talking about say a house, i think the poorer person who rents (and has rent increase with inflation) would be much more negatively affected over time, notwithstanding the extra capital gains tax the person who owns the house would have to pay upon sale.

I agree that it would increase inequality not decrease it like people would assume a wealth tax (inflation + capital gains tax) would do. The problem I see with the government having their revenue tied to wealth tax becomes incentivized to do things that will make the wealthy wealthier, like maintain a higher rate of inflation.

High inflation has a huge benefit to the government in that the government is a major borrower and inflation reduces the value of their debt.

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

#383

Post by chowchowchow » Sat, Mar 23, 2024, 1:45 AM UTC

pdonis wrote: post #308

chowchowchow wrote: post #250

Earlier quoted context omitted.

As was noted above. If your claims are true, then inflation was 800% in the 2000s and then 0% in the 2010s. There's clearly market supply/demand driving changes in gold price, not simply exchange rate fluctuation.

> There's clearly market supply/demand driving changes in gold price Of course. And in all other commodity prices. But in a world where the money supply was stable, those price changes, over time, would average out to zero. Or, if you factor in increased productivity over time, they would average out to a steady (if probably slow) decrease in the prices of goods and services. What you would not see is an average incr…

There’s no natural state of money is there? I feel like characterizing monetary policy that way, as manipulative, is normative and kinda begs the question that there’s a natural state of monetary policy.

How could there be growth in the economy with a fixed pie of money? It is contradictory. There’d be a tremendously high bar for investment in any enterprise which could generate dollars if I could buy more tomorrow with the dollars I already have today.

Think about how much bitcoin is being put to work in the productive economy versus hodled.

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

#384

Post by gentleman11 » Sat, Mar 23, 2024, 1:46 AM UTC

simonh wrote: post #380

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’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 als…

Hasn’t it been the case? Most people make the same or less than 50 years ago, except the upper class, which has captured almost everything

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

#385

Post by unboxingelf » Sat, Mar 23, 2024, 1:49 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…

This guy gets it. Bitcoin fixes this.

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

#386

Post by rhelz » Sat, Mar 23, 2024, 1:49 AM UTC

diego_sandoval wrote: post #358

rhelz wrote: post #295

Earlier quoted context omitted.

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…

> If the transition to a deflationary economy is slow and planned,

If your money is guaranteed to grow in value--and without the risk of actually investing it--that would starve the economy of investment, which would reduce economic growth. People would hold back on their consumption (why buy it today, when tomorrow it will be cheaper??), further reducing demand, which would further depress prices, etc in a doom cycle.

That conclusion wasn't reached by extensive investigation of economists belly-buttons. Its observed fact and lived experience in every deflational economy ever observed.

And if you think Banks are just going to forgive your debt if your salary decreases, you are nuts.

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

#387

Post by gopher_space » Sat, Mar 23, 2024, 1:52 AM UTC

testacpwoek wrote: post #228

esoterica wrote: post #217

Earlier quoted context omitted.

Why are inflation truthers so resistant to spending even the tiniest amount of time learning how inflation is computed instead of repeating nonsensical conspiracy theories that match their ideological priors? Replacing porterhouse with hanger steaks in the basket simply means giving the change in price of hanger steaks a higher weight than the change in price of porterhouse steaks in the basket. It does not mean reco…

> nonsensical conspiracy theories that match their ideological priors People's lived experiences in many parts of the country don't match what they're being told. If macro trends go one way but microtrends all over the country go the other way, then the macrotrend analysis is functionally meaningless for millions of people. That's not a conspiracy theory, and hand-waving so many people's lived experiences away becaus…

I'd argue that talking about averages at all is arguing in bad faith; there are only a few economic buckets people fit into and they're well defined.

Is there a point of view where not primarily discussing "bucket 1" even makes sense, given everyone's stated intentions?

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

#388

Post by bsdpufferfish » Sat, Mar 23, 2024, 1:52 AM UTC

ajkjk wrote: post #322

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…

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.

its really not. the math is a distant abstraction of a social subject

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

#389

Post by rhelz » Sat, Mar 23, 2024, 1:53 AM UTC

ncivkcndixbdbx wrote: post #352

rhelz wrote: post #295

Earlier quoted context omitted.

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.

We do have way too much debt---and when we have too much debt, the inevitable result is inflation. Thank you, President Trump, for adding $8.4 trillion to the national debt and for financing the deficit by printing money.

But that doesn't mean that debt is intrinsically bad, or must always benefit the rich at the expense of the poor. Like any other tool, it depends on how you use it.

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

#390

Post by bsdpufferfish » Sat, Mar 23, 2024, 1:56 AM UTC

analog31 wrote: post #340

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…

Ah, but if inflation is underreported with a 2% target, it's also likely to be underreported with a 0% target. On the other side, fiscal hawks have an incentive to overreport inflation.

fiscal hawks, like who? and with what power?