5 ms·

The 2% figure is arbitrary though. The correct thing to do is just stop printing money entirely. The idea of a 'deflationary spiral' is one of the many not very

The 2% figure is arbitrary though. The correct thing to do is just stop printing money entirely. The idea of a 'deflationary spiral' is one of the many not very well founded bits of economics that's really more like psychology, but inflation is always and everywhere a redistribution of wealth away from savers and people at the bottom, towards those who print money at the top. There's a deep lack of justice in that.

jbay808 5y ago
It's arbitrary but I got those numbers from economist John Taylor, who knows more than I do. Maybe zero inflation would be better.
imtringued 5y ago
The "savers" don't stop saving just because the money supply stays the same. They will actually save more until there is mass unemployment and they are structurally unable to save because of the aforementioned unemployment. We got at least two world wars out of "deflationary spirals" and every single gold standard that was attempted failed during deflation. Also, liquidity preference is a systemic redistribution from the bottom 90% to the top 10%. The people that benefit from inflation are the savers and bankers in the top 10% because they can live off the interest or capital yields which must be higher than interest. Bankers and savers benefit because governments, people and companies pay debts first before they pay anyone else. If the cantillon effect exists it exists in the boring form of those who own the most get paid the most. The proximity argument is nonsense because there are banks in every city. You can "print" money yourself by getting a mortgage to buy a house and many people do.
- native_samples 5y ago
  "They will actually save more until there is mass unemployment" This is pop psychology and there is ample counter-evidence for it. World War 2 was not caused by monetary policy! A hypothesised, partial cause that Hitler certainly exploited was crippling debts. But that wasn't solvable by economists. Do you think the allied powers that defeated Germany in WW1 would have sat back and tolerated Germany inflating away its war debts?

jbay808 5y ago

It's arbitrary but I got those numbers from economist John Taylor, who knows more than I do. Maybe zero inflation would be better.

imtringued 5y ago

The "savers" don't stop saving just because the money supply stays the same. They will actually save more until there is mass unemployment and they are structurally unable to save because of the aforementioned unemployment. We got at least two world wars out of "deflationary spirals" and every single gold standard that was attempted failed during deflation. Also, liquidity preference is a systemic redistribution from the bottom 90% to the top 10%. The people that benefit from inflation are the savers and bankers in the top 10% because they can live off the interest or capital yields which must be higher than interest. Bankers and savers benefit because governments, people and companies pay debts first before they pay anyone else. If the cantillon effect exists it exists in the boring form of those who own the most get paid the most. The proximity argument is nonsense because there are banks in every city. You can "print" money yourself by getting a mortgage to buy a house and many people do.

native_samples 5y ago
"They will actually save more until there is mass unemployment" This is pop psychology and there is ample counter-evidence for it. World War 2 was not caused by monetary policy! A hypothesised, partial cause that Hitler certainly exploited was crippling debts. But that wasn't solvable by economists. Do you think the allied powers that defeated Germany in WW1 would have sat back and tolerated Germany inflating away its war debts?