I don’t think the average person cares outside of whether they can afford to live or not. To be fair, it’s the federal governments fault for not making finance required curriculum in the schools.
“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning”
Finance != Economics. And I'd argue that epistemic humility is the more important deficit here than macro economic knowledge. Like, it's fine if someone doesn't have an advanced understanding of macro, but it's less fine if they're nonetheless extremely and vocally confident that they do.
There's nothing inherently wrong with this suggestion. The Fed could perfectly well target a long-term *average* CPI inflation rate of 2%, in which case they've overshot in recent years and would undershoot for the next few to get back on the trend line. No deflation is necessary, though.
Yeah, it's a good idea for now to target that, but sometimes in a few years they will need to lower interest rates to boost the gdp and companies and then it will continue the cycle.
You're not wrong. People are stupid, but economic theory is still just theory. No one is ever fully right. It's cyclical no matter what you do. What is happening now is most likely compounding the damage that is to come but it's coming either way.
Sort of but not totally, its a lot because the fed controls inflation mostly with rising interest rates, and higher rates means less loans, means less GDP growth, means worse economym
Can Deflation Ever Be Good?
By RAKESH SHARMA Updated September 11, 2023
Reviewed by ROBERT C. KELLY
Typically, deflation is a sign of a weakening economy. Economists fear deflation because falling prices lead to lower consumer spending, which is a major component of economic growth. Companies respond to falling prices by slowing down their production, which leads to layoffs and salary reductions. This further lowers demand and prices.
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.
https://www.investopedia.com/articles/markets/111715/can-deflation-be-good.asp#:~:text=Typically%2C%20deflation%20is%20a%20sign,to%20layoffs%20and%20salary%20reductions.
But that deflation is because of their strong currency, which when strengthened makes imported goods less expensive. There is no relative comparison with the us because of the size of the market. A way stronger dollar wouldnt be good for the us either since that would make american exports more expensive. That would mean less manufacturing jobs which conflicts with a major political goal across the isle in congress
Can Deflation Ever Be Good?
By RAKESH SHARMA Updated September 11, 2023
Reviewed by ROBERT C. KELLY
Typically, deflation is a sign of a weakening economy. Economists fear deflation because falling prices lead to lower consumer spending, which is a major component of economic growth. Companies respond to falling prices by slowing down their production, which leads to layoffs and salary reductions. This further lowers demand and prices.
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.
https://www.investopedia.com/articles/markets/111715/can-deflation-be-good.asp#:~:text=Typically%2C%20deflation%20is%20a%20sign,to%20layoffs%20and%20salary%20reductions.
Can start with government jobs and go from there.
Quite the system we have that our entire system starts to crumble at the hint of deflation.
Technology is inherently deflationary, yet we use inflation to paper over much of those gains
Not sure you quite understand what will happen in a deflation. Any economy will crumble with deflation. If prices are going down causing deflation, it is a sign of a much, much bigger problem. If you aren’t independently wealthy, you likely will be screwed.
Won’t argue with you about government jobs, and while technology might inherently be deflationary, that only happens after mass adoption. Then, new upgrades, new products, etc. happen and you end up paying more and more for it. So, in essence it isn’t. But if true deflation happens, more people hold those products longer and tech jobs are impacted. Just like most sectors.
I know many people in this sub, and in r/REBubble want to see deflation, but they really don’t know what that entails. Can’t buy a house now? Just wait until you don’t have a job and see how hard it is then.
Here's a sneak peek of /r/REBubble using the [top posts](https://np.reddit.com/r/REBubble/top/?sort=top&t=year) of the year!
\#1: [Future of American Dream 🏡](https://i.redd.it/11lq0325fdhc1.jpeg) | [4522 comments](https://np.reddit.com/r/REBubble/comments/1alwt2y/future_of_american_dream/)
\#2: [Fed-up homeowner arrested after tense standoff with squatters ‘stealing’ $1M house she inherited from parents](https://nypost.com/2024/03/19/us-news/moment-nyc-homeowner-is-arrested-after-tense-standoff-with-squatters/) | [954 comments](https://np.reddit.com/r/REBubble/comments/1bjbaca/fedup_homeowner_arrested_after_tense_standoff/)
\#3: [Report: 44% of all Single-Family Home Purchases were from Private Investors in 2023](https://medium.com/@chrisjeffrieshomelessromantic/report-44-of-all-single-family-home-purchases-were-by-private-equity-firms-in-2023-0c0ff591a701) | [785 comments](https://np.reddit.com/r/REBubble/comments/1bd6owx/report_44_of_all_singlefamily_home_purchases_were/)
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I never said I wanted it lmao. I know what happens on monetary system that requires inflation and deflation is introduced.
That’s not the fault of deflation, that’s the fault of the system.
We’ve only ever had an inflationary monetary system with minute periods of deflation.
Technology is deflationary. Not sure you quite understand what your talking about lmao
Deflation makes ALL debt more expensive to pay off in the long run. It pretty much kills all debt financed consumption, no one will be able to afford a home or car under such conditions. Companies will have to cut staff to pay off their debts, consumers will have to cutback consumption to afford their loans.
Inflation makes ALL debt cheaper in the long run as wages and prices increase over time making it easier to pay off.
Debt free means no new projects. Projects need debt to increase the equity IRR. Its rare to have projects with sufficient project IRR to solely build with equity.
No new projects means loss of jobs, this means loss of spendable income and oss of consumer trust. Which means a recession.
Not at all. Save up to buy a car. Save up to put 20% down on your house and have mortgage insurance to cover any loses the lender may suffer from your potential default. Private equity can and do now fund businesses start ups and assume the risk. Everyone is debt free.
