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

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

#431

Post by dlp211 » Sat, Mar 23, 2024, 4:31 AM UTC

jonplackett wrote: post #290

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.

They’re making a valid point, don’t shout them down by calling it a one off. Quality of living is plummeting and inflation on things you actually care about is way more than the headline rate. Housing, for example takes up a vast proportion of income and the increase has been way over inflation. I don’t think it’s headline news to state that the headline rate of inflation is not all that reflective of reality.

> Quality of living is plummeting

Massive citation needed.

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

#432

Post by blackhawkC17 » Sat, Mar 23, 2024, 4:35 AM UTC

JohnMakin wrote: post #153

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.

>You have capital gains tax on it eventually, Erm... no. That's how people imagine it's supposed to work, but in reality, the wealthy fund their consumption from loans using their wealth as collateral, enjoying the benefit of their wealth while avoiding capital gains taxes. Warren Buffet has famously criticized this, it's not some unheard of thing. There are many, many loopholes and they are very much there on purpos…

That’s how some wealthy people fund their lifestyles.

Take a look at SEC filings, and you’ll see a massive amount of stock sales and capital gains taxes getting paid every day.

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

#433

Post by dools » Sat, Mar 23, 2024, 4:36 AM UTC

cjbgkagh wrote: post #172

neilwilson wrote: post #135

Earlier quoted context omitted.

God knows where you got that from

I remember reading it in a Harvard white paper, I deleted my MMT archives once it became obvious that it was not only economically unworkable (which I had already assumed) but also politically unworkable. Economists used to think that inflation was hard to start which made MMT more tenable and now they think inflation is hard to stop. It was only hard to start because speculative asset bubbles soak up liquidity and r…

MMT describes how money already works

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

#434

Post by chowchowchow » Sat, Mar 23, 2024, 4:39 AM UTC

pdonis wrote: post #428

chowchowchow wrote: post #383

Earlier quoted context omitted.

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 w…

> There’s no natural state of money is there? If you mean there is no specific quantity of money that is "natural", that's true. Any quantity of money can work. But that does not mean that changing the quantity of money as a routine, common operation is a good thing. > How could there be growth in the economy with a fixed pie of money? It is contradictory. No, it isn't. Economic growth means producing more goods and…

> Economic growth means producing more goods and services.

How do you incentivize this? Your view seems fairly communist. Also how does a net new innovation factor into this framework. New pharmaceuticals for previously untreatable diseases for example. What slice of the fixed money pie do those get?

> But that is because the quantity of Bitcoin is not fixed. People can mint more.

Sorry pal this is sophistry. Your contention is people hodl bitcoin because the supply of btc is not fixed?

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

#435

Post by npoc » Sat, Mar 23, 2024, 4:46 AM UTC

notahacker wrote: post #312

npoc wrote: post #235

Earlier quoted context omitted.

I appreciate you filling in the details. > it gets richer when you pay interest in excess of its costs of providing you with money. Apart from the costs of running the bank, any other costs are simply what I would call money laundering (i.e. smoke and mirrors - as I mentioned, we can argue over who exactly receives what proportion of the money, but it doesn't escape the facts that the population is paying interest on…

The costs of running the bank include the costs of administering the loans, the cost of the bank paying interest on reserves it needs to borrow and the costs of defaults. No "money laundering" is involved. Banks are going to earn money on the margin between the rate they can lend at and the rate they need to pay to secure reserves regardless of monetary system. The alternative without Fed access is the population pay…

There is no real cost of defaults. The money that wasn't paid back was created out of thin air with no effort from the bank.

Money laundering is taking ill-gotten gains and processing them to make them look legitimate. This is exactly what the central banking system, in partnership with the government, does.

However much you try to justify what they are doing you can't deny that the banking system is charging interest on every unit of currency in existence and they created them all for essentially free.

People absolutely should pay more interest - the free-market rate. It's absolutely wrong that people who get into debt are rewarded for doing so, at the cost of people who don't, who have the value of their savings, wages and pensions stolen.

