3 ms·

Note that most of this period falls before the modern inflation target was established in 1995. In the past 30 years we've had 75% accumulated annual inflation

Note that most of this period falls before the modern inflation target was established in 1995. In the past 30 years we've had 75% accumulated annual inflation (aka prices have increased be a factor of exp(0.75) = 2.1) of which 16% (aka 21% of the total) took place during an inflation excursion (which lasted 2.5 years aka 8% of the total time period). If anything the data points at "inflation targeting works and is producing slow and steady inflation" rather than "inflation comes in concentrated bursts".

raincole 6mo ago
The devaluation also mostly happened during the periods that everyone calls good old times now.
- trgn 6mo ago
  there was wage growth
  - tmountain 6mo ago
    Yeah, didn't people used to make like $10/week as the median wage at the turn of the 20th century? I agree that we have big problems now, but I feel like this analysis is deeply flawed without the inclusion of wage data.
    - zer00eyz 6mo ago
      Wage data, population growth, overall consumption, credit (and guarantees against it) are all drivers of inflation. Look at student loans vs the cost of college: 1958: Federal program to encourage science and engineering. 1976: Remove restrictions on bankruptcy dismissal of this debt. 2005: Same rules for private loans. Today college has a (as someone here so eloquently put it) a cruise ship ascetic, and has far more "administration" than "eduction" in terms of raw staff. Tv went from an expensive box (fixed cost) to cable (monthly fee) to on demand programing (several monthly fees, and with ad's). A phone used to be a single item in your house with a monthly fee. It was an item so durable that you could beat a robber with it and still call the police (see old att, black rotary phone). Now its an item per person in a household, that you can easily loose, might break if you drop it, and costs any where from 200 to 1500 dollars. None of this is inflation in the traditional sense, but it does impact the velocity of all money in the system, and puts pressure on individual spending in a way that isnt even accounted for in this chart. I wont even get started on housing, but I will leave this chart behind and ask those who care to point to the housing crisis on it: https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N
- marcosdumay 6mo ago
  Hum... I don't think people refer to the world wars as good times. Out of them, there's one single interval that most people that talk about it refer as "the end of the good times" (but yeah, I've seen people refer as good times too) and the COVID pandemic.
- joelwilliamson 6mo ago
  Who calls WWI, stagflation or Covid good old times? Only the post-WWII boom was really a good time.
cyanydeez 6mo ago
I believe the broader reason for an inflation target is to increase the value of "doing something" as opposed to "doing nothing" with money. Of course, like most policies, this acts on people with way too much of it and skews the perception of control and locus of control to those entities with too much.
- siruwastaken 6mo ago
  Not to reply against you, just to add clarification. This is the reason why a slightly positive inflation rate is normally targeted. Theoretically, it would be entirely possible to target 0% inflation, but then you are so close to possible deflation, that most people would simply save up money instead of buying things from the economy.
  - FpUser 6mo ago
    >"that most people would simply save up money instead of buying things from the economy." And making it not an option leads to the situations where rich buy assets that are only go up and become richer. Average Joe meanwhile does not own assets and gets poorer and poorer
- PowerElectronix 6mo ago
  That's a bit of falacy. If inflation target were 0%, people would still have an oportunity cost of doing nothing compared to deposits, bonds and other "zero risk" investments. You just stop punishing people that has their wealth in form of cash savings. 2% is an arbitrary number that just looks good and seems to work. The issue is that that target is very much not set into stone, as central banks often disregard or take too long to take action when inflation shoots up. And never, ever do they try to compensate afterwards with a lower target for a time. You can have a government spend way beyond its income making inflation spike, eroding their own debt at the cost of cash savings purchase power and the central bank just sit put and wait until inflation runs too hot to then increase rates that then cut way before inflation is on target. As we are having right now in basically every country on earth.
- deleted 6mo ago
  [deleted]

raincole 6mo ago

The devaluation also mostly happened during the periods that everyone calls good old times now.

trgn 6mo ago
there was wage growth
- tmountain 6mo ago
  Yeah, didn't people used to make like $10/week as the median wage at the turn of the 20th century? I agree that we have big problems now, but I feel like this analysis is deeply flawed without the inclusion of wage data.
  - zer00eyz 6mo ago
    Wage data, population growth, overall consumption, credit (and guarantees against it) are all drivers of inflation. Look at student loans vs the cost of college: 1958: Federal program to encourage science and engineering. 1976: Remove restrictions on bankruptcy dismissal of this debt. 2005: Same rules for private loans. Today college has a (as someone here so eloquently put it) a cruise ship ascetic, and has far more "administration" than "eduction" in terms of raw staff. Tv went from an expensive box (fixed cost) to cable (monthly fee) to on demand programing (several monthly fees, and with ad's). A phone used to be a single item in your house with a monthly fee. It was an item so durable that you could beat a robber with it and still call the police (see old att, black rotary phone). Now its an item per person in a household, that you can easily loose, might break if you drop it, and costs any where from 200 to 1500 dollars. None of this is inflation in the traditional sense, but it does impact the velocity of all money in the system, and puts pressure on individual spending in a way that isnt even accounted for in this chart. I wont even get started on housing, but I will leave this chart behind and ask those who care to point to the housing crisis on it: https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N
marcosdumay 6mo ago
Hum... I don't think people refer to the world wars as good times. Out of them, there's one single interval that most people that talk about it refer as "the end of the good times" (but yeah, I've seen people refer as good times too) and the COVID pandemic.
joelwilliamson 6mo ago
Who calls WWI, stagflation or Covid good old times? Only the post-WWII boom was really a good time.

cyanydeez 6mo ago

I believe the broader reason for an inflation target is to increase the value of "doing something" as opposed to "doing nothing" with money. Of course, like most policies, this acts on people with way too much of it and skews the perception of control and locus of control to those entities with too much.

siruwastaken 6mo ago
Not to reply against you, just to add clarification. This is the reason why a slightly positive inflation rate is normally targeted. Theoretically, it would be entirely possible to target 0% inflation, but then you are so close to possible deflation, that most people would simply save up money instead of buying things from the economy.
- FpUser 6mo ago
  >"that most people would simply save up money instead of buying things from the economy." And making it not an option leads to the situations where rich buy assets that are only go up and become richer. Average Joe meanwhile does not own assets and gets poorer and poorer
PowerElectronix 6mo ago
That's a bit of falacy. If inflation target were 0%, people would still have an oportunity cost of doing nothing compared to deposits, bonds and other "zero risk" investments. You just stop punishing people that has their wealth in form of cash savings. 2% is an arbitrary number that just looks good and seems to work. The issue is that that target is very much not set into stone, as central banks often disregard or take too long to take action when inflation shoots up. And never, ever do they try to compensate afterwards with a lower target for a time. You can have a government spend way beyond its income making inflation spike, eroding their own debt at the cost of cash savings purchase power and the central bank just sit put and wait until inflation runs too hot to then increase rates that then cut way before inflation is on target. As we are having right now in basically every country on earth.
deleted 6mo ago
[deleted]