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Not the original commentor, but much of the US' financial system is run with the express goal of trying to grow at about 5% per year. The target inflation of 2%
by JackMorgan 6y ago
Not the original commentor, but much of the US' financial system is run with the express goal of trying to grow at about 5% per year. The target inflation of 2% is intended to encourage us to spend money reinvesting in new business rather than sitting on it. Returns have to be better than 2% to just break even.
- brutusborn 6y agoBut where do you get this 5% figure from? My understanding was that the inflation target of 2% was to reduce the risk of runaway deflation. I'm not saying you're wrong, but I hear the "unlimited growth" argument crop up a lot with no basis.
- idiocrat 6y agoReally sorry for causing confusion, by putting up such an exact number, 5%. It is just my common understanding that the countries anchoring the growth goals around that number. The policies pf cause vary by country (developed, developing), for example for GDP: Japan's "annual forecast is +3.6% in 2021, and +2.2% in 2022". [0] The UN's Sustainable Development Goal [1] sets "For the least developed countries, the economic target is to attain at least a 7 percent annual growth in Gross Domestic Product (GDP)." Long time ago I remember watching a video by a prof, who asked a local council what would be the desirable growth (in range 1%-10%). The council agreed that 5% is reasonable. Here I found the video [2]. [0] https://www.ubs.com/global/en/investment-bank/in-focus/2020/japanese-economic-outlook.html https://www.ubs.com/global/en/investment-bank/in-focus/2020/... [1] https://en.wikipedia.org/wiki/Sustainable_Development_Goal_8 https://en.wikipedia.org/wiki/Sustainable_Development_Goal_8 [2] https://youtu.be/DZCm2QQZVYk?t=520 https://youtu.be/DZCm2QQZVYk?t=520