While I do agree that central banking has gone too far, central bankers--at least in developed countries--are not on some blatant mission to rob people of money for their own enrichment. Sure corruption might happen on the fringes, but it's not the primary intent.
Pump and dumps are pump and dumps. The primary mission is to fuck others over.
> are not on some blatant mission to rob people of money for their own enrichment.
Yes, they are. The point of inflation in contemporary mainstream economic theory is to lower the nominal price of labor and increase employment. So if "making themselves look like they are doing something" counts as "their own enrichment" then yes, central bankers are robbing people of their past value of their labour, especially low income labourers, to make themselves look like they are doing the country a solid.
CS Lewis quote comes to mind: "Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience"
Erm. Wut? Pray tell which economic theory espouses this? The point of inflation (1-2%) is to prevent deflationary spirals. Presuming there is some maximum productive capacity, wages will necessarily go up with inflationary currencies ideally in line or exceeding inflation. Bank interest rates also ideally match the inflation rate.
The only reason nominal wages have remained suppressed in developed nations has been outsourcing. This is not a function of the central bank.
https://archive.nytimes.com/krugman.blogs.nytimes.com/2010/0...
"even in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis"
Paul Krugman is about as mainstream an economist as you can get
> wages will necessarily go up with inflationary
What exactly is the mechanism for this? I'm reminded of this video:
THIS IS WHAT ECONOMISTS ACTUALLY BELIEVE
*The aim is to avoid a deflationary collapse, not to cut wages.* Let's say you have a typical economic cycle in an apple producing economy with real growth and a fixed currency. Since you have real growth, you're producing more and more apples with the same resources. This is great! Apples are cheap! Except you now have created a behavioral problem.
Since the price of apples decreases with growth, a farmer needs to cut costs to remain profitable. In an ideal world, this would mean cutting wages. In a real growth scenario, the workers should be able to purchase more apples despite the wage cuts since the price drop in apples should exceed the wage cut. In the real world, this farmer would lose his head for cutting pay--wages are sticky. So instead of making the optimal choice (paying people less in nominal, but more in real terms), the farmer will fire people. This is BAD.
Again, I'm going to keep pounding the table that the only reason inflation has gotten this out of hand is due to the *immense size of the stimulus.* The central bank raising interest rates would have only deferred that inflation into the future.
No? The cost of inputs will also go down?
> The aim is to avoid a deflationary collapse
I am literally quoting him in the article. It may be that the aim is to prevent a "deflationary collapse", but it's still inextricably "trying with no guarantee it will work to prevent a deflationary collapse specifically by cheating laborers out of their wages"
It's even encoded in your explanation: you are preoccupied with saving the farmer's skin, not with being fair to the laborer.
For the record, I am no Marxist, I'm very much an advocate of free markets, I just don't like cheating laborers. Inflationism is basically just corporatism/trickle down, made palatable to liberals.
No, that's not at all the reason. Low targeted inflation is to prevent the wild economic swings that preceded central banking as wild inflation and deflation routinely wiped out people, including low income laborers. Take some time with this list of historical US recessions [1]
Virtually zero people hold pure cash as their only wealth, so virtually zero people lose value over time from low inflation. Other goods like real estate, stocks, etc., rise with inflation. Wages rise with inflation. So your low income laborer part getting robbed makes no sense.
The reason inflation target of zero is not used is to avoid deflationary spirals, a lesson learned again over history through repeated painful events.
The evidence on these is so solid every single country, all 200ish choose this system. It's not a grand conspiracy of evil wizard people. It's what educated people choose as a solution to past problems. If other systems worked better for an economy, don't you think at least 1 of 200ish countries would be doing it?
[1] https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...
Countries chose inflation because it's less obvious way to tax people, and because screwing over labor makes you short term competitive in trade markets (they took er jerbs). Especially as other countries inflate. It's an easy choice to make.
> Countries chose inflation because it's less obvious way to tax people
I think you're missing significant understanding about money and inflation.
Explain carefully how inflation taxes people to the benefit of the govt. Your explanation should carefully distinguish between the Fed and the Treasury, the three methods the Fed used to influence the rate, the laws and accounting both use.
