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Why the 2% inflation target? (2023)

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

#551

Post by rhelz »

living_room_pc wrote: post #500
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…

On a individual level, your examples may not representative of younger generations who have less liabilities. This demographic of course are more likely to rent and buy a cheaper car (or no car at all), consequently they would likely have a higher liquid/non-liquid asset ratio and therefor would probably benefit in the short term to deflation. In the long term they would fair better than older generation for the reas…

> your examples may not representative of younger generations

Well, first of all, let me heartily agree with you that the young adults are being and have been being screwed for about 20 years now.

But remember in 2008, when middle aged and old farts like myself were being thrown out of their houses by the millions? That had absolutely no ill effect on young adults?

> plus the fact they can change their living situation faster

Yeah....but isn't that pretty much saying "lets screw the younger generation--they can take it better than we can!!" I mean, the younger generation shouldn't be always scrambling to find a new job at a lower salary, moving out of apartments they can no longer afford, etc etc. They should have the security to enable them to build a wonderful future for themselves.

> Regarding inflation, I would argue that younger people are more susceptible.

True. Inflation is bad. But it's important to realize that the inflation we are currently suffering didn't come about by the Federal reserve mucking around with interest rates. It was caused by Trump adding $8.5 trillion to the deficit, and financing that largely by printing money.

The young, of course, are screwed both ways: they have to endure the present inflation, and then they have to pay back that debt, while they are trying to keep their parents in a decent nursing home at the same time they are trying to pay for their kids college education.

The only reason they aren't rioting in the streets demanding better from us is that most of them are too young to even remember an economy which works the way it should.

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

#552

Post by carlosjobim »

okr wrote: post #477
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…

I can agree with that. It is like the frog in slowly boiling water, just the other way around, people don't realize and appreciate, in what wealth they live and that we all make it constantly better for everyone, consciously or unconsciously. But people look at other people who are visibly better off, compare themselves against those and get tricked into believing, that it is no just. How he can have more? Must be ev…

If you mean what you say, I'll trade you all my modern conveniences in return for a small patch of land with a house in 1970s standard or 1960s standard. Deal? If offered this, a large majority of young people and people without real estate would gladly accept and happily live without iphones or AC.

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

#553

Post by HDThoreaun »

npoc wrote: post #466
treyd wrote: post #354

Earlier quoted context omitted.

GDP per capita is a poor measure of general wellbeing since it doesn't account for changes in the cost of living and is skewed by funny business in stock markets.

Most importantly, it's measured using something that is halving in value every ten years. https://fred.stlouisfed.org/series/M2SL

Real GPD...

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

#554

Post by cjblomqvist »

spaceman_2020 wrote: post #155
bluescrn wrote: post #44

Earlier quoted context omitted.

> 2) Inflation reduces the true value (cost) of debt. And with $34.5 trillion of it, that’s a big incentive to keep it around. This is the point that a lot of people miss. Inflation is good for governments as well as businesses who can exploit high inflation to raise prices and shrinkflate products disproportionatly while lowing their wage bills in real terms. But it inflicts the most suffering on not just the workin…

So many of my cohort are now in a state of financial nihilism. Just yolo into the hottest stocks and crypto because debt is money and cash is for suckers.

With regards to debt is money - it's actually the other way around. Money is debt (by definition).

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

#555

Post by noqc »

throw0101d wrote: post #158
noqc wrote: post #71

Earlier quoted context omitted.

food became cheaper because it became cheaper to produce. Inflation is a very natural consequence of the fact that If I have money now, I can also very easily have that same money later, but the same cannot be said of having money later. Strategically, having money now dominates having money later, so money now is worth more than money later. How much? Who can say, but some.

> food became cheaper because it became cheaper to produce. Which was caused by technological progress which is the key source of de flation (being able to buy more with the same amount of money). It is de flation is happening regularly: > But Inflation is not inevitable. There are numerous countervailing forces that have been at work for much of the past 50 years. The three big Deflation drivers: 1) Technology, whic…

This is not the same effect. You'd still rather have money prior to the industrial revolution than the same amount of money after. The money itself is worth more earlier. The phenomenon I described is mathematical fact.

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

#556

Post by randomdata »

harimau777 wrote: post #403
randomdata wrote: post #371

Earlier quoted context omitted.

> 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 compare…

How can people be richer in housing if they can't own a house. That doesn't make sense to me.

You can't own social interaction, but some people are rich socially. Rich is not defined by ownership.

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

#557

Post by vel0city »

bsdpufferfish wrote: post #550
vel0city wrote: post #413

Earlier quoted context omitted.

Holding on to currency or shiny objects is just another form of speculation. Maybe the bank fails. Maybe your house burns down and melts the contents of your safe. Maybe you're robbed. Maybe trade wars massively reduce your purchasing power. Maybe a new source of the shiny objects gets found and it's not are rare as you think. Maybe less people care about that shiny object in the future. Maybe that gold certificate w…

Of course there is always risk. But one of the supposed goals of fiat money and property rights is to reduce that risk, ensuring the ability to save into the future. There are countless examples of countries where that trust was broken.

Your argument of governments are supposed to protect property rights still applies for bonds and stocks and other investments, so once again still not exactly an argument for incentivizing speculation on pieces of paper or shiny objects instead of productive assets.

The point of fiat isn't to give returns to those who worked hard by burying paper in their backyard, the point of fiat is to be an easy medium of exchange which does involve a certain level of value stability. A currency having a slow, predictable rate of inflation can still be considered having a certain level of stability, at least when concerning being a useful medium of exchange. I know that a loaf of bread isn't going to be $50 or $0.05 tomorrow, it'll likely be roughly the same as today. Over a long time scale sure that loaf will probably be more than today, but I'll be buying that bread in 2044 dollars not 2024 dollars, because in the end I shouldn't be incentivized to hold dollars.

And once again the only way to address "it's not good for society that ordinary people have to speculate" is by having strong social safety nets. Hoarding paper or shiny objects is still speculation with risks, as you just agreed.

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

#559

Post by vkou »

mitthrowaway2 wrote: post #368
vkou wrote: post #350

Earlier quoted context omitted.

Scarcity because nobody is working. It's not a contradiction. Inflation encourages economic activity - work. Deflation discourages it.

I think you're being downvoted because you haven't explained why the store wouldn't raise prices before the shelves go empty.

If all the stores did that, and people would actually buy goods at those prices, you'd be in an inflationary economy, not a deflationary one.

What do you think inflation is? It's a reduction in the value of money, relative to goods. You can't say that the solution to the problems of deflation is inflation. (I mean, you can, that is my whole point... but it fully undermines the original argument.)

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

#560

Post by Alpha3031 »

throwaway14356 wrote: post #293
smegger001 wrote: post #187

Earlier quoted context omitted.

and we didn't even get the productivity increase, if we had the computer revolution should have massively increased everyone wages due to increased efficiency.

One can always argue the computer is doing more of the work. Sitting there watching the production line doesn't look very productive or challenging?

Labour productivity in economics is output per labour hour, it doesn't matter what is doing the work. As an extreme example, if robots took over and human labour is no longer required for anything then (human) labour productivity would be infinite, it doesn't matter if no humans are actually doing any labour.
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