Why the 2% inflation target? (2023)

One thing that's occurred to me recently is that demands for a 4 day working week seem entirely reasonable in the context that the labour force has, if not quite doubled, dramatically increased (due to more women participating) over the last few decades (and that time has been taken away from time that was previously available for the completion of domestic chores).

I'm sure it is an efficiency win on the total, but perhaps not as gigantic as often assumed.

a computer won't increase the wage of someone whose work is unrelated to the procurement of the computer/system (even if their work was made more efficient).

For example, a checkout clerk now dont need to compute, because of the efficient Point-of-Sale system (when previously they'd need to recall prices). So even if the output of the clerk is now higher, they could be less skilled and so the supply increases, leading to lower wages.

The people whose job is to procure the computer systems _do_ get increased wages. That's why so many software engineers are rich.

As you reject ignorance (which I applaud), what knowledge is that based on?

> Since 1963, inflation has risen 896%, while housing prices have risen by more than 2,350%.

> For example, between 1984 and 2021, home prices in Massachusetts rose by 469.89% while incomes increased by 221.10%.

ETC, ETC

https://www.investopedia.com/ask/answers/correlation-inflati...

Inflation is a killer for the poor and most of the middle class - and a boon for the wealthy (who own appreciating assets) - everyone I know who is not wealthy enough to not care, is feeling it.

I trust the data, and the data shows their lives are better. If you don't trust the data, it's impossible to know.

Define "better": is a higher CPI better, or is a lower CPI better?

Because the Boskin Commission found that the CPI numbers out of the BLS were too high and they changed the methodology to lower them after the Commission's report. Pre-Boskin CPI was being overstated.

Do you understand how StatCan calculates the CPI? What their methodology is?

The CPI you see in the headlines is made of of various components (Shelter, Food, Transportation, etc), the proportions of which are determined by spending surveys:

* https://www.statcan.gc.ca/en/survey/household/3508

As people change their buying habits the items that are tracked also change to reflect what consumers are spending. Here are the items in each category:

* https://www.statcan.gc.ca/en/statistical-programs/document/2...

* https://www.statcan.gc.ca/en/statistical-programs/document/2...

You can see the list of changes going back to 1913 at:

* https://www.statcan.gc.ca/en/statistical-programs/document/2...

Do you think the CPI should reflect reality—i.e., track what people actually buy—or be some arbitrary list of stuff that has no relevances to people's actually basket of goods (e.g., coal and lard were removed/replaced in 1956; 35mm film removed in 2013; video rental removed in 2015).

It should also be noted that the number reported in the headlines is the national average, while the prices can vary widely depending on your location. So in the report for February 2024, the national number was 2.8%, but Alberta had 4.2% while Manitoba had 0.9%:

* https://www150.statcan.gc.ca/n1/daily-quotidien/240319/dq240... (Chart 5)

* https://www150.statcan.gc.ca/n1/pub/71-607-x/2018016/cpi-ipc...

* https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=181000... (searchable by province)

StatCan has a "Personal Inflation Calculator" where you can enter your own numbers/budget and find a number that may be closer to what's happening around you:

* https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2020015...

Remember: the CPI is a model of reality, and not reality itself. It is used as a guide, and to use the words of [Alfred Korzybski](https://en.wikipedia.org/wiki/Alfred_Korzybski):

* [The map is not the territory.](https://en.wikipedia.org/wiki/Map–territory_relation)

* https://fs.blog/map-and-territory/

Or those of statistician George Box:

* [All models are wrong but some are useful.](https://en.wikipedia.org/wiki/All_models_are_wrong)

> Great news for the person who buys a new TV with their groceries every week!

If you don't like televisions being a part of the 2.25% of the CPI that is "Household equipment":

* https://www150.statcan.gc.ca/n1/pub/71-607-x/2018016/cpi-ipc...

Then tell the average Canadian to stop buying televisions so that it does not show in spending surveys. If people stop consuming televisions it will stop being part of the Consumer Price Index, QED.

Meanwhile Food is 11% of the CPI because that is on average what the average Canadian spends on their average basket of goods per the spending surveys that StatCan gets.

