An interesting and little known fact is that New Zealand is often used as a beta test site. They had ATMs in the 70s because the kiwis act like westerners, but if things go wrong, nobody notices. Similarly computer based police databases. Hopefully they can show us how UBI works...
Why the 2% inflation target? (2023)
481–490 of 619 posts
Re: Why the 2% inflation target? (2023)
#482Earlier 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…
What makes you think appealing to authority at Harvard is impressive? Or using the term “economist” when you have Powell talking about being guided by the stars?
MMT is a description of how reserve accounting works in an economy with a floating exchange rate and how that is linked to the physical economy.
If you have something that shows how that isn’t the case in practice then I’m all ears.
Re: Why the 2% inflation target? (2023)
#483Earlier 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…
Considering how difficult it has become (even pre-COVID) for young people to buy a home, your argument flies in the face of reality, doesn't it?
Buy a home where? In the area of a thriving city? Where everyone wants to live?
Re: Why the 2% inflation target? (2023)
#484The 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…
Gold fell 50% from 1980 to 2000, does that mean we had 50% deflation over that time period?
Did gold fall or did the dollar rise?
Define deflation
Re: Why the 2% inflation target? (2023)
#485Earlier quoted context omitted.
Deflation causes the production of goods and services to become more expensive in addition to slowing down the velocity of money. Hence, businesses actually go bankrupt (as in liquidated, restructuring becomes far more risky), productive capacity sits idle, unemployment rises, consumption slumps further, remaining businesses become even more distressed, all of which leads to a complete collapse in confidence in the m…
What if the deflation is caused by continuous improvement in productivity, as was the case for semiconductors? It seems like in that scenario, the continual decline in prices is more than counterbalanced by a continuous increase in production volumes, resulting in profits for manufacturers despite precipitous decline in the price of the products they sell. Moore's law didn't cause investment in semiconductor fabs to…
Productivity/efficiency driven deflation is almost always a good thing. The problem is when deflation is being driven by the scarcity of money or some other unsustainable mechanism
Re: Why the 2% inflation target? (2023)
#486Earlier quoted context omitted.
it's not unlimited. There's a regulated amount for which they're not allowed to go over (reserve requirement - which has since 2020 been set to zero), and they are required to have enough equity/capital (called capital requirements outlined here: https://docs.google.com/viewerng/viewer?url=https://www.fede... ) If it is indeed true that a bank could just print unlimited loan notes, then why did Silicon Valley Bank co…
You're missing the bigger picture too. Silicon Valley Bank didn't collapse - it was bailed out with unlimited money from the bigger banks. The only limitation the banking system faces is excuses to loan money (one of the reason long-standing wars that last for years are increasingly common - the banking system gets to fund both sides)
> it was bailed out with unlimited money from the bigger banks.
tell that to the equity owners of the bank.
Re: Why the 2% inflation target? (2023)
#487What is missing from the article (unless I missed it myself) is why inflation would be desirable in the first place. There's probably a couple of reasons, some already discussed. Like lowering wages without actually lowering wages. And inflation is a great tool for governments to "pay off" their debt. But you have to keep the rate at a level low enough not to cause upheavals. Hence the rates of like 1% or 2%.
The major reason for a base inflation this: If there was zero inflation, then keeping cash in the bank is the safest thing to do. If everyone does this, money moves less, less investment, slower economy. Sure some will still invest, but the vast majority of people will just put money in the bank, or under their mattress. With >0% inflation, you now need to do something with your money or else you lose money. If my gr…
But isn't that "artificial" growth of the economy than basically eaten up by the inflation?
Re: Why the 2% inflation target? (2023)
#488Earlier quoted context omitted.
This is the solution to the "two-income trap".
That only works if it is a global change in work practices.
I don't think that's true. We already have significantly varied working hours between countries. China has 996. The US has a 40 hour standard work week and the culture is such that people often work longer hours. Whereas in Europe 35 or 37.5 hours or even less is common. Different countries have different numbers of public holidays, etc.
Re: Why the 2% inflation target? (2023)
#489Earlier quoted context omitted.
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.
if you were the one whose jobs' being cut, would you make that very same argument?
I've been let go. It was fine.
The premise of your quip is nonsensical, since people are let go anyways. You wouldn't know that you were the marginal human that was cut because we are in inflation or not.
Re: Why the 2% inflation target? (2023)
#490Earlier quoted context omitted.
You're missing the bigger picture too. Silicon Valley Bank didn't collapse - it was bailed out with unlimited money from the bigger banks. The only limitation the banking system faces is excuses to loan money (one of the reason long-standing wars that last for years are increasingly common - the banking system gets to fund both sides)
> it was bailed out with unlimited money from the bigger banks. tell that to the equity owners of the bank.
There's no such thing as equity ownership anymore. The banking system has seen to that by slowly changing the legislation in every country around the world.