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An alternative way to look at it, is that central banks' inflation target of 2% (and likely much larger that official statistics) means that anything that is na

An alternative way to look at it, is that central banks' inflation target of 2% (and likely much larger that official statistics) means that anything that is naturally scarce goes up in value. You see this in housing, education, healthcare, and anything that can't scale like software gets ever more expensive. IMO the inflation target should be 0%. I don't agree with arguments about artificially inflating the currency. We don't need to use psychological tricks to make people consume more. We should aim for stable prices. This would reduce the value of housing as an inflation hedge for the common man. Right now it's like a quasi-bank.

ffgjgf1 3y ago
> We don't need to use psychological tricks to make people consume more. It’s not a psychological trick, when prices are increasing at a stable and predictable rate it’s perfectly rational to spend more instead of saving. Which is good for economic growth. In many way the economy has been inherently deflationary over the past several decades. Due to growing productivity the cost of certain goods and services has been going down consistently. The outcome being that in sectors which this doesn’t happen due to scarcity or other reasons like housing prices have been going up at significantly higher pace. I’m not sure reducing inflation to 0% would helpful for that considering the context. Price growth might slow down at the cost of slower real GDP growth but that’s probably not ideal either.
syndicatedjelly 3y ago
Any market where the inflation rate has been 0% has seen a natural decline in the quality of the offering. Look at the airline industry - prices have not changed in about 40 years. It cost about $1200 USD to fly to the other side of the world in 1980: it’s still the same price in 2023. How did airlines do it? By making the product much shittier in that time.

ffgjgf1 3y ago

> We don't need to use psychological tricks to make people consume more. It’s not a psychological trick, when prices are increasing at a stable and predictable rate it’s perfectly rational to spend more instead of saving. Which is good for economic growth. In many way the economy has been inherently deflationary over the past several decades. Due to growing productivity the cost of certain goods and services has been going down consistently. The outcome being that in sectors which this doesn’t happen due to scarcity or other reasons like housing prices have been going up at significantly higher pace. I’m not sure reducing inflation to 0% would helpful for that considering the context. Price growth might slow down at the cost of slower real GDP growth but that’s probably not ideal either.

syndicatedjelly 3y ago

Any market where the inflation rate has been 0% has seen a natural decline in the quality of the offering. Look at the airline industry - prices have not changed in about 40 years. It cost about $1200 USD to fly to the other side of the world in 1980: it’s still the same price in 2023. How did airlines do it? By making the product much shittier in that time.