If the government would stop trying to micromanage the economy, then it wouldn't need to find some aggregate statistic to use, no matter how misleading or counterproductive it was.

Quality of living is plummeting and inflation on things you actually care about is way more than the headline rate. Housing, for example takes up a vast proportion of income and the increase has been way over inflation.

I don’t think it’s headline news to state that the headline rate of inflation is not all that reflective of reality.

I couldn’t care less what’s happening in some government statistical bureau. That doesn’t affect the quality of my day to day life.

But when I catch up with old friends, see young colleagues, talk to cashiers at the store, and they all have tales of misery, I feel miserable.

If you're drowning in the ocean 100 ft below the surface, saying you managed to go 80 ft so you're still 20 ft below the surface is remarkably stupid and fails to appreciate the gravity of the situation.

Is there a point of view where not primarily discussing "bucket 1" even makes sense, given everyone's stated intentions?

Elon 101: hire aggressively until product finds PMF, then fire aggressively.

I would MUCH rather a firm have to face the music and reputational damage of cutting employee pay or firing employees. It's far more honest and the actual other option is gasp don't cut your employees wage and instead take a hit to your margins.

If there's a downturn, then everyone will have to tighten belts, and firms can make that case to employees.

Making a real 2% salary cut the universal default is cruel, and if your typical hourly wage-earner understood clearly the choice being made on their behalf, they'd be pissed.

Deals shouldn't be altered without agreement, but that's what 2% inflation targets do. If you agree to a salary, then nobody should be specifically putting their thumb on the scale one way or the the other.

Professionals and job-hoppers have less problem negotiating to keep up with inflation. It's the poor people who get screwed.

Also, inflation is less steady the farther away from zero it is, I'd wager. So we have inflation spikes sometimes, like we've seen. There's always a time lag between spikes in price increases on goods, and wage increases (which require negotiation). During that lag period before a compensating wage increase, savings get used and real loss is suffered. I highly doubt that the loss in savings is generally recovered, and the Fed never even aims to recover that loss. The most vulnerable people lose the most, and are impeded from building wealth as a result, and probably come to depend on government more.

Debt should not be encouraged nor discouraged. Interest rates should be natural, based on market forces about the time value of money.

Homeowners don't deserve a mortgage subsidy paid via inflation. If there is a subsidy, make it explicit through law.

Are you two talking about different time scales? Individuals in the workforce get poorer as their buying power drops, but each generation lives in a wealthier society as more innovation improves life.

That is the issue with the absurdities of inflation and interest rates - how do you tell whether we're better off if the yardstick for measuring value is being purpose fully distorted? And the way we measure the distortion seems to be unreliable;I don't see how inflation is supposed to rise faster than wages but asset prices seem to be inflating substantially faster than the inflation rate making it harder to save. GDP also disassociated from energy use in the 1970s so I don't see why it going up means I'm better off either - I need cheap energy to be comfortable. All the stuff GDP measures is nice, but rising energy prices are a massive problem that we don't focus on as much as we did when they were driving GDP growth despite the fact that they are still a major part of existing.

Asia is better off in real terms. A friend of mine was talking about how he went home to his ancestral village and they had toilets now which is a massive QoL step change. So if "society" is global, yes.

If we're talking English speaking countries, you can tell me I'm better off, but I'm not sure what metrics you're using or why we believe they matter. I have access to much better electronic equipment than my parents, and our ability to cure ailments has improved markedly. But a bunch of people I know had to leave the city because they literally couldn't afford to live here. Debt seems to be out of control. We're seeing political discontent in the UK and US that seems to be linked to people who don't believe that they are becoming better off, and I tend to believe people when they say that.

TLDR; maybe. But you're making a claim that is vaguer than you might think. We're a much smarter society than we were 50 years ago, but it is less obvious who it is that is "significantly wealthier" and what that means.

Things we consume have gotten cheaper - flights, electronics.

Things related to wealth - assets but also things like education have all gotten more expensive.

So we all get to live a more "experiential" life but good luck passing anything on, if you care about those kinds of things...

EDIT here we go - similar (if not the same) chart:

https://www.washingtonpost.com/news/wonk/wp/2016/08/17/the-s...

