5 ms·

Soft landing? No, they haven’t even come down to 10,000 feet and are nowhere near a runway. Where we are right now is an unhealthy stasis with inflation well a

Soft landing? No, they haven’t even come down to 10,000 feet and are nowhere near a runway. Where we are right now is an unhealthy stasis with inflation well above 2%. And low unemployment due to a disabled workforce. All they are doing is delaying the inevitable. If inflation is to go down anywhere near 2%, then the Fed has the raise rates.

toomuchtodo 3y ago
Something to note is that the Fed didn't come up with 2%. They cribbed it off the bank of New Zealand two and a half decades ago. 2% might be untenable in a macro with a shrinking working force due to structural demographics (55+ participation is what is holding up US participation rate currently, and those people retire and die every day). The future is unable to repeat the past. 3-4% is probably more reasonable imho. Raising rates forever when you can't get to 2% because of fundamentals is unproductive. https://www.nytimes.com/2014/12/21/upshot/of-kiwis-and-currencies-how-a-2-inflation-target-became-global-economic-gospel.html https://www.nytimes.com/2014/12/21/upshot/of-kiwis-and-curre... https://www.nytimes.com/2023/03/24/business/inflation-federal-reserve-interest-rates.html https://www.nytimes.com/2023/03/24/business/inflation-federa... https://fivethirtyeight.com/features/why-the-feds-want-2-percent-inflation/ https://fivethirtyeight.com/features/why-the-feds-want-2-per... https://seekingalpha.com/article/4531829-older-workers-propping-up-us-economy https://seekingalpha.com/article/4531829-older-workers-propp... > And high unemployment due to a disabled workforce Wut? Please prove this assertion wrt the use of the word "high." [1] That's arguably a call for stronger social safety nets [2], not more disabled employment. At least a lot of these folks are able to be on Medicare ("Half of all persons with a disability were age 65 and over, nearly three times larger than the share for those with no disability.") and Social Security. [1] https://www.bls.gov/news.release/disabl.nr0.htm https://www.bls.gov/news.release/disabl.nr0.htm [2] https://www.ssa.gov/benefits/disability/ https://www.ssa.gov/benefits/disability/
- FollowingTheDao 3y ago
  > And high unemployment due Sorry, that meant to say “high employment due to a disabled workforce”. Text to speech error. I don’t know opinion about the 2% rate, it’s just wet the Fed names for. They’ve said it over and over again that that’s the goal. And you can say it’s made up butt inflation at 4% is unsustainable when wages aren’t rising at the same rate. And when wages do you start to rise?
  - toomuchtodo 3y ago
    > And when wages do you start to rise? When workers organize and unionize, which they are not doing fast enough (imho) considering the leverage available to them (due to structural demographics previously mentioned).
    - FollowingTheDao 3y ago
      Yeah sorry I kind of garbled that sentence. That’s my point when inflation, rises and ploy is unionized, and we just go up. And then wages go up there’s less profit for the company so either there’s an economic downturn or there’s inflation again. So the people who control the economy are trying to balance this level between corporate profit and work or revolt. And that has been the so-called 2% sweet spot.
- bryanlarsen 3y ago
  2% is an arbitrary number, yes. But the fact that there is a target, and that the target is credible is far more important than the actual value. If they changed the value now, nobody would trust the new value and it'd lose all meaning. I agree that 2% is too low, but the only way to credibly change the number is prove they take the number seriously by getting back down to 2% before they increase it.
  - FollowingTheDao 3y ago
    In my opinion, 2% is not too low, 2% is too high. Inflation only serves to create profit for industry. The only inflation target I propose is 0%. Just think about it, why don’t they consider a 0% inflation a stable economy? And why is 0% inflation a bad thing?
    - jfengel 3y ago
      0% inflation is a bad thing because it encourages people to put off purchasing things. That means that people who make things lose work. Fewer people are employed; less stuff is made; the economy as a whole doesn't advance. Low inflation is good for savers, but they'd rather have people invest money than sit on it. Inflation is a punishment for people who take their money out of the system. The Fed aims for a gentle inflation to nudge people into buying stuff now rather than putting it off until tomorrow. The 2% figure is, very roughly, the amount of inflation that matches the expected systemic unemployment under Okun's Law. ("Laws" in economics are, of course, much less solid than they are in physics, but it does mean there's a model behind it and not just a guess.)
      - FollowingTheDao 3y ago
        > 0% inflation is a bad thing because it encourages people to put off purchasing things. I would say, that’s a good thing actually, considering the state of the climate.
        jfengel 3y ago