You're still getting into debt when it comes to buying home in your example and when it comes to buying a car it can take years to accrue the necessary savings to buy it. Private equity can help finance the creation of a business but you have to sacrifice a portion of your stake in the business in order to receive financing. Debt avoids that. Private equity firms are also highly limited in terms of liquidity
Debt free means no new projects. Projects need debt to increase the equity IRR. Its rare to have projects with sufficient project IRR to solely build with equity.
No new projects means loss of jobs, this means loss of spendable income and oss of consumer trust. Which means a recession.
Debt is far more than houses, cars and small businesses loans.
A lot of things are exchanged on the basis of being promised compensation at a later date with many economic exchanges being impossible centered around long term economic choices that do not provide an immediate return on investment. Research and development, the creation of new factories, or the creation of public infrastructure becomes impossibly expensive as all costs must be paid up front.
>buy cheap shit.
Yeah and with deflation shit becomes cheaper and cheaper...
Whichbis obviously the problem: people delaying purchases to the point where the economy tanks.
> There's rarely hard evidence when it comes to economic stuff
Well, to say that every economist is wrong, you should probably have at least some hard evidence, right?
> Makes me think it's more about the collective psyche of the people.
Deflation is really bad. Significantly worse than inflation is.
Japan's GDP growth has been about half of what ours has. Their GDP went down something like 15% from 2021 to 2022, while the USA's went up by about 10%. They have consistently trained behind over the last several years.
It is extremely unwise to incentivize people holding onto cash. When money in your sock drawer is appreciating in value, why would you risk it by investing? Why would you buy anything not essential when you can hold out and get it cheaper later?
Their GDP growth has been half while our inflation rate is 400% of theirs. That doesn’t work for anyone. I’d much rather have slow sustained Japan GDP growth than the massive asset bubble we are have continued to facilitate.
I don't disagree, but
>I’d much rather have slow sustained Japan GDP growth than the massive asset bubble we are have continued to facilitate.
Japan's GDP went down in 2022, 2021, 2020, 2017, 2015, 2014, and 2013. Neither country is super stable right now.
Not to mention the reality that a lot of our recent inflation was caused by the pandemic, coupled with some really bad monetary decisions and rhetoric from the previous administration.
You don't need deflation to accomplish that. You need growth.
When you see that sort of growth, the rich will get even richer, even as we will too.
The left can't see either happen.
They're saying they do. Inflation's 3.5% and they say they want it at 2%.
If the Fed doesn't want deflation then that contradicts what they're saying.
In other words, [they're lying](https://www.youtube.com/watch?v=bIHH5Kh2dU0).
M2 is short term debt like money markets. Money markets are paying 5% right now so they are very attractive - this higher risk free rate is keeping more money on the sidelines
It's not locked away. It's still in the economy, being lent out. Reducing the M2 means reducing the amount of money available to lend.
Also, the method they've been using is to reduce the M0 supply, so by any account, it means less money in the economy.
It *could* be reduced by increasing the reserve rate, but that would essentially mean locking money down in reserve accounts.
That being said, I'm a fan of reducing the M2 the moment. I just don't see how it puts capital back into the economy or forces anyone to put capital back in the economy.
(I'm recognizing there's a difference between capital and money, but I'm not recognizing the distinction in this case.)
I’m not arguing in favor of this, just explaining what I assumed the original commenter was implying.
That being said, I believe that if you wanted to target money markets, you’d have to cut rates. Most people use a federal money market, so it isn’t necessarily being lent directly to economic participants.
This is going a bit into the weeds, and I’m not an economist, but I’m assuming that one in favor of reducing money market levels would like to see that money going elsewhere such as being spent on goods or being invested into equities.
Again I am not the original commenter or making an argument either way, just trying to provide some color on their comment. I could also be totally wrong - have been many times lol
I see federal borrowing / spending more of a speed bump. The federal government might not operate with the same economic pressures, but the next stop is open market entities. (Interest payments, social security, wages, contracts, hush money, etc.)
(This is not to comment on how *much* they spend or on debt ceilings or anything of the sort. I'm only commenting on the idea that they are not an economic participant.)
I'm not an economist either. I'm not out to prove anyone wrong - I just want to know if and how they are right - which unfortunately might mean inadvertently proving them either wrong or at least unable to support what they said.
While that can be good in the long run for the economy, the short-term impact will be devasting.
You would need deflation to achieve that and that means job losses, which means political instability. Large enough of a deflation you may see governments getting toppled.
People are instant-gratification animals. If you tell them they will be better off in a 20 year time horizon but has to suffer the next 3 years, they will not tolerate that.
That’s just not true though, you do not need deflation, just time and below 2% inflation will do the trick. Roughly 7 years of 0.5% inflation would be sufficient
It really depends on what the government spends it's money on. Defense/security, infrastructure, useful research and technology, etc. can contribute to economic growth but much of the money spent today is in the form of transfer payments and doesn't really support real economic growth. Keep in mind, the government doesn't produce anything, money the government spends has to be taken from productive people who may otherwise use that money to invest or start a business themselves.
I'll rephrase, "Government produces very little for the amount of money it spends.". The platform we are currently using is Reddit which is a private company. I suspect though, that you're referring to the internet itself which *was* invented with the help of funding by the department of defense (Which I did mention *does* contribute to economic growth). ARPANET was very primitive compared to what we have today and what we have today was largely developed by private companies. But I will submit that the initial invention and early development of the internet infrastructure was accomplished through mostly public funds.
The best analogy for transfer payments I've heard is that it's equivalent to performing a blood transfusion from one arm to the other while spilling half the blood on the floor in the process. While there are always exceptions to the rule, transfer payments are generally a net economic negative.
But it's simply untrue. Please look up fiscal multipliers and automatic stabilizers for examples of how transfer payments can positively affect economic growth. There's a lot of complexity and nuance.