The family is not too much less wealthy but also we have families with two incomes, breadearners working overtime, stressed out family dynamics, and student going into deeper and deeper debt to be credentialed enough to participate in the sophisticated workforce.

If you look at the "wtf happened in 1970" chart, the y axes are productivity and real wages.

It turns out 2% inflation is enough to steal the productive increase of labor and middle classes and transfer it to the politically connected, wealthy, and financial sectors. At some point it's just going to be impossible to wring more gains out of labor and technology improvements. We're probably really close.

I think you are confusing two entirely different things. You can have a society that's getting wealthier and still people getting poorer. In fact, you have just that in the real world. It's as simple as seeing how the median salary and average salary compare and evolve. It's as simple as comparing how minimum wages evolved with inflation.

It's no coincidence that even in the US, humanity's apex in economic development and wealth, the average Joe cannot afford a house while a few decades back it could.

But people look at other people who are visibly better off, compare themselves against those and get tricked into believing, that it is no just. How he can have more? Must be evil! Stolen from the people! Typical divide and conquer, to play with ego and greed, that causes misery and anger among our fellows. It makes me sad to see the same scheme being played out everytime.

Better quality and more abundant goods with decreasing marginalized labor costs is what we should expect since technology is naturally deflationary. If anything, the oddity is that food prices ever increase over time when quality is stagnant. The book "The Price of Tomorrow" does a good job giving a perspective on this.

There's also the problem of misguided/fraudulent capital investment which is when governments and corporations raise costs under the guise of technological improvements. This is when they say they add in extra processes for quality when they're really just lining their pockets. Think medical schools and doctors (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6288618/), the FDA processes(https://en.wikipedia.org/wiki/Criticism_of_the_Food_and_Drug...), etc.

1. It's your money, so it's not for others to control.

2. You may have a good reason for keeping money under your mattress. For example, you're poor and inexperienced with investing and have heard how people lose their shirts if they don't know what they're doing. There is a lot of complexity to investing, and scary contracts and qualifiers, and then you find out that you don't really own clear title to the stocks you've bought, and hear stories that brokerage firms transfer stock that they don't even have, but will protect favored rich clients if push comes to shove.

3. Maybe there's real risk in the economy, so recklessly investing despite that danger shouldn't be forced one someone with the threat of stealing value.

4. The rich can afford advisors who will help them invest so that they don't have to hold onto inflating cash, and know of ways to preserve value. Only the poor have a sizeable portion of their wealth in cash.

for inflation caused by external factors - such as a war and spiralling high energy prices - it can rise without wages rising.

But that doesn't mean that debt is intrinsically bad, or must always benefit the rich at the expense of the poor. Like any other tool, it depends on how you use it.

If your money is guaranteed to grow in value--and without the risk of actually investing it--that would starve the economy of investment, which would reduce economic growth. People would hold back on their consumption (why buy it today, when tomorrow it will be cheaper??), further reducing demand, which would further depress prices, etc in a doom cycle.

That conclusion wasn't reached by extensive investigation of economists belly-buttons. Its observed fact and lived experience in every deflational economy ever observed.

And if you think Banks are just going to forgive your debt if your salary decreases, you are nuts.

Well, deflation means everything costs less. And "everything" includes wages and salaries, even yours. If we had 50% deflation, that means the boss could hire somebody who was as productive as you for 50% less. This is elementary, right? That's what deflation means.

So either you are going to renegotiate that contract, or the boss will just fire you and hire somebody else.

"But I have a contract--how can he fire me??" Do you have a contract with your employer? If so, take another look at it--it will say you can be fired at any time for any reason.

There was a time in America when unions were strong enough that they could demand contracts for you which limited the conditions under which you could be fired. But (thank you, Ronald Reagan) those days were half a century ago. Some call it bullshit, some call it "efficient capitalism".

But the more efficient capitalism is, the faster your salary would decrease in lockstep with deflation. You would very rapidly not be able to pay your car payment, mortgage and credit cards. And if you think the banks are going care about your sob story, remember in 2008, the last time that large numbers of people couldn't pay their mortgages, they were kicked out into the street by the millions.

