Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Why the 2% inflation target? (2023)

sites.lsa.umich.edu

Post reply on HN
Print view View original

591–600 of 619 posts

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

#591

Post by carlosjobim »

tasuki wrote: post #589
carlosjobim wrote: post #552

Earlier quoted context omitted.

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.

I believe that's what they'd say but they actually wouldn't want to do that. Do you know the size of houses in 1960s and how many people lived in how much space? Today people are priced out of the housing market because everyone expects opulent luxury.

No, that's not true. And I don't think you really believe that yourself either. It's just an easy cop out to not have to think about a very serious issue that is crushing your fellow man right now.

It is the home sellers who put "opulent luxury" prices on worn down homes in need of repair. It is the sellers who renovate homes for 100 000 to increase the asking price with 500 000.

Imagine if this was the market for cars or any other goods.

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

#592

Post by carlosjobim »

adriand wrote: post #277
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…

An under-appreciated benefit of inflation is that it reduces the value of debts. All things being equal (and of course they aren’t), inflation is good for debtors and bad for debt-holders. If you owe $500k on your mortgage, inflation at 5% annually is reducing your debt load substantially without you needing to do anything.

That's only true if wages keep up with inflation. Which they haven't done in decades.

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

#593

Post by npoc »

notahacker wrote: post #590
npoc wrote: post #567

Earlier quoted context omitted.

> The money was "created out of thin air" is the loaning bank's debt to the account the borrowed money is assigned to, not the bank's asset, so there's a very real cost to them if the borrower defaults and stops repaying them. Banks can become bankrupt, just like any other business, and no, they can't "print" their way out of it. I think the confusion is down to the fact that I'm looking at the central banking system…

You're not "looking at the bigger picture", you're just unambiguously and spectacularly wrong. The banking system is composed of banks, and being insolvent is bad for a bank, for a bank that is owed money by an insolvent bank, and for banks which are owed money by banks which are owed money by insolvent banks, for banks that aren't owed money by banks, and ultimately, for consumers that are owed currency. The fact th…

As I've seen time and time again from pepple with views like yours, you simply can't see the wood for the trees.

Fact 1: The amount of dollars is continuously increasing, at a rate of ~100% per decade. The amount which it has dropped in the last 2 years is tiny - that you use this as a counter is a simply ridiculous. https://fred.stlouisfed.org/series/M2SL

Fact 2: The money is created effortlessly.

Fact 3: The banking system is collecting interest on every single dollar in existence.

Assuming 3% average interest, and $100 trillion total, that interest would amount to ~$3,000,000,000,000 per year or * ~15% of the total GDP of the USA*. I'd love to hear your justification for how this is value for money.

It's absolute theft through deception.

> It's not difficult to find savings opportunities at above the average rate of inflation, unless you define "saving" as "bury money in the ground". But yes, if you think the purpose of the economy is ensure the unproductive maximize their returns, the existing system is definitely worse...

Yes, "saving" is storing your earnings for use later. This is entirely sensible and natural. Most people who are not aware of hard money are forced to either a) lend their life savings to the stock market for essentially free (7% returns only make up for the 7% devaluation due to money printing). b) take a house off the market and rent it out to a tenant who is unable to buy due the monetisation of real estate, only making it even harder for the next person to buy.

The only reason this whole scam continues is because the general population has no idea of the rate at which the banking system is stealing value from their money. And people like you only exacerbate the problem.

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” - Henry Ford

Ultimately digital hard money doesn't care about your Keynesian pseudo-science. Just like the law of gravity and the law of nature, Thier's and Gresham's Laws will prevail and shut the whole central banking scam down.

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

#594

Post by npoc »

Entwickler wrote: post #528
npoc wrote: post #437

Earlier quoted context omitted.

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.

Proof of work was the first of the consensus algorithms to be used with blockchains because Satoshi (imo, probably Hal Finney) likely didn't know about Proof of Stake at the time. By the time it was being discussed, Satoshi was already becoming less active in the community. The claim PoS is not the best store of value is asinine. PoW in BTC has consolidated around a cabal of a handful of miners and the power usage is…

Proof of stake is not really any different to the fiat system it's trying to replace.

If a money isn't proof-of-work then it implies that some people can create it without doing work.

Gold's proof-of-work stood it in good stead for thousands of years. It was only some of it's physical limitations that led to fiat beating it. In fact fiat would be worthless if it wasn't boot-strapped into having value by originally representing gold's proof-of-work. Now we have digital proof of work in bitcoin. It doesn't have the physical limitations of gold, and fiat is going to hyperinflate to 0 once again - but this time it will stay there.

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

#595

Post by xnx »

carlosjobim wrote: post #552
okr wrote: post #477

Earlier quoted context omitted.

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.

