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Why does the US need to stick to a 2% inflation rate? India's has exceeded 5% for decades (https://www.worlddata.info/asia/india/inflation-rates.php#:~:text=Dur

by sabujp 4y ago

Why does the US need to stick to a 2% inflation rate? India's has exceeded 5% for decades (https://www.worlddata.info/asia/india/inflation-rates.php#:~:text=During%20the%20observation%20period%20from,year%20inflation%20rate%20was%206.5%25 https://www.worlddata.info/asia/india/inflation-rates.php#:~....). Indian stock market shows no signs of recession. If you held since 1990 (or inception) (data from tv https://www.tradingview.com/x/rGnAJxlH/ https://www.tradingview.com/x/rGnAJxlH/) : Ethereum +9110% India NIFTY50 +6059% Bitcoin +5566% Nasdaq100 +4705% Shanghai SSE Composite +2307% NIFTY100 +1709% SPX S&P 500 +908% SSE50 +227% SSE100 +67%

imtringued 4y ago
Because inflation should be predictable to ensure that businesses and people can plan and save up for purchases ahead of time. 5% inflation falsifies economic statistics at a greater rate than 2%
surement 4y ago
> Why does the US need to stick to a 2% inflation rate? Because high inflation means the money in your bank account becomes worthless at an exponential pace.
- stubish 4y ago
  Which encourages investment and spending, stimulating the economy, rather than letting money sit idle.
  - surement 4y ago
    not everyone wants to actively invest their money, "spend/invest your money or lose it" is a pretty shitty attitude
    - sabujp 4y ago
      Wherever you have "high" inflation you have bank fixed deposit rates to match. Do you know what the FD rate is for major banks in India say for a 1 year FD (CD)?
    - msworddebugger 4y ago
      It’s the reality. Money is an abstraction over value. You provide value to get money, you spend money receive value. Some value is provided by nature (clean air, wild berries, etc.) and is therefore priceless. However, most value is created by applying energy and human attention to base inputs. Money is not a battery for work in the physics sense, or for work in the labor sense. If you earn money through labor today, there is no guarantee that there will be someone tomorrow willing or able to do the same labor you did for the same money. Humans want to believe in stored value (see bitcoiers, goldbugs), but the reality is the majority of value in the world is delivered by systems that must be continually operated such as energy grids, water systems, retailers, internet infrastructure providers, farms, and factories. There is nothing that guarantees these systems will exist tomorrow except for the efforts or regular people like you and me, so there is nothing that guarantees that your money will be worth anything tomorrow except for the belief that everyone will keep showing up and trying.
- comte7092 4y ago
  2% inflation and 10% inflation are both exponential. It’s a matter of degree, not of kind.
  - surement 4y ago
    I'm also against a 2% inflation target.
anuvrat1 4y ago
If you want the reasoning, this IMF paper[1] goes into the detail. Generally gist is development rate (like GDP) is high in developing country, so is the inflation [1: Inflation Targeting as a Framework for Monetary Policy]: https://www.imf.org/external/pubs/ft/issues/issues15/ https://www.imf.org/external/pubs/ft/issues/issues15/
- sabujp 4y ago
  India's central bank target inflation rate is 4% +- 2%, and even now the rate is still at 7-8% and they're in no hurry to try to reduce it (https://www.reuters.com/world/india/exclusive-india-govt-in-no-hurry-medium-term-inflation-target-sources-2022-09-21/ https://www.reuters.com/world/india/exclusive-india-govt-in-...).
  - rhaway84773 4y ago
    7% inflation as opposed to a targeted high of 6% is very different from 7% (actually 8+%) inflation, from a targeted high of about 2-4% (the Fed doesn’t publish a range I believe…they only say they target 2%…in practice, historically, they’ve treated 2% as a high, but I believe thats changed since the Great Recession so I’ll generously assume a +-2% range). What’s even more relevant to the Indian situation is that much of that inflation is being driven by the strength of the dollar which has made imports more expensive. The U.S., of course, is on the other side of that problem. The ridiculously strong dollar means that solely currency effects should be making things cheaper for Americans.

by sabujp 4y ago

imtringued 4y ago

Because inflation should be predictable to ensure that businesses and people can plan and save up for purchases ahead of time. 5% inflation falsifies economic statistics at a greater rate than 2%

surement 4y ago

> Why does the US need to stick to a 2% inflation rate? Because high inflation means the money in your bank account becomes worthless at an exponential pace.

stubish 4y ago
Which encourages investment and spending, stimulating the economy, rather than letting money sit idle.
- surement 4y ago
  not everyone wants to actively invest their money, "spend/invest your money or lose it" is a pretty shitty attitude
  - sabujp 4y ago
    Wherever you have "high" inflation you have bank fixed deposit rates to match. Do you know what the FD rate is for major banks in India say for a 1 year FD (CD)?
  - msworddebugger 4y ago
    It’s the reality. Money is an abstraction over value. You provide value to get money, you spend money receive value. Some value is provided by nature (clean air, wild berries, etc.) and is therefore priceless. However, most value is created by applying energy and human attention to base inputs. Money is not a battery for work in the physics sense, or for work in the labor sense. If you earn money through labor today, there is no guarantee that there will be someone tomorrow willing or able to do the same labor you did for the same money. Humans want to believe in stored value (see bitcoiers, goldbugs), but the reality is the majority of value in the world is delivered by systems that must be continually operated such as energy grids, water systems, retailers, internet infrastructure providers, farms, and factories. There is nothing that guarantees these systems will exist tomorrow except for the efforts or regular people like you and me, so there is nothing that guarantees that your money will be worth anything tomorrow except for the belief that everyone will keep showing up and trying.
comte7092 4y ago
2% inflation and 10% inflation are both exponential. It’s a matter of degree, not of kind.
- surement 4y ago
  I'm also against a 2% inflation target.

anuvrat1 4y ago

If you want the reasoning, this IMF paper[1] goes into the detail. Generally gist is development rate (like GDP) is high in developing country, so is the inflation [1: Inflation Targeting as a Framework for Monetary Policy]: https://www.imf.org/external/pubs/ft/issues/issues15/ https://www.imf.org/external/pubs/ft/issues/issues15/

sabujp 4y ago
India's central bank target inflation rate is 4% +- 2%, and even now the rate is still at 7-8% and they're in no hurry to try to reduce it (https://www.reuters.com/world/india/exclusive-india-govt-in-no-hurry-medium-term-inflation-target-sources-2022-09-21/ https://www.reuters.com/world/india/exclusive-india-govt-in-...).
- rhaway84773 4y ago
  7% inflation as opposed to a targeted high of 6% is very different from 7% (actually 8+%) inflation, from a targeted high of about 2-4% (the Fed doesn’t publish a range I believe…they only say they target 2%…in practice, historically, they’ve treated 2% as a high, but I believe thats changed since the Great Recession so I’ll generously assume a +-2% range). What’s even more relevant to the Indian situation is that much of that inflation is being driven by the strength of the dollar which has made imports more expensive. The U.S., of course, is on the other side of that problem. The ridiculously strong dollar means that solely currency effects should be making things cheaper for Americans.