toomuchtodo 3y ago

Something to note is that the Fed didn't come up with 2%. They cribbed it off the bank of New Zealand two and a half decades ago. 2% might be untenable in a macro with a shrinking working force due to structural demographics (55+ participation is what is holding up US participation rate currently, and those people retire and die every day). The future is unable to repeat the past. 3-4% is probably more reasonable imho. Raising rates forever when you can't get to 2% because of fundamentals is unproductive. https://www.nytimes.com/2014/12/21/upshot/of-kiwis-and-currencies-how-a-2-inflation-target-became-global-economic-gospel.html https://www.nytimes.com/2014/12/21/upshot/of-kiwis-and-curre... https://www.nytimes.com/2023/03/24/business/inflation-federal-reserve-interest-rates.html https://www.nytimes.com/2023/03/24/business/inflation-federa... https://fivethirtyeight.com/features/why-the-feds-want-2-percent-inflation/ https://fivethirtyeight.com/features/why-the-feds-want-2-per... https://seekingalpha.com/article/4531829-older-workers-propping-up-us-economy https://seekingalpha.com/article/4531829-older-workers-propp... > And high unemployment due to a disabled workforce Wut? Please prove this assertion wrt the use of the word "high." [1] That's arguably a call for stronger social safety nets [2], not more disabled employment. At least a lot of these folks are able to be on Medicare ("Half of all persons with a disability were age 65 and over, nearly three times larger than the share for those with no disability.") and Social Security. [1] https://www.bls.gov/news.release/disabl.nr0.htm https://www.bls.gov/news.release/disabl.nr0.htm [2] https://www.ssa.gov/benefits/disability/ https://www.ssa.gov/benefits/disability/

FollowingTheDao 3y ago
> And high unemployment due Sorry, that meant to say “high employment due to a disabled workforce”. Text to speech error. I don’t know opinion about the 2% rate, it’s just wet the Fed names for. They’ve said it over and over again that that’s the goal. And you can say it’s made up butt inflation at 4% is unsustainable when wages aren’t rising at the same rate. And when wages do you start to rise?
- toomuchtodo 3y ago
  > And when wages do you start to rise? When workers organize and unionize, which they are not doing fast enough (imho) considering the leverage available to them (due to structural demographics previously mentioned).
  - FollowingTheDao 3y ago
    Yeah sorry I kind of garbled that sentence. That’s my point when inflation, rises and ploy is unionized, and we just go up. And then wages go up there’s less profit for the company so either there’s an economic downturn or there’s inflation again. So the people who control the economy are trying to balance this level between corporate profit and work or revolt. And that has been the so-called 2% sweet spot.
bryanlarsen 3y ago
2% is an arbitrary number, yes. But the fact that there is a target, and that the target is credible is far more important than the actual value. If they changed the value now, nobody would trust the new value and it'd lose all meaning. I agree that 2% is too low, but the only way to credibly change the number is prove they take the number seriously by getting back down to 2% before they increase it.
- FollowingTheDao 3y ago
  In my opinion, 2% is not too low, 2% is too high. Inflation only serves to create profit for industry. The only inflation target I propose is 0%. Just think about it, why don’t they consider a 0% inflation a stable economy? And why is 0% inflation a bad thing?
  - jfengel 3y ago
    0% inflation is a bad thing because it encourages people to put off purchasing things. That means that people who make things lose work. Fewer people are employed; less stuff is made; the economy as a whole doesn't advance. Low inflation is good for savers, but they'd rather have people invest money than sit on it. Inflation is a punishment for people who take their money out of the system. The Fed aims for a gentle inflation to nudge people into buying stuff now rather than putting it off until tomorrow. The 2% figure is, very roughly, the amount of inflation that matches the expected systemic unemployment under Okun's Law. ("Laws" in economics are, of course, much less solid than they are in physics, but it does mean there's a model behind it and not just a guess.)
    - FollowingTheDao 3y ago
      > 0% inflation is a bad thing because it encourages people to put off purchasing things. I would say, that’s a good thing actually, considering the state of the climate.
      - jfengel 3y ago