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The primary driver of the fed is stopping prices from increasing too fast? The fed does talk about inflation, but unless my perception is wrong, they talk abou
by dnautics 5y ago
The primary driver of the fed is stopping prices from increasing too fast? The fed does talk about inflation, but unless my perception is wrong, they talk about employment more.
- reducesuffering 5y agoI think you're interpretation is correct and GP is wrong to think the "primary driver of the Fed is stopping prices from increasing too fast." Fed has recently repeatedly stated it's goal is to drive down unemployment and is willing to let inflation run hot to achieve that. It's always a balancing act if one of them is worse than the other, they will focus on that. However it looks like when both of them are bad, they would rather focus on unemployment by letting inflation hit harder.
- notahacker 5y agoThe Fed has a formal target of 2% inflation (the major change recently was to allow it to be 2% on average, over time rather than 2% period) It doesn't have any employment target, although obviously extremes of unemployment is something it pays some attention to when deciding whether it's OK to miss its primary target or not.
- Geee 5y agoThere's a mistake in that comment. The opposite is true. Central banks primary driver is to stop CPI prices from decreasing, which happens naturally because economic productivity increases with technological progress, making it easier and cheaper to produce goods and services. Money is created to revert this development so that CPI prices increase at the rate of 2% per year. Naturally, life would get easier because of technology, but instead life is made harder and harder to incentivize economic growth and environmental destruction, and keeping people in jobs that are not necessary or keeping work days longer than necessary (hamster-wheel economy). It's important to note that inflation is relative to CPI prices, because CPI prices will naturally decrease but prices of scarce assets like real estate will relatively increase because they're more limited by space, time and energy. On the other hand, digital goods and services are highly deflationary, i.e. digital consumption is getting cheaper. So, there's digital deflation, 2% CPI inflation, 10% (or more) asset inflation.
- dnautics 5y agoTrue. I would 100% agree that the fed's priorities, (north star: maintain 'stability' for some definition of stability), in order of importance are: KPI 1. Keep prices from decreasing (screw the poor, put the middle class on a hamster wheel so they don't get too powerful) KPI 2. Keep employment up (if you're working you're too busy to revolt) KPI 3. Keep prices from increasing too fast (or else people will have nothing to lose and will riot)
- solveit 5y agoI can't tell if you're exaggerating for effect or if you really believe the parenthetical comments, but the people working at the fed are fairly regular people and don't think that way.
- dnautics 5y agoThe people working at the fed are not regular people. I know at least two. Call me when someone at the fed has driven for Uber or Lyft for two years to understand markets from a "regular person" perspective, or moonlights a second job as a server at a restaurant to understand how the disparity in tax treatment for tipped jobs affects economic choices of the exhausted wage-earner. The point of the parentheticals is not to imply this is what those a the fed believe, but to highlight how the single north star "optimize for social stability" has encoded within itself dangerous biases. Whether or not they believe those things, that is what they are working towards.
- Geee 5y agoKPI 4. Allow wealthy people, institutions and governments to get cheap money without real cost of capital, stealing away all wealth from the common people.
- xapata 5y agoIf inflation goes up as a result of low inflation rates, debtors benefit. Which is why all the bankers are complaining about the possibility.