I'm pretty sure you have no idea, and are simply making up ghost stories to cover misunderstandings.
So, explain the process. Because I do know in detail how these pieces fit, and nothing like your beliefs occur. So you explain it.
Oh, and by the way, inflation helps nearly anyone with debt such a college loans, car loans, or mortgages, because it lowers effective payments. Given most people have more debt than cash as savings, inflation helps borrowers and costs lenders.
Think about that a bit
And others, like you perhaps, read the content and learn something useful.
> Oh, and by the way, inflation helps nearly anyone with debt such a college loans, car loans, or mortgages, because it lowers effective payments
Only if you are getting pay raises. We know the workers return on productivity has stagnated since 1970. Why do you love stealing from the poor?
Lowering the cost to borrow by volume mostly helps finance: big corporate bonds, and financial instruments like shorts and options.
Think about that for a bit.
It's not the same, as the evidence I just posted proves. That you don't care to learn it is telling. The string evidence that things were worse is what led every country to switch to central banking.
Or are you that much smarter than every economist and banker on the planet? Maybe you should post a paper with your evidence. Overturning over a century of data across hundreds of countries would make you famous.
>Only if you are getting pay raises. We know the workers return on productivity has stagnated since 1970
First, the "only if you are getting pay raises" is false. It would depend on the loan and wage.
Also, your two claims do not even make logical sense. Either they got pay raises or incomes did not remain flat. (Hint: they got pay raises, AND they got increases in total remuneration, which includes things besides wages. And yes, wages are flat, but remuneration and total cost to employ (both data series the BLS tracks which you can check yourself) have increased).
Want proof of all this? It took me one google of "do wages match inflation over time", and this [1] from the first page provides historical graphs showing exactly what I claimed.
So yes, people did get raises to match inflation (which is trivially checkable), their effective loan payments did decrease.
Please at least put in some effort to check the numerical evidence before you post more stuff you just pull from god knows where.
>Lowering the cost to borrow by volume mostly helps finance: big corporate bonds, and financial instruments like shorts and options
You apparently have no idea the difference between cost to borrow and inflation. The cost to borrow is the interest rate - no one knows future inflation well enough to make a loan with such wizardry. Higher than expected inflation simply helps borrowers and costs lenders. Inflation the other direction works in the opposite direction.
But cost to borrow and inflation are completely different things.
Since you're just making stuff up, please provide decent sources (not opinion blogs - decent polling or data places are good) for any further claims. You're too untrustworthy for me to waste more time on.
[1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
What is inflation?
I can understand that the "for their own enrichment" part of that sentence is a bit debatable. It's true (as far as I know) that the central bankers are not personally building giant Scrooge McDuck money bins and siphoning cash directly from their monetary policy decisions in there for swimming purposes.
However, you can point out that the money and power they gain is due to their willingness to keep business as usual (inflation) churning. And let's not forget that the central bankers can manage to get high 6 figures speaking engagement fees, at least after they're out. I can't be sure what level of quid pro quo goes on with all of that, but they certainly do manage to enrich themselves by playing their part and continuing the generally policy of inflation.
It's not supposed to. The policy rate is supposed to match the inflation rate on average. When the fed says 2% inflation target it also implies that the fed funds rate should be at 2%.
Most of the runaway inflation you're seeing today is because the *government* spent way, way too much money which put a massive strain on limited resources. Blame the CARES Act + American Rescue Plan. You want to see corruption and pork spending? Look at the $3 trillion in deficit spending across the Trump and Biden administrations.
And then people get cost of living raises - that's why almost all income groups have seen wage growth in inflation adjusted dollars since, well, 100+ years.
Here's what happens when central banking didn't target low inflation [1]. Read through it for a better understanding of why the current system is better than any that preceded it.
[1] https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...
Think this through. Whose purchasing power? If you have a billion dollars and I have nothing, and prices go up 2%, which of us lost purchasing power? Keeping in mind that inflation drives up wages too?
It's absolutely true that central bankers and other cartoon villain fatcats are trying to enrich themselves. But the way they do that is by investing their wealth in the economy, and then manipulating inflation to make the economy grow as fast as possible.
Have you looked at the current world?
You're alright, we should hang out :)
Cheers