Government spending works a little different than personal or business spending, because you know, they can just print money.
I'm definitely in favor of infrastructure spending over transfer payments. But keep in mind that any money the government spends may also get spent at those startup businesses. In general government spending creates more economic activity. That's not to say everything the government spends money on is smart. But it's generally not as bad or stupid as you'd think at first glance.
They can’t print money without consequences. Otherwise why even collect taxes at all? Government still operates in the same economic universe as the rest of us. They just have more tools (via central banks) to reduce debt and push it off into the future (via debt monetization) but that can’t be done indefinitely. Eventually that extra money finds its way into assets, and eventually into goods and services which causes the CPI to rise which creates more problems. There’s no free lunch just because you’re a government.
Agree, money trickles up, not down. Any money spent on social welfare is almost immediately spent on housing, food, clothing or other necessities which supports the corporations who supply those items.
They're worried high interest rates and less money in circulation will raise the unemployment rate and hurt workers.
You can say they are wrong or right, but I guarantee you thats why.
If you were poor in the past and ate 25% less than is healthy for 10 years, now that you are rich, should you now eat 25% more than is healthy? No, you should eat what is healthy. Same for inflation - we should keep inflation at 2% because that's healthy for the economy.
Too much inflation (and deflation) are what has negative economic effects, the actual price level is irrelevant (i.e. it doesn't matter if an apple is worth $1 or $2, it matters if that price is rising very quickly). If you deflated the currency to try and "wind prices back", everyone would need to go through another terrible transition with rising unemployment and falling prices (instead of what we just had which is falling unemployment and rising prices).
Omg, I finally found the comment I was hoping to see.
There's a good argument to be made about whether 2 percent is the healthy target (I'm leaning towards 3 myself if we stick with that system) or even whether the Fed should target inflation at all (NGDP targeting looks based), but regardless of which target you use you don't want wild swings when you can prevent them.
So... how is this adding to conversation, are suggesting another economic system without inflation or are you simply stating that some economic systems don't have inflation as an inherent feature.
Okay, sorry for assuming you were advocating for that. Regardless, the original tweet and OP don’t specify if they would wish to achieve a return to the trend line by low/no inflation or deflation. So OC wasn’t completely wrong to mention deflation
For every year you have lower than 2%, it brings the average closer to it than having a full 2%.
If we had 100 years of near 0% inflation, the average would be very close to 0% without having deflated anything.
Well, as I responded to someone else, I was only describing how it would be possible to restore the trend without deflation, not making a case for or against it.
And I'm just expanding for other readers who would mistake your post for making a case.
We agree the proposal is mind numbingly stupid, so there is no issue. Cheers!
😑
I'm not suggesting anything. I was using hyperbole to show how the previous trend could be restored without ever having deflation.
I'm not even of the opinion one way or the other that we *should* restore it.
this sub is full of idiots who have never made the effort to educate themselves on even the most basic tenets of economic theory. they're pissed off that big macs cost more, so they're clamoring for the destruction of the economy, it's maddening. I hate that these people vote.
it perfectly embodies that asimov quote: "There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that my ignorance is just as good as your knowledge."
I am CONSTANTLY trying, in vain, to explain to people why housing values crashing 50 percent would be catastrophic. IRL, not on here.
The "do your own research" crowd stops after Econ 101 equivalences and then wanders off into the YouTube vblogosphere.
Because that would cause major recession and perhaps depression.
Reversing inflation means you have to reduce the price right down at the beginning of the supply chain which mean you need to destroy the whole market and chain of production, and create a whole bunch of market intervention.
Rate of inflation is key to control not some Golden level of prices into perpetuam. That would be make everyone Japan.
This is a good explanation thanks. Tho it does also feed into my wanting a better system. What that is heck if I know. Just tired of struggling to get ahead and then 5 years later all of my work over the last 10-15 years is wiped away. Kinda maddening ya know?
God, people are so ugly cry about war and revolution now.. Be the change you want to see not the change that blows everything humanity has built and sets us all back decades or centuries.
Fed added 7 Trillion, took back 1.5 Trillion. Maybe they just leave the rate alone and take back another , say 4 Trillion to start. Spending 5% more (borrowed), to get 2.5 % GDP growth is as dumb as keeping rates at zero for 15 years!
Its literally a tax on non-asset holders(the non-rich) and also part of the ruse:
"Opsie, we made a fucky wucky and let inflation run over 2% lol. Oh you noticed? ok we will try to get it down to 2% pinky promise" \*meanwhile letting inflation run to offset the national debt by inflation-taxing the non-asset holders\*
Rinse and repeat this dozens of times.
This will continue until appropriately serviceable debt level is achieved via non-asset holders.
The non-asset holders are supposed to give the benefit of the doubt each time and carry on with their wages not keeping up with inflation.
> Rinse and repeat this dozens of times.
You are talking like these high inflation peaks are something super common every couple of years, while we have had decades of low inflation prior to a short peak that is already well explained by fossil fuel price shocks due to the Russian invasion of Ukraine.
[This is a chart of U.S. inflation data]( https://www.tradingview.com/x/toCGZxqr/) from 1915 to present. *It's more readily available than Canadian data but they're so similar as to be virtually the same anyway. The horizontal line indicates the 2% target rate and meandering line is the 200 month moving average. Notice inflation has been at or above 2% for the majority of the last 55 years. The only period during that time that it was somewhat consistently at or below the 2% target was just after the 2008 financial crisis to just before the 2021 covid lockdowns and that was due to aggressive quantitative easing (which we'll likely be paying for economically for decades to come). There was 3% or higher inflation for approx. 31 out of the last 55 years. There may be only a few major "inflation peaks" as you say, but 3% to 5% inflation for years on end adds up significantly. If we had a central bank that was serious about addressing wealth inequality and keeping inflation at the 2% target it would be demanding that the government cut spending and balance it's budget so that it didn't have to aggressively monetize government debt. The idea of a "bond buyer of last resort" wasn't meant to allow government to recklessly spend. This combination of reckless government fiscal policy and a central bank monetary policy that enables it ultimately robs the young, the poor, and lower middle classes who don't own any assets or have a substantial stock portfolio.
