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The Fed's inflation target is a long-term stable 2% annual increase in prices of personal consumption expenditures (PCE): https://www.federalreserve.gov/econom

by cs702 1y ago

The Fed's inflation target is a long-term stable 2% annual increase in prices of personal consumption expenditures (PCE): https://www.federalreserve.gov/economy-at-a-glance-inflation-pce.htm https://www.federalreserve.gov/economy-at-a-glance-inflation... The motivation for 2%/year is that when inflation is lower, businesses and consumers tend to hoard more cash, instead of spending or investing it, reducing economic activity, and when inflation is higher, it tends to become self-reinforcing and can spiral out of control: Businesses raise prices and employees demand higher pay to keep up with expected rising costs. Deflation (prices decreasing every year) is undesirable, because it forces businesses and consumers to spend and invest less, but no one ever wants to earn less (e.g., employees don't like pay cuts), so deflation tends to shrink economic activity even more, and in the worst case, can induce a depression, with businesses spending and investing less because consumers are spending less, and consumers, in turn, spending less because businesses are spending and investing less. I'm of course oversimplifying, to keep things short. Inflation remains above target, but thankfully, as of now, it doesn't appear to be self-reinforcing. I mean, I hope it isn't: https://news.ycombinator.com/item?id=45182111 https://news.ycombinator.com/item?id=45182111

skdjbd 1y ago
> The motivation for 2%/year is that when inflation is lower, businesses and consumers tend to hoard more cash, instead of spending or investing it, reducing economic activity That’s what they say. In reality, inflation is a permanent tax on those who earn money through labor. Every greenback they print makes 90% of us a little poorer, and conversely makes the capital holders richer. Popular economists should be thought of as a priestly class employed to enforce this order with explanations like the one you gave above. Defending a system that has resulted in an ever increasing wealth gap and the proliferation of businesses who optimize for accumulating capital is indefensible. There are other systems (https://en.m.wikipedia.org/wiki/Social_credit https://en.m.wikipedia.org/wiki/Social_credit). The economy should serve the people, not the elites. It’s hard to read a lot of economic discussion when the system is so fundamentally flawed. It’s not workable as is.
- MattPalmer1086 1y ago
  We should not downvote a post just because we may disagree with it. That doesn't foster curiosity and discussion. It's clear that continual inflation makes us poorer (unless we can also obtain pay rises). To me it's also clear that having no inflation (or indeed, deflation) would disincentivise investment. So I'm in favour of targeting a minimal inflation rate. If there are other economic systems that would give both growth and better distribution of the proceeds of it, I'm all ears. I couldn't really understand the social credit link that was posted or how that might work.
  - 9rx 1y ago
    > We should not downvote a post just because we may disagree with it. There is nothing to suggest it was downvoted because of disagreement. We have no idea why it was downvoted. But the most likely explanation is that a user with poor dexterity accidentally pressed the button. There is no logical reason for why someone would purposefully exert the effort to press a button that doesn't do anything other than maybe change the font color. And one will employ a once and done CSS override to change the color if they really don't like the default choice for some reason.
    - MattPalmer1086 1y ago
      It had multiple downvotes; a single one doesn't fade it out that much. I see nothing in the post that warrants that. Anyway - don't want to argue about that really. I would prefer to discuss the economic points raised.
      - 9rx 1y ago
        > It had multiple downvotes Well, the HN has been around for quite some time now and the user base is getting older. Dexterity doesn't get better in old age. > I would prefer to discuss the economic points raised. Go nuts! Nothing stopping you but yourself.
    - myvoiceismypass 1y ago

by cs702 1y ago

skdjbd 1y ago

> The motivation for 2%/year is that when inflation is lower, businesses and consumers tend to hoard more cash, instead of spending or investing it, reducing economic activity That’s what they say. In reality, inflation is a permanent tax on those who earn money through labor. Every greenback they print makes 90% of us a little poorer, and conversely makes the capital holders richer. Popular economists should be thought of as a priestly class employed to enforce this order with explanations like the one you gave above. Defending a system that has resulted in an ever increasing wealth gap and the proliferation of businesses who optimize for accumulating capital is indefensible. There are other systems (https://en.m.wikipedia.org/wiki/Social_credit https://en.m.wikipedia.org/wiki/Social_credit). The economy should serve the people, not the elites. It’s hard to read a lot of economic discussion when the system is so fundamentally flawed. It’s not workable as is.

MattPalmer1086 1y ago
We should not downvote a post just because we may disagree with it. That doesn't foster curiosity and discussion. It's clear that continual inflation makes us poorer (unless we can also obtain pay rises). To me it's also clear that having no inflation (or indeed, deflation) would disincentivise investment. So I'm in favour of targeting a minimal inflation rate. If there are other economic systems that would give both growth and better distribution of the proceeds of it, I'm all ears. I couldn't really understand the social credit link that was posted or how that might work.
- 9rx 1y ago
  > We should not downvote a post just because we may disagree with it. There is nothing to suggest it was downvoted because of disagreement. We have no idea why it was downvoted. But the most likely explanation is that a user with poor dexterity accidentally pressed the button. There is no logical reason for why someone would purposefully exert the effort to press a button that doesn't do anything other than maybe change the font color. And one will employ a once and done CSS override to change the color if they really don't like the default choice for some reason.
  - MattPalmer1086 1y ago
    It had multiple downvotes; a single one doesn't fade it out that much. I see nothing in the post that warrants that. Anyway - don't want to argue about that really. I would prefer to discuss the economic points raised.
    - 9rx 1y ago
      > It had multiple downvotes Well, the HN has been around for quite some time now and the user base is getting older. Dexterity doesn't get better in old age. > I would prefer to discuss the economic points raised. Go nuts! Nothing stopping you but yourself.
  - myvoiceismypass 1y ago