Why the 2% inflation target? (2023)

Post by anonuser123456 » Sat, Mar 23, 2024, 1:57 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…

Post by bsdpufferfish » Sat, Mar 23, 2024, 2:03 AM UTC

pixl97 wrote: post #221

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.

We've done that before... the boom bust cycles were far worse.

Post by simonh » Sat, Mar 23, 2024, 2:11 AM UTC

gentleman11 wrote: post #384

simonh wrote: post #380

Earlier quoted context omitted.

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

Post by bsdpufferfish » Sat, Mar 23, 2024, 2:12 AM UTC

vel0city wrote: post #166

mike_hearn wrote: post #112

Earlier quoted context omitted.

> punishes hoarding Or put another way, punishes saving. Forcing people to "save" by loaning the money to businesses and governments bonds and equities is good for politicians who like to be measured by economic metrics. But it's bad for being able to actually save for the future, and reducing dependencies on banks, leading to the moral hazard (with 0% inflation you could have narrow banking without problems).

It's not good for a society to save by holding on to worthless pieces of paper or shiny objects. It's good for society to save by investing in productive assets.

Post by bsdpufferfish » Sat, Mar 23, 2024, 2:14 AM UTC

SubjectToChange wrote: post #374

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 b…