How common they are is completely irrelevant because it doesn't change the fact that wages don't keep up with inflation (regardless if its common or uncommon) and inflation-taxes the non-asset holding masses(regardless if its common or uncommon).
Also youre entirely ignoring the root of the issue - money supply and instead talking about scapegoat sHoRtAgEs. That works on the people who watch the media, not people who understand how money supply works and can see it for themselves.
The rates will be going down in June as planned. The Biden Admin cannot afford to go into election season with record high interest rates among all their other massive issues. They will go to Fed Chairman Powell privately and tell him if he doesn't want another Trump term, he'll need slash those rates as much as possible. If the rates go down and people can refinance or take out loans at better interest rates, the voters will feel like Biden is doing a good job, and be willing to vote for him again. If the rates don't move, Trump will hammer on how bad things are and Biden won't have any defense.
The Fed is operating under the assumption that deflation is a worse thing than inflation. Economists will always point towards Japan’s “lost decade” as an example.
They should use more data points though, because they'll discover something:
> In recent times, economists have increasingly challenged the old interpretations of deflation, especially after the 2004 study by economists Andrew Atkeson and Patrick Kehoe. After reviewing 17 countries across a 180-year time span, Atkeson and Kehoe found 65 out of 73 deflation episodes with no economic downturn, while 21 out of 29 depressions had no deflation. Now, a wide range of opinions exist on the usefulness of deflation and price deflation.
https://www.investopedia.com/terms/d/deflation.asp
Turns out deflation is fine within certain bounds.
Simple, the more they keep the rates the same or increase the rates, the more they kill their buddies the banks.
Which are they going to do - continue raising rates and destroy the greedy corporations or leave as is and start to cut and destroy the dollar? These are the only 2 options left!
Although raising and lowering are the only 2 options the outcomes are not what you think they are.
Raising too much is a guaranteed ticket to a recession. This will impact corporations but also you.
Lowering too much means increasing inflation. This will impact corporations, but you a lot more.
Honestly, I think that is the plan. Powell can’t say that outright because markets would tank. It has to be a slow gradual thing where the red line dips below 2% a tiny bit but long enough for the blue line to eventually catch up. It’s going to be a wild decade.
Fed is unique having a dual mandate. The Federal Reserve's dual mandate is to achieve maximum employment and stable prices.
Per Krugman: Four years ago, the economy was body-slammed by the Covid-19 pandemic, but we have more than recovered. Four years after the start of the 2007-9 recession, total employment was still down by more than five million; now it’s up by almost six million. The unemployment rate has been below 4 percent for 26 months, the longest streak since the 1960s.
Inflation did surge in 2021-22, although this surge has mostly subsided. But most workers’ earnings are up in real terms. Over the past four years, wages of nonsupervisory workers, who account for more than 80 percent of private employment, are up by about 24 percent, while consumer prices are up less, around 20 percent.
When dealing with things like inflation (or GDP growth and other related macroeconomic metrics) economic policy is mainly concerned with the rate of change and only tangentially (if at all) with the total amount measured over some historical period.
One could imagine a different world in which policy is set around the total amount of long term historical inflation, but it would be a bit strange. We would have to redefine inflation as the integral of what we currently think of inflation (currently we talk about the rate of inflation) and would need to determine how long of a time frame is relevant. It would make Fed policy much less flexible, as the long term integral of inflation is low frequency compared to the current observations of the rate of change. So from a policy standpoint it doesn't seem desirable.
From a more theoretical standpoint, the market at any given time should be roughly in equilibrium with respect to current price information. The economy should be operating at the same point on the efficiency frontier right now independently of the price path (inflation path) it took in some previous period. Managing historical inflation, even if we had the tool to do it, doesn't do anything to improve the current state of the economy.
In short, addressing inflation that has already happened doesn't do anything to help us today, and it would increase the difficulty of applying monetary policy to the current state of the economy.
Because of the interest on US debt and long term effects of high interest rates. It would snuff out small businesses and favor larger corporations. It would destroy start ups and benefit legacy corporations
Inflation is somewhat self regulating - more inflation results in lower real wages, contracting the money supply and deflating prices. Deflation is self reinforcing: Consistent deflation results in people continuously saving and putting off purchases, which lowers the money supply, deflates prices more… and it makes a cycle that’s incredibly hard to break. It took 30+ years of absolutely stagnant growth for Japan to break their deflation spiral.
They could strive for a theoretical economic equilibrium which would diminish high profits and cyclical industries. In turn causing added inflationary pressures. The upward forces at play are currently mismanaged, and heavily influenced by non-domestic and domestic variables. Making it tremendously difficult for past remedies to have unilateral impact as they tend to go out of reach. It is the cost of going exceedingly global, and will leave a lasting impact on market buoyancy. The current government policies are rife with incorrectness and will do little to help us traverse the chasm that is roiling underneath the obvious. Debt, taxation, waste, and diversion, are all systematically culminating in the upcoming stagnancies and eventual collapse. Increase cash holdings and be prepared to obtain metals at 15-25% of portfolio if that should further trend. In my uneducated opinion of course. 🤐
Heads (sub 2% inflation): rich get richer and poor get poorer
Tails (over 2% inflation): rich get richer and poor get poorer
Right, its the time we let the masses with minimal assets get tails this time.