> (in countries that don't suck, anyway).

Well, two points, 1) America is a country that sucks, in that sense, and 2) Countries that don't suck do not let themselves fall into a deflationary trap.

Well, first of all, let me heartily agree with you that the young adults are being and have been being screwed for about 20 years now.

But remember in 2008, when middle aged and old farts like myself were being thrown out of their houses by the millions? That had absolutely no ill effect on young adults?

> plus the fact they can change their living situation faster

Yeah....but isn't that pretty much saying "lets screw the younger generation--they can take it better than we can!!" I mean, the younger generation shouldn't be always scrambling to find a new job at a lower salary, moving out of apartments they can no longer afford, etc etc. They should have the security to enable them to build a wonderful future for themselves.

> Regarding inflation, I would argue that younger people are more susceptible.

True. Inflation is bad. But it's important to realize that the inflation we are currently suffering didn't come about by the Federal reserve mucking around with interest rates. It was caused by Trump adding $8.5 trillion to the deficit, and financing that largely by printing money.

The young, of course, are screwed both ways: they have to endure the present inflation, and then they have to pay back that debt, while they are trying to keep their parents in a decent nursing home at the same time they are trying to pay for their kids college education.

The only reason they aren't rioting in the streets demanding better from us is that most of them are too young to even remember an economy which works the way it should.

We've made massive increases in production efficiency across the board over the years, but the banks and government have creamed off all those efficiency gains for themselves, by printing money, creating the illusion that everything is instead going up in value, and have made themselves mind-blowingly powerful.

As the world economies are so broken, if the money supply went down instead of up (i.e. deflationary supply), the real value of the already enormous debts would increase even if the nominal value didn't, causing the economies to collapse suddenly. By keeping the money supply increasing, the economies are collapsing slowly instead, ultimately ending in hyperinflation.

Which was caused by technological progress which is the key source of deflation (being able to buy more with the same amount of money). It is deflation is happening regularly:

> But Inflation is not inevitable. There are numerous countervailing forces that have been at work for much of the past 50 years. The three big Deflation drivers: 1) Technology, which creates massive economies of scale, especially in digital products (e.g., Software); 2) Robotics/Automation, which efficiently create more physical goods at lower prices; and 3) Globalization and Labor Arbitrage, which sends work to lower cost regions, making goods and services less expensive.

> Put into this context, Inflation is periodic, driven by specific events; Deflation is consistent, the background state of the modern economy. To fully understand this requires grasping how scarcity and abundance act as the drivers of the price of labor and goods. My suspicion is many economists who came of age during earlier eras of inflation fail to discern how the world has changed since.

* https://ritholtz.com/2021/02/stop-stressing-about-inflation/

This 1991 Radio Shack add illustrates the point quite well IMHO:

    There are 15 electronic gimzo type items on this page, being sold from America’s Technology Store. 13 of the 15 you now always have in your pocket.
    
    So here’s the list of what I’ve replaced with my iPhone.
    
    * All weather personal stereo, [US]$11.88. I now use my iPhone with an Otter Box.
    * AM/FM clock radio, $13.88. iPhone.
    * In-Ear Stereo Phones, $7.88. Came with iPhone.
    * Microthin calculator, $4.88. Swipe up on iPhone.
    * Tandy 1000 TL/3, $1599. I actually owned a Tandy 1000, and I used it for games and word processing. I now do most of both of those things on my phone.
    * VHS Camcorder, $799. iPhone.
    * Mobile Cellular Telephone, $199. Obvs.
    * Mobile CB, $49.95. Ad says “You’ll never drive ‘alone’ again!” iPhone.
    * 20-Memory Speed-Dial phone, $29.95.
    * Deluxe Portable CD Player, $159.95. 80 minutes of music, or 80 hours of music? iPhone.
    * 10-Channel Desktop Scanner, $99.55. I still have a scanner, but I have a scanner app, too. iPhone.
    * Easiest-to-Use Phone Answerer, $49.95. iPhone voicemail.
    * Handheld Cassette Tape Recorder, $29.95. I use the Voice Memo app almost daily.
    * BONUS REPLACEMENT: It’s not an item for sale, but at the bottom of the ad, you’re instructed to ‘check your phone book for the Radio Shack Store nearest you.’ Do you even know how to use a phone book?
    