This seems extremely unlikely. I'd rather give up indoor plumbing than my phone.

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

#596

Post by Aerbil313 »

throwawaymaths wrote: post #438
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…

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…

This was so insightful, thanks.

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

#597

Post by Aerbil313 »

bsdpufferfish wrote: post #396
lupire wrote: post #191

Earlier quoted context omitted.

"Paradox of thrift". Economic version of losing weight by cutting off your toes.

Even if it's good for GDP to have everyone spending every penny, it's not good for you.

Two economists were walking down the street. One saw a dog shit on the ground, and told the other: “If you eat that, I’ll give you thousand dollars.” Other guy looked at it, thought “It’s bad, but I’ll get $1000”, and ate it. His friend paid him, although he still regretted it because it was really bad. After some time, they encountered another dog shit. This time the guy who ate it before, seeking revenge of the foul taste in his mouth, offered $1000 for eating it to his friend. He accepted, thinking “I’ll gain the $1000 I lost”. He ate it and got paid. After some time, they stopped for a while, and one said to other, “I feel like we just ate shit for nothing”, his friend replied: “Oh, come on! We just contributed to the GDP by $2000, it can’t be for nothing!”

(Commented this exact commenting the past, but relevant so doing it again.)

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

#598

Post by Aerbil313 »

orwin wrote: post #99
csomar wrote: post #61

> This would be problematic since people would not invest or spend money to get the country out of a recession when they could just get a return from doing nothing. Instead of taking a risk and investing the money, the velocity of money decreases, and there is less spending leading to higher unemployment and less growth. > The story of the inflation target is one which is much more random and less thought through tha…

If all money become deflationnary, countries will have to move almost all taxes to wealth taxes, which is, now that i think about it, not a bad idea. I might be convinced now :P

In Islamic economy interest is forbidden, there are no taxes and every Muslim is required to give 1/40 of their wealth to the poor every year (zakah). It is collected mandatorily and distributed by the government. Non-Muslims pay an annual protection tax aka jizya, in exchange for not paying zakah and not serving in the army. Modern scholars argue that collecting tax is permissible because of modern needs and responsibilities of the government (e.g infrastructure building), but only the strictly needed amount.

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

#599

Post by npoc »

HDThoreaun wrote: post #553
npoc wrote: post #466

Earlier quoted context omitted.

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

Real GPD...

Real GDP uses CPI as a correction factor making it highly misleading.

CPI is thoroughly flawed. It doesn't take into account that consumables are actually falling in value by 5%/year due to ever increasing efficiencies of production, and it only includes a carefully selected basket of goods which notably doesn't include hard assets like real estate. It's algorithm is even changed through years and if we use algorithms from previous decades, they produce much higher figures.

It completely ignores the fact that the fiat currencies are devalued through money supply inflation (the real inflation)

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

#600

Post by notahacker »

npoc wrote: post #593
notahacker wrote: post #590

Earlier quoted context omitted.

You're not "looking at the bigger picture", you're just unambiguously and spectacularly wrong. The banking system is composed of banks, and being insolvent is bad for a bank, for a bank that is owed money by an insolvent bank, and for banks which are owed money by banks which are owed money by insolvent banks, for banks that aren't owed money by banks, and ultimately, for consumers that are owed currency. The fact th…

As I've seen time and time again from pepple with views like yours, you simply can't see the wood for the trees. Fact 1: The amount of dollars is continuously increasing, at a rate of ~100% per decade. The amount which it has dropped in the last 2 years is tiny - that you use this as a counter is a simply ridiculous. https://fred.stlouisfed.org/series/M2SL Fact 2: The money is created effortlessly. Fact 3: The bankin…

I assume by "people with views like yours" you mean people who haven't formed their impression of how the financial system works from solely from lists of falsely-attributed pithy quotes

Learning how stuff actually works doesn't mean you can't see woods, but it does save the embarrassment of claiming that the banking system is no worse off if debts aren't repaid. I mean, I've encountered some pretty wild takes on the 2007 financial crisis before, but I've never encountered anyone that thinks it didn't happen!

It also means you can say stuff like "Fact 4: "printing" dollars and bearing the risk of non-repayment of loans represents a cost to banks", and come to the conclusion that seems to give them a pretty good reason to be able to charge interest. And also to suggest that if you think current interest rates aren't "value for money" you should probably rethink your calls for them to go up!

The irony of shilling for "digital hard money" - i.e an ever increasing range of entirely synthetic assets entirely printed in the last 15 years whose demand is driven partly by counterfeit dollars and partly on people borrowing to speculate on other-newly printed entirely synthetic assets... after complaining about expansionary dynamics in M2 (which unlike "digital hard money" sometimes has a downslope) is just chefs kiss.

Post reply on HN