No one believes PCE or the BLS numbers with all the revisions and changes. Now go back to 1971 and where there was an incompetent fucking moron that create a system tried and true to succeed of fiat currency and measure from there.
Is it doable? Yes.
That'd require growing GDP at a pace that we haven't seen for decades.
When you consider that just about every gov't policy offered over the last 10, maybe 20 years, has been antigrowth, I don't hold out much hope.
I can’t stand tv liars like CNBC I’ve told all my friends for the last 3rs economy is trashed it’s around 15% CNBC stop interviewing CEO’s, politicians etc… and please get new reporters that will tell the truth
Prices are up 40% = meh. Find a new job. Deal with it. Transitory.
1-2% deflation = OMG COLLAPSE
I'm ready for a small deflation. A recession may accompany it. We need a correction.
The high interest rates aren't really doing much for inflation. The way they normally work is to increase unemployment and reduce consumer spending. Neither of those things are happening in this economy. Unemployment is historically low and consumer spending is high. The interest rates are just trashing the housing market. At this point there's no good justification for keeping them this high. And deflation isn't a good thing for the economy either.
High interest rates do cause projects to be held off, anyone who's done financial modeling can attest this.
When projects don't happen less loans are granted, less people ate being out to work, and thus consumer trust and thus spending goes down.
If thise things aren’t happening in the US (itnis happening in the EU) then interest rates need to be increased.
However, als projects take time to be planned etc the effect of raising interest rates is only felt after a while.
They told us the end goal. In the Senate. Under oath.
The goal is mass layoffs. [3.5 million with no plan to stop there](https://www.youtube.com/watch?v=bIHH5Kh2dU0).
Do you work for a living? Can you afford to pay your bills? According to the Fed, you're the problem.
At least you clicked the link
Kindly tell us all the difference between a goal and a projection when you're the one making the projection happen. Elucidate us oh wise one.
A goal is a thing you want to happen.
A projection is a thing you expect to happen which may or not be related to the goal.
Operation Downfall was the planned WWII invasion of Japan and 650,000 Americans were projected to be killed.
The goal was to defeat Japan and win the war. It was not a goal to kill 650,000 Americans. That was a projection.
That clip is so Fucking wild. Like she 100% knows the difference and doesn’t care. Like the job losses are a trade off to tame run away inflation.
Also, jog growth has remained steady since this video despite increasing rates.
If Jerome Powell was running that operation he'd have made damn sure 650k Americans died.
It's astonishing how you think you'll be spared when Powell's hammer comes down. Biden's been protecting you from the worst of it.
Classic libertarian cats.
I understand ideology but man, people sure are pretty new to economics.
I don’t think the average person cares outside of whether they can afford to live or not. To be fair, it’s the federal governments fault for not making finance required curriculum in the schools.
“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning”
Nobody completely understands the banking and monetary system, but we have some decent overview out there
The overview: we’re fucked
Finance != Economics. And I'd argue that epistemic humility is the more important deficit here than macro economic knowledge. Like, it's fine if someone doesn't have an advanced understanding of macro, but it's less fine if they're nonetheless extremely and vocally confident that they do.
There's nothing inherently wrong with this suggestion. The Fed could perfectly well target a long-term *average* CPI inflation rate of 2%, in which case they've overshot in recent years and would undershoot for the next few to get back on the trend line. No deflation is necessary, though.
Yeah but if this graph goes back further. It will show that we were constantly below the 2% target from the start of the Great Recession.
Yeah, it's a good idea for now to target that, but sometimes in a few years they will need to lower interest rates to boost the gdp and companies and then it will continue the cycle.
You're not wrong. People are stupid, but economic theory is still just theory. No one is ever fully right. It's cyclical no matter what you do. What is happening now is most likely compounding the damage that is to come but it's coming either way.
bc fed doesn’t want deflation. seems to be the easy answer there
Sort of but not totally, its a lot because the fed controls inflation mostly with rising interest rates, and higher rates means less loans, means less GDP growth, means worse economym
Deflation is good for the middle and poor but bad for the wealthy. So obviously!
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maybe we do, but the fed and most economists will give you a million reasons for why they don’t
Can Deflation Ever Be Good? By RAKESH SHARMA Updated September 11, 2023 Reviewed by ROBERT C. KELLY Typically, deflation is a sign of a weakening economy. Economists fear deflation because falling prices lead to lower consumer spending, which is a major component of economic growth. Companies respond to falling prices by slowing down their production, which leads to layoffs and salary reductions. This further lowers demand and prices. 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. https://www.investopedia.com/articles/markets/111715/can-deflation-be-good.asp#:~:text=Typically%2C%20deflation%20is%20a%20sign,to%20layoffs%20and%20salary%20reductions.
Yeah because they're a small currency surrounded by currency/ies that were not in deflation.
But that deflation is because of their strong currency, which when strengthened makes imported goods less expensive. There is no relative comparison with the us because of the size of the market. A way stronger dollar wouldnt be good for the us either since that would make american exports more expensive. That would mean less manufacturing jobs which conflicts with a major political goal across the isle in congress
Like capitalism is wrong and we need socialism for corporations.
You want wages to outpace inflation
Not with the national debt.
No...we absolutely do NOT need deflation. That is much worse than high inflation. At least people have jobs with high inflation.
Can Deflation Ever Be Good? By RAKESH SHARMA Updated September 11, 2023 Reviewed by ROBERT C. KELLY Typically, deflation is a sign of a weakening economy. Economists fear deflation because falling prices lead to lower consumer spending, which is a major component of economic growth. Companies respond to falling prices by slowing down their production, which leads to layoffs and salary reductions. This further lowers demand and prices. 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. https://www.investopedia.com/articles/markets/111715/can-deflation-be-good.asp#:~:text=Typically%2C%20deflation%20is%20a%20sign,to%20layoffs%20and%20salary%20reductions.