    You’d have spent [US]$3,054.82 in 1991 to buy all the stuff in this ad that you can now do with your phone. 

That US$1600 Tandy 1600 runs a 286 CPU and has a 20MB hard drive, and supported 640×200×16 resolution (720×350 mode for monochrome monitors):

* https://en.wikipedia.org/wiki/Tandy_1000#Tandy_1000_SL_and_T...

If you wish to run the same software as was run on that machine, you can still do so on your desktop/laptop:

* https://en.wikipedia.org/wiki/DOSBox

Or even in your web browser:

* https://js-dos.com (JavaScript DOS)

* https://archive.org/details/softwarelibrary_msdos_games

Somehow people don't notice the deflation happening all around them.

It's the other way around. US switched from a bimetallic system to the gold standard in 1873.

> I'm guessing it's that the US Currency was backed by gold

Well sort of, only until 1971 (or to some extent 1933) though. So you maybe could do that if you wanted to compare the price of housing in the 1870s and 1920s, certainly not between 1970 and the 2020s.

Look at how the price of gold changed between 2000 and 2020. It's not at all constant (it's actually more volatile than the dollar)

> I'd argue that using the dollar as a measure of value would be absurd,

Perhaps. Still less absurd than using gold for that.

> When they turn the interest rates back up, they get their reward

When the interest rates go up the price of bonds goes down. If you're holding a lot of bonds and interest rates go up you're certainly not in a good position (that's how the Silicon Valley Bank went bankrupt). Just basic math. Of course if we're talking about variable rate debt then you do have a point (however almost all household debt in the US is fixed rate, it varies by country though).

Have you actually examined these numbers? From my quick check, it doesn't seem to be anywhere near true. In 1970, Gold was $35.96/oz in 1970 USD. The average house was $23,400 in 1970USD. So 650 oz of gold would get you a house. Today, 1 oz of gold is $2,063.76 in 2024 USD. An average house costs $395,100 or 191 oz of gold. Houses are significantly cheaper with respect to gold today than they were in 1970.

Not really? Adjusted by inflation it's very volatile and not at all stable. Gold now is worth ~7x more than in 1970 but 25% less than in 1980, yet 4x more than in 2000 but still less than in 2011... There were some periods since 1970 where the (CPI adjusted) price of gold was relatively stable but that's certainly the exception and not the rule.

> but it's the most stable denomination of value that exists

You might use oil instead? It's not that much more unstable than gold.. Or wheat?

They might be saying, it's just not really true:

http://www.goldchartsrus.com/chartstemp/free/USHomePricesAU0...

In gold houses are about 3x cheaper now than they were back in 1970. Yet in the mid 2000s they were even more expensive than in 1970. What can we make of that besides that the price of gold is very unstable and increase in money supply is not the primary reason of that? (e.g. compare 2000s and 2010s..)

There is nothing special about gold, it's just a highly speculated commodity with very volatile price and that's it. We might as well do the same experiment and use the prices of oil/wheat/etc. and it would make a lot more sense.

It can. It would just be a pretty bad idea to use it for that since it would indicate that prices where consistently falling during the 80s and 90s amongst other. I mean the nominal price of gold in 1980 was exactly the same as in 2007... I can barely think of a worse measuring stick (we could just use the price of oil instead? It's hardly less stable).

> inflation is measured by the government as a relative change in a cherry-picked basket of goods that changes over time

perhaps. Seems fairly tangential, unless you're implying that governments generally tend to severely underreport inflation most of the time.

inflation is the reason why it makes sense to own you house.

please enlighten me on how rich people benefit from (salary-)inflation

Lending out money at the rate of inflation is 0 profit after inflation.

The consequences of this are wide ranging, but relevant to this thread, it means a bank does not get richer when creating money, it gets richer when you pay interest in excess of its costs of providing you with money. Although the bank created the loan money from nothing, it still ends up with significant costs to provide that money, for example through capitalisation regulations on the asset.

