3 ms·

> Inflation is still twice the target rate at 4% First of all, the article says inflation is at 3%. Sounds like you're over-reacting here. 4% may be "double"

> Inflation is still twice the target rate at 4% First of all, the article says inflation is at 3%. Sounds like you're over-reacting here. 4% may be "double" (if that's the number you want to go with), but it's not a huge difference. Some economists even think the target is too low, and 3% would be completely fine. On top of that 1) it takes time for all these interest rate hikes to give their full effect, 2) inflation is currently going down, 3) killing jobs just to get slightly closer to a magic number no one really knows is essential to achieve is odd. Inflation is already low and under control. Being alarmist about (not actually) 4% is odd.

nostrademons 3y ago
For reference, 2% inflation over 30 years is an 82% rise in prices. 4% inflation over 30 years is a 232% rise in prices. Many people underestimate the effect of compounding interest and how much of a difference rates of return make.
- afterburner 3y ago
  Many people underestimate the effect of compounding unemployment.
  - nostrademons 3y ago
    Unemployment doesn't compound, though. The highest it can go is 100%, and in practice people have a strong incentive to get new jobs and make new jobs long before it reaches that point. Unemployment has a negative feedback loop: the more people who are unemployed, the more wages drop, which makes it more cost effective to employ people, which reduces unemployment. Inflation has a positive feedback loop: the higher prices rise, the more people need to hunt for raises to make ends meet, which means higher costs and even higher prices. Or alternatively, the more time they spend looking for new jobs, meaning less actual work done, meaning lower productivity, less output, greater scarcity, and higher prices. That was the big realization of the late 70s and early 80s. When the 70s inflation first got going in the late 60s, people thought "Eh, a little inflation is preferable to mass unemployment." By the end of the 70s, they'd learned that if you choose inflation, you get both, because people can't make prudent investments in the future if prices are not stable.
    - afterburner 3y ago
      The effects of unemployment on people compounds. It screws them over during their life, and affects the economy, over and over. Inflation is under control, and there is no expectation of high inflation, so we do not have the same trade off as in the 70s at all.
Auracle 3y ago
Core inflation is 4.8%, and that’s the number that’s usually used as a benchmark. These headlines are really starting to get on my nerves. When NPR was talking about it last night they threw a line in there about core inflation but the rest the few minutes was celebratory about hitting 3%.

nostrademons 3y ago

For reference, 2% inflation over 30 years is an 82% rise in prices. 4% inflation over 30 years is a 232% rise in prices. Many people underestimate the effect of compounding interest and how much of a difference rates of return make.

afterburner 3y ago
Many people underestimate the effect of compounding unemployment.
- nostrademons 3y ago
  Unemployment doesn't compound, though. The highest it can go is 100%, and in practice people have a strong incentive to get new jobs and make new jobs long before it reaches that point. Unemployment has a negative feedback loop: the more people who are unemployed, the more wages drop, which makes it more cost effective to employ people, which reduces unemployment. Inflation has a positive feedback loop: the higher prices rise, the more people need to hunt for raises to make ends meet, which means higher costs and even higher prices. Or alternatively, the more time they spend looking for new jobs, meaning less actual work done, meaning lower productivity, less output, greater scarcity, and higher prices. That was the big realization of the late 70s and early 80s. When the 70s inflation first got going in the late 60s, people thought "Eh, a little inflation is preferable to mass unemployment." By the end of the 70s, they'd learned that if you choose inflation, you get both, because people can't make prudent investments in the future if prices are not stable.
  - afterburner 3y ago
    The effects of unemployment on people compounds. It screws them over during their life, and affects the economy, over and over. Inflation is under control, and there is no expectation of high inflation, so we do not have the same trade off as in the 70s at all.

Auracle 3y ago

Core inflation is 4.8%, and that’s the number that’s usually used as a benchmark. These headlines are really starting to get on my nerves. When NPR was talking about it last night they threw a line in there about core inflation but the rest the few minutes was celebratory about hitting 3%.