Why central banks insist on a 2% inflation target
english.elpais.com
english.elpais.com
- 3% is the limit before people notice
I'd add: the recent experience shows that 1% is too low because undershoot leaves the central bank stuck on the zero-bound with no room to inject stimulus without acrobatics.
Sounds like a range centred on 2% is current best practice. Anyone deliberately running hotter tends to run hotter than they intend.
Any good counterexamples?
https://www.statista.com/statistics/270034/percentage-of-us-...
No one is forcing anyone to become owners of assets, but in practice anyone (even the poor) can become asset owners, as assets can be more than just a home. Putting $30/mo into financial assets is attainable by anyone.
Poor financial decision making will always be present, and the idea is to encourage (but not force) people to make rational economic decisions.
The justification/counter-argument from academia is that if deflation were allowed to occur it would harm the economy by disincentivizing the circulation of money (since all you have to do to is wait and your currency becomes more valuable).
The counter-counter argument is that it is nonsensical to expect that a falling cost of living would harm the economy because price deflation is, on the contrary, an effect of economic growth that has already occurred.
No arguments against the idea that inflation is effectively a tax.
The contention centers on whether price deflation is a good or bad thing.
If you're a "grow the pie" kind of person, you probably think that it's a good thing because falling prices without falling demand is simply a sign of the pie having grown.
If you're a "redistribute the pie" kind of person, you understand that deflation is an opportunity to control where newly created wealth is funneled to without the people who create the wealth noticing.