Another relevant consequence of this is that a bank is not incentivised to have a huge balance sheet - which it would have if it only made loans. Instead these loans made are securitised and removed from the bank’s assets. This means interest paid on the loan no longer goes to the bank but to whoever bought the loan.

> As a counterpoint to your one example re: money supply and inflation, I would present the following: https://en.wikipedia.org/wiki/Hyperinflation#Notable_hyperin...

People like to point out money supply/printing and inflation (cause of), but often fail to ask what caused the money printing in the first place:

* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799102

People don't 'run the printers' for funsies: there are usually extraneous reasons why it happens (including a good portion of what the US (and most other countries) recently experienced).

> Now think about that – did 6 different governments [including Weimar Germany], all within a 4 year time period [in the 1920s], and all bordering each other and/or in the same post WWI region and intellectual/political climate (with the seeds of the some of the farthest right and farthest left regimes in all of history within them that would lead to WWII just ~18 years later)—

> Did all of a sudden this little world region and precise time period and intellectual milieu decide to just start spending like crazy? At the same time? While the rest of the world did not?

> Or did they share the same underlying, and preceding, set of problems discussed above?

* https://clintballinger.com/2021/01/12/the-myth-of-hyperinfla...

* https://clintballinger.com/2019/05/24/the-autocorrelation-of...

Further, in modern financial systems money is mostly created by banks creating credit:

* https://www.pragcap.com/stop-with-the-money-printing-madness...

* https://advisoranalyst.com/2014/01/09/cullen-roche-the-ten-b...

* https://rationalreminder.ca/podcast/132

Which of course they're not. Nor will they ever be. Even if you forced things to be this way on some particular day, they wouldn't stay that way, because people have different needs, different expectations, and different judgments about the best ways to use their money. And in a free market, they will act differently because of those differences, and quickly trade away from any "even distribution" of anything.

> If you have a healthy banking market with several competitors the banks will compete to the point where none of them can extract too much profit.

I agree that banking should be a competitive free market (as I think every good and service should be).

> you end up with companies extracting wealth in any market where they get too much of a monopoly

If "monopoly" means "ability to buy favors from the government to avoid free market competition", then I agree with this. But such a "monopoly" in no way requires there to be a lack of competition in an industry. There is plenty of competition in banking. It just all takes place against a backdrop of monetary manipulation by the government.

If it is indeed true that a bank could just print unlimited loan notes, then why did Silicon Valley Bank collapse? Wouldn't it be possible to just print themselves out of their troubles?

Absent government intervention in the functioning of markets, being frugal would have paid off way more than it has.

Unfortunately high inflation penalizes savers by eroding the purchasing power of savings, and it forces all workers on a treadmill where it seems that the cost of living rises faster than many people’s ability to catch up. The only way to beat inflation it seams is to invest in assets such as real estate or stocks, but those squeezed by inflation have little to invest, and these assets are increasingly difficult to obtain due to inflation. I find being on the wrong side of inflation highly demoralizing and upsetting.

And in an inflationary world, you can just park your money in government bonds (effectively returning it back to the Fed) to beat inflation most of the time. Inflation doesn't force you to spend your money productively.

The only difference is the direction of the value transfer. In a inflationary environment the transfer is from poor to rich. In a deflationary environment is from rich to poor.

Guess which economic theory will be enshrined in the public's mind? Guess which economists will become successful?

> However, for a period of approximately five years, prices of consumer goods went down in Switzerland without any widespread negative impact on the country's economy. > In fact, their economy prospered in the midst of falling prices. > This has caused some economists to revise their opinion about the ill effects of deflation, with some arguing that as long as there isn't too much deflation, consumers, and producers in an economy can find an equilibrium.

I think "postpone buying stuff because your money will be worth more in the future" is exactly what we should be doing at this point in time.

Or put another way, punishes saving. Forcing people to "save" by loaning the money to businesses and governments bonds and equities is good for politicians who like to be measured by economic metrics. But it's bad for being able to actually save for the future, and reducing dependencies on banks, leading to the moral hazard (with 0% inflation you could have narrow banking without problems).

Coincidentally my religion enforce around 2.5% wealth tax which sounds almost exactly the inflation target.