It's a vicious cycle - lower than free-market interest rates force people to have to borrow money. Look at what it has done to prices of houses relative to wages over the last 50 years. It's reached the point that many people are now forced to take on 35, even 50 year mortgages, just to buy a very modest home.

Look up the Cantillon effect.

See here for some of the terrible, far reaching effects: https://wtfhappenedin1971.com/

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

#436

Post by npoc » Sat, Mar 23, 2024, 5:05 AM UTC

buzzerbetrayed wrote: post #309

npoc wrote: post #281

Earlier quoted context omitted.

The fix is already here, it's just a matter of time while we wait for the world to understand what it is. "I don't believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can't take them violently out of the hands of government, all we can do is by some sly roundabout way introduce something they can't stop" F.A. Hayek https://www.youtube.com/watch?v=CBIidtaU…

Having enjoyed your other comments in this thread, I'm curious how Bitcoin fixes this issue. Because it can't be created out of thin air? Or is there something else I'm missing?

To understand why Bitcoin fixes the issue takes hundreds of hours of research - much more than I can explain here.

Here are some good starting points:

https://youtube.com/playlist?list=PL2jAZ0x9H0bQFY6wIbQfnrnIl... (listen to at least the first 7 episodes - absolutely fascinating - the most interesting lectures I ever heard. Prepare to have your mind slowly blown)

https://youtu.be/Z6qzEYxBYcQ

https://www.onceinaspecies.com/p/bitcoins-full-potential-val...

https://youtu.be/CoGxakp1_3I - tip: watch this at at least 1.5x speed ;)

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

#437

Post by npoc » Sat, Mar 23, 2024, 5:09 AM UTC

Entwickler wrote: post #419

buzzerbetrayed wrote: post #309

Earlier quoted context omitted.

Having enjoyed your other comments in this thread, I'm curious how Bitcoin fixes this issue. Because it can't be created out of thin air? Or is there something else I'm missing?

Crypto currencies are an experiment in the "denationalization of money" which was a book written by Hayek - of course he wrote this before cyrpto currencies were even a thing. I would avoid just picking out BTC (which being stable in supply is prone to hoarding as digital gold and not really used as a means of commerce) and look at what other crypto has to offer as well, such as Ethereum which has a dynamic supply li…

Ethereum is not proof of work and so ultimately won't be as good a store of value as Bitcoin.

Any digital network that doesn't use the best store of value is not going to be able to compete with one that does.

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

#438

Post by throwawaymaths » Sat, Mar 23, 2024, 5:13 AM UTC

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…

People are not getting poorer because productivity has been going up to compensate. As in, we're milking more and more out of the labor and middle classes. (Ok also technology papers over the problem as commerce becomes somewhat more efficient)

The family is not too much less wealthy but also we have families with two incomes, breadearners working overtime, stressed out family dynamics, and student going into deeper and deeper debt to be credentialed enough to participate in the sophisticated workforce.

If you look at the "wtf happened in 1970" chart, the y axes are productivity and real wages.

It turns out 2% inflation is enough to steal the productive increase of labor and middle classes and transfer it to the politically connected, wealthy, and financial sectors. At some point it's just going to be impossible to wring more gains out of labor and technology improvements. We're probably really close.

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

#439

Post by throwawaymaths » Sat, Mar 23, 2024, 5:20 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.

> have average people

You mean median person. If society gets wealthier the average nearly definitionally gets better (modulo population increase)

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

#440

Post by throwawaymaths » Sat, Mar 23, 2024, 5:24 AM UTC

graeme wrote: post #260

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 haven't understood the issue. If a firm needs to lower costs, the alternatives to mild inflation are: * Negotiating actual salary cuts, or * Job losses Ideally in a market, prices adjust up and down freely. Obviously this is not a sensible approach to salaries. Given the bias towards loss aversion, having mild inflation make mild losses is preferable to having, say: 5% deflation, 7% salary cut. This concept is fr…

So you're saying that it's government's responsibility to let firms be shitty to their employees with stealth pay cuts?

I would MUCH rather a firm have to face the music and reputational damage of cutting employee pay or firing employees. It's far more honest and the actual other option is gasp don't cut your employees wage and instead take a hit to your margins.