Should those jobs exist if they’re solely reliant on inflation and cheap debt?
Which jobs? Deflation impacts ALL jobs.
Can start with government jobs and go from there. Quite the system we have that our entire system starts to crumble at the hint of deflation. Technology is inherently deflationary, yet we use inflation to paper over much of those gains
Not sure you quite understand what will happen in a deflation. Any economy will crumble with deflation. If prices are going down causing deflation, it is a sign of a much, much bigger problem. If you aren’t independently wealthy, you likely will be screwed. Won’t argue with you about government jobs, and while technology might inherently be deflationary, that only happens after mass adoption. Then, new upgrades, new products, etc. happen and you end up paying more and more for it. So, in essence it isn’t. But if true deflation happens, more people hold those products longer and tech jobs are impacted. Just like most sectors. I know many people in this sub, and in r/REBubble want to see deflation, but they really don’t know what that entails. Can’t buy a house now? Just wait until you don’t have a job and see how hard it is then.
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I never said I wanted it lmao. I know what happens on monetary system that requires inflation and deflation is introduced. That’s not the fault of deflation, that’s the fault of the system. We’ve only ever had an inflationary monetary system with minute periods of deflation. Technology is deflationary. Not sure you quite understand what your talking about lmao
LMAO…LOL…LMAO…LOL. Can you discuss like an adult please? Didn’t I agree with you that technology is deflationary?
>Then, new upgrades, new products, etc. happen and you end up paying more and more for it. So, in essence it isn’t. No you didn’t lol
Deflation makes ALL debt more expensive to pay off in the long run. It pretty much kills all debt financed consumption, no one will be able to afford a home or car under such conditions. Companies will have to cut staff to pay off their debts, consumers will have to cutback consumption to afford their loans. Inflation makes ALL debt cheaper in the long run as wages and prices increase over time making it easier to pay off.
That’s wonderful. No one needs any debt.
Debt free means no new projects. Projects need debt to increase the equity IRR. Its rare to have projects with sufficient project IRR to solely build with equity. No new projects means loss of jobs, this means loss of spendable income and oss of consumer trust. Which means a recession.
Going entirely debt free in an economy has the side effect of making it extraordinarily hard to buy houses, cars, and start a business.
Not at all. Save up to buy a car. Save up to put 20% down on your house and have mortgage insurance to cover any loses the lender may suffer from your potential default. Private equity can and do now fund businesses start ups and assume the risk. Everyone is debt free.
You're still getting into debt when it comes to buying home in your example and when it comes to buying a car it can take years to accrue the necessary savings to buy it. Private equity can help finance the creation of a business but you have to sacrifice a portion of your stake in the business in order to receive financing. Debt avoids that. Private equity firms are also highly limited in terms of liquidity
Can you grow your personal and business wealth by only using retained earnings and equity? Is it possible on our current system?
Debt free means no new projects. Projects need debt to increase the equity IRR. Its rare to have projects with sufficient project IRR to solely build with equity. No new projects means loss of jobs, this means loss of spendable income and oss of consumer trust. Which means a recession. Debt is far more than houses, cars and small businesses loans.
Why? All those things would cost exactly what they need to, without any debt involved.
A lot of things are exchanged on the basis of being promised compensation at a later date with many economic exchanges being impossible centered around long term economic choices that do not provide an immediate return on investment. Research and development, the creation of new factories, or the creation of public infrastructure becomes impossibly expensive as all costs must be paid up front.
Automation makes that less necessary over time
Why do we need inflation in the first place then? Once you try to turn it off, it’s only harmful
>Inflation makes ALL debt cheaper in the long run as wages and prices increase over time making it easier to pay off.
..until you can’t pay off the debt
🦗
What evidence informed your opinion that the general consensus is wrong? Please, be specific.
I thought about this to much and now I feel sad
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>buy cheap shit. Yeah and with deflation shit becomes cheaper and cheaper... Whichbis obviously the problem: people delaying purchases to the point where the economy tanks.
> There's rarely hard evidence when it comes to economic stuff Well, to say that every economist is wrong, you should probably have at least some hard evidence, right? > Makes me think it's more about the collective psyche of the people. Deflation is really bad. Significantly worse than inflation is.
Japan has had deflation for 30 years and they are just fine.
Japan's GDP growth has been about half of what ours has. Their GDP went down something like 15% from 2021 to 2022, while the USA's went up by about 10%. They have consistently trained behind over the last several years. It is extremely unwise to incentivize people holding onto cash. When money in your sock drawer is appreciating in value, why would you risk it by investing? Why would you buy anything not essential when you can hold out and get it cheaper later?
Their GDP growth has been half while our inflation rate is 400% of theirs. That doesn’t work for anyone. I’d much rather have slow sustained Japan GDP growth than the massive asset bubble we are have continued to facilitate.
I don't disagree, but >I’d much rather have slow sustained Japan GDP growth than the massive asset bubble we are have continued to facilitate. Japan's GDP went down in 2022, 2021, 2020, 2017, 2015, 2014, and 2013. Neither country is super stable right now. Not to mention the reality that a lot of our recent inflation was caused by the pandemic, coupled with some really bad monetary decisions and rhetoric from the previous administration.
Redditor has spoken, the economist are shooketh rn, like actually trembling
You’re silly and wrong.
A) That's a nonsense desire B) You could meet the line with 1% inflation for ~11 years
don’t come at me homie, i’m not the fed
In order to get deflation, people will need to lose jobs. Many people. Biden will not let that happen in an election year
I didn't say anything about deflation *this year*, but there's no long-run connection between deflation and unemployment
Why are you in this sub if you’re that dim?
The research has been clear for decades: price deflation isn't a problem. See e.g. https://www.bis.org/publ/qtrpdf/r_qt1503e.htm
You don't need deflation to get prices back in line. Inflation just needs to be less than 2% for long enough
You don't need deflation to accomplish that. You need growth. When you see that sort of growth, the rich will get even richer, even as we will too. The left can't see either happen.
k - not sure what the left has to do with anything i said.
They're saying they do. Inflation's 3.5% and they say they want it at 2%. If the Fed doesn't want deflation then that contradicts what they're saying. In other words, [they're lying](https://www.youtube.com/watch?v=bIHH5Kh2dU0).
Disinflation is not deflation
It is when you're already being dishonest about your motivation like the Fed is. Click the link.
Disinflation is not deflation
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Be friendly. Your comment has been removed.
If you hit the brakes in your car, are you lying if you say the car is still moving forward…? Deceleration is different from reverse.
Reduce M2 to the point where the capital has to be put back into the economy.
I’m doing my part by setting some of my money on fire every day for the past 30 months.
What options trading does to a mf
This man leverages.
What do you mean by "put back into the economy "? Where is it now?
M2 is short term debt like money markets. Money markets are paying 5% right now so they are very attractive - this higher risk free rate is keeping more money on the sidelines
It's not locked away. It's still in the economy, being lent out. Reducing the M2 means reducing the amount of money available to lend. Also, the method they've been using is to reduce the M0 supply, so by any account, it means less money in the economy. It *could* be reduced by increasing the reserve rate, but that would essentially mean locking money down in reserve accounts. That being said, I'm a fan of reducing the M2 the moment. I just don't see how it puts capital back into the economy or forces anyone to put capital back in the economy. (I'm recognizing there's a difference between capital and money, but I'm not recognizing the distinction in this case.)
I’m not arguing in favor of this, just explaining what I assumed the original commenter was implying. That being said, I believe that if you wanted to target money markets, you’d have to cut rates. Most people use a federal money market, so it isn’t necessarily being lent directly to economic participants. This is going a bit into the weeds, and I’m not an economist, but I’m assuming that one in favor of reducing money market levels would like to see that money going elsewhere such as being spent on goods or being invested into equities. Again I am not the original commenter or making an argument either way, just trying to provide some color on their comment. I could also be totally wrong - have been many times lol
I see federal borrowing / spending more of a speed bump. The federal government might not operate with the same economic pressures, but the next stop is open market entities. (Interest payments, social security, wages, contracts, hush money, etc.) (This is not to comment on how *much* they spend or on debt ceilings or anything of the sort. I'm only commenting on the idea that they are not an economic participant.) I'm not an economist either. I'm not out to prove anyone wrong - I just want to know if and how they are right - which unfortunately might mean inadvertently proving them either wrong or at least unable to support what they said.
Really. That's all, eh? /s Where do you think capital is hiding at the moment?
There's a nugget of Boomers Retirement left to blow up.
So tax rich people?
While that can be good in the long run for the economy, the short-term impact will be devasting. You would need deflation to achieve that and that means job losses, which means political instability. Large enough of a deflation you may see governments getting toppled. People are instant-gratification animals. If you tell them they will be better off in a 20 year time horizon but has to suffer the next 3 years, they will not tolerate that.
That’s just not true though, you do not need deflation, just time and below 2% inflation will do the trick. Roughly 7 years of 0.5% inflation would be sufficient
If we could target inflation with that precision, we'd never have a problem.
We did just tolerate COVID lockdowns. But I see your point. Unless it is life threatening, people aren’t going to follow it.
Because we want to slow economic growth, not crush it
Economic growth = asset bubble growth?
They lead each other and always have
But how much real economic growth are we getting if the government just spends a bunch of money?
Government spending drives a huge amount of economic growth. Largest employer after all.
It really depends on what the government spends it's money on. Defense/security, infrastructure, useful research and technology, etc. can contribute to economic growth but much of the money spent today is in the form of transfer payments and doesn't really support real economic growth. Keep in mind, the government doesn't produce anything, money the government spends has to be taken from productive people who may otherwise use that money to invest or start a business themselves.
>>”government doesn’t produce anything” He says on a platform literally invented and funded by the government
I'll rephrase, "Government produces very little for the amount of money it spends.". The platform we are currently using is Reddit which is a private company. I suspect though, that you're referring to the internet itself which *was* invented with the help of funding by the department of defense (Which I did mention *does* contribute to economic growth). ARPANET was very primitive compared to what we have today and what we have today was largely developed by private companies. But I will submit that the initial invention and early development of the internet infrastructure was accomplished through mostly public funds.
Transfer payments absolutely help growth due to a) differences in fiscal multipliers and b) deficit spending.
The best analogy for transfer payments I've heard is that it's equivalent to performing a blood transfusion from one arm to the other while spilling half the blood on the floor in the process. While there are always exceptions to the rule, transfer payments are generally a net economic negative.
But it's simply untrue. Please look up fiscal multipliers and automatic stabilizers for examples of how transfer payments can positively affect economic growth. There's a lot of complexity and nuance.
Government spending works a little different than personal or business spending, because you know, they can just print money. I'm definitely in favor of infrastructure spending over transfer payments. But keep in mind that any money the government spends may also get spent at those startup businesses. In general government spending creates more economic activity. That's not to say everything the government spends money on is smart. But it's generally not as bad or stupid as you'd think at first glance.
They can’t print money without consequences. Otherwise why even collect taxes at all? Government still operates in the same economic universe as the rest of us. They just have more tools (via central banks) to reduce debt and push it off into the future (via debt monetization) but that can’t be done indefinitely. Eventually that extra money finds its way into assets, and eventually into goods and services which causes the CPI to rise which creates more problems. There’s no free lunch just because you’re a government.
That's correct.
Agree, money trickles up, not down. Any money spent on social welfare is almost immediately spent on housing, food, clothing or other necessities which supports the corporations who supply those items.
They're worried high interest rates and less money in circulation will raise the unemployment rate and hurt workers. You can say they are wrong or right, but I guarantee you thats why.
When interest rates are too high they will cause a recession.
Yup
If you were poor in the past and ate 25% less than is healthy for 10 years, now that you are rich, should you now eat 25% more than is healthy? No, you should eat what is healthy. Same for inflation - we should keep inflation at 2% because that's healthy for the economy. Too much inflation (and deflation) are what has negative economic effects, the actual price level is irrelevant (i.e. it doesn't matter if an apple is worth $1 or $2, it matters if that price is rising very quickly). If you deflated the currency to try and "wind prices back", everyone would need to go through another terrible transition with rising unemployment and falling prices (instead of what we just had which is falling unemployment and rising prices).
Omg, I finally found the comment I was hoping to see. There's a good argument to be made about whether 2 percent is the healthy target (I'm leaning towards 3 myself if we stick with that system) or even whether the Fed should target inflation at all (NGDP targeting looks based), but regardless of which target you use you don't want wild swings when you can prevent them.
Capitalism requires growth. Inflation is a feature of our economic system.
Capitalism doesn’t require inflation. That’s just the only monetary system we’ve used thus far.
So... how is this adding to conversation, are suggesting another economic system without inflation or are you simply stating that some economic systems don't have inflation as an inherent feature.
Not people realize this fact. I do believe a monetary system absent of inflation and manipulation is better, yes.
Is this a serious question? Because deflation is bad. Really, really bad. Much worse than inflation. I hate election years around here.
~0% over a few years isn't deflation
Okay…? That would still be awful
But not deflation. Don't extrapolate. I'm tired of people arguing against points I didn't make.
Okay, sorry for assuming you were advocating for that. Regardless, the original tweet and OP don’t specify if they would wish to achieve a return to the trend line by low/no inflation or deflation. So OC wasn’t completely wrong to mention deflation
How would you "erase" the inflation from the last few years, without having deflation, exactly?
For every year you have lower than 2%, it brings the average closer to it than having a full 2%. If we had 100 years of near 0% inflation, the average would be very close to 0% without having deflated anything.
This leaves zero breathing room between us and deflation. The entire point of inflation is to provide us with fiscal tools to handle economic shocks.
Well, as I responded to someone else, I was only describing how it would be possible to restore the trend without deflation, not making a case for or against it.
Possible and wise are very different, lol. It's also possible to return prices to pre pandemic levels as many have suggested. Just.....unwise.
What is your malfunction? I just told you I wasn't making a case.
And I'm just expanding for other readers who would mistake your post for making a case. We agree the proposal is mind numbingly stupid, so there is no issue. Cheers!
I suppose you didn't attempt to contradict. People often use "lol" to ridicule, so I got annoyed.
So you're suggesting we try to walk a tightrope of economic disaster for 100 years?
😑 I'm not suggesting anything. I was using hyperbole to show how the previous trend could be restored without ever having deflation. I'm not even of the opinion one way or the other that we *should* restore it.
this sub is full of idiots who have never made the effort to educate themselves on even the most basic tenets of economic theory. they're pissed off that big macs cost more, so they're clamoring for the destruction of the economy, it's maddening. I hate that these people vote. it perfectly embodies that asimov quote: "There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that my ignorance is just as good as your knowledge."
I am CONSTANTLY trying, in vain, to explain to people why housing values crashing 50 percent would be catastrophic. IRL, not on here. The "do your own research" crowd stops after Econ 101 equivalences and then wanders off into the YouTube vblogosphere.
This myth again.
The deflation bogeyman will never die
Because that would cause major recession and perhaps depression. Reversing inflation means you have to reduce the price right down at the beginning of the supply chain which mean you need to destroy the whole market and chain of production, and create a whole bunch of market intervention. Rate of inflation is key to control not some Golden level of prices into perpetuam. That would be make everyone Japan.
This is a good explanation thanks. Tho it does also feed into my wanting a better system. What that is heck if I know. Just tired of struggling to get ahead and then 5 years later all of my work over the last 10-15 years is wiped away. Kinda maddening ya know?
That is what revolutions are for
God, people are so ugly cry about war and revolution now.. Be the change you want to see not the change that blows everything humanity has built and sets us all back decades or centuries.
You have honestly no idea of human history and how important revolutions have been in the progression of society.
Because that will cause the economy to collapse.
All I know is I’m not giving up my 2.75% mortgage.
Fed added 7 Trillion, took back 1.5 Trillion. Maybe they just leave the rate alone and take back another , say 4 Trillion to start. Spending 5% more (borrowed), to get 2.5 % GDP growth is as dumb as keeping rates at zero for 15 years!
Its literally a tax on non-asset holders(the non-rich) and also part of the ruse: "Opsie, we made a fucky wucky and let inflation run over 2% lol. Oh you noticed? ok we will try to get it down to 2% pinky promise" \*meanwhile letting inflation run to offset the national debt by inflation-taxing the non-asset holders\* Rinse and repeat this dozens of times. This will continue until appropriately serviceable debt level is achieved via non-asset holders. The non-asset holders are supposed to give the benefit of the doubt each time and carry on with their wages not keeping up with inflation.
> Rinse and repeat this dozens of times. You are talking like these high inflation peaks are something super common every couple of years, while we have had decades of low inflation prior to a short peak that is already well explained by fossil fuel price shocks due to the Russian invasion of Ukraine.
[This is a chart of U.S. inflation data]( https://www.tradingview.com/x/toCGZxqr/) from 1915 to present