I’ve seen this comment a lot in recent years and I think there’s a lot of nuance here that is unappreciated.

When taken literally, it is used as a weapon of anti-intellectualism e.g. the doctors don’t know what they are doing when it comes to vaccines.

What it actually should mean is that the experts know there’s only a small slice about the universe/society that we understand, and thus proposal represents the best of our knowledge. It cannot guarantee success. But by god, it’s a lot better of an attempt than the opinion of some guy off the street

On the other hand, it reminds me of that Steve Jobs quote about the whole world being built by people who are no smarter than you and me. It's humbling and encouraging, that we ourselves may participate in the perpetual (re)making of the world.

“At a certain age, you want the answer. You want the rolled up parchment in the inmost room that tells you who runs your lives and why. The trouble is that by then, you’re the very people who know best that the inmost room is bare.”

The market for money then goes where it will according to free market principles and the autostabilisers operate in the market for labour instead.

No point giving free money to people who already have money.

Nothing about the current conditions are particularly abnormal. CPI was at 2.5-3 through the entirety of the dot com boom, higher than that still in the 80's, and of course between 1968 and 1982 it was almost entirely above 5%.

I really don't think you're considering all the things, all things considered.

The doom slinging on this issue really is getting ridiculous. People picked their rhetoric based on an assumption of 8-9% a year ago (for baldly partisan reasons) and are refusing to reconsider when it turned out the doom didn't arrive.

Everyone bitches when the price of milk goes up 8%, but nobody seems to realize that it went up because wages did. On average, if you're a worker, and you aren't saving (or trying to save) a pile of cash, inflation is net-zero for you.

[1] Stimulus checks did steer the behavior of normal people, but they were fiscal, not monetary policy. They had knock-on monetary policy effects, but the juice was worth the squeeze - thanks to them and the PPP, the economy didn't entirely collapse.

That is quite different than sitting on cash.

It is also a useful tool for steering the economy.

> Taxing people by the amount of savings they have.

That's essentially what inflation does.

And more dollars competing for the same goods would just drive inflation higher (the rich do not directly compete with the poor in buying things, other than potentially crowding them out of real estate investments - that is a legitimate societal problem. But so is NIMBY-ism - driven largely by the fact that racial covenants and crime-targeting became illegal in the 1960s-1990s). Although we haven't really come up with great alternatives (other than drive prices up because income tends to correlate inversely with propensity for crime).

Singapore-like enforcing of laws and harsh sentences could do it (the other low-crime countries are much more ethnically homogenous), but the trade-off there is much less freedom than in the U.S. - so it probably wouldn't be palatable here.

I'm aware. What I was saying is that the US Government doesn't care about whether or not you're using USD for your transactions, so long as you pay the appropriate taxes in USD.

This intentionally kills the use of anything other than the dollar for transactions.

So what other policy would you prefer the federal government to have? It's pretty much the only good solution.

The record keeping for this sort of nonsense presents a massive and impractical to fight burden.

It's honestly hilarious that a few IRS regulations are all it took to fundamentally break cryptocurrency. Yeah sure, if you jump through dozens of loops and practice air-tight opsec, you can get away from paying taxes. But at that point it's basically a small group of people exchanging digital beanie babies and pretending they're valuable.

Some people take on too much debt. But overall asset backed debt is a great system that lets people build wealth.

You mean the federal debt. The federal deficit is funded by the federal debt. [1]

If the federal debt were fully paid back, would any money be destroyed? Wouldn't it just go from taxpayers to bond holders?

1. https://fiscaldata.treasury.gov/americas-finance-guide/natio...

I would describe this as “categorically incorrect”.

The law of supply and demand normally has two sides—supply, and demand. It’s simplistic way of looking at it, but it’s enough to explain why prices of a product can increase even if there isn’t more money.

If you focus narrowly on the supply on money, like it’s the only variable, you won’t end up with a satisfactory explanation of inflation. It’s like trying to understand the world by looking through a peephole.

A lot of things other things happened in 1914. For instance, World War 1. Why not blame that for inflation?

I said inflation was due to all of the factors you listed. Debt and deficits was one of the factors. I just don't think it's the only factor, like you do.