3 ms·
Not at the targeted 2% it doesn't. It convinces people to buy houses. Otherwise the money would be sitting in a bank account because if it's deflationary there'
by cguess 4y ago
Not at the targeted 2% it doesn't. It convinces people to buy houses. Otherwise the money would be sitting in a bank account because if it's deflationary there's no impetus to use it since it may be worth more next year. It's about balancing.
- aww_dang 4y agoSitting in a bank where borrowers could access it at a market rate of interest. Alternatively it would be invested in enterprises which generate returns above that market rate. Contrast this to the status quo of negative real rates. Speculative mania, valuations over dividends and FOMO driving investment cycles into increasingly absurd tulip bubbles. Despite increases in productivity, consumer prices continue to increase. Families have two spouses working and less leisure time. There's nothing wrong with deflation. This is the natural result of increased productivity and technological advances.
- datadata 4y ago"Convincing people to buy homes" is literally an example of misallocation of capital, in the sense that monetary policy is meant to be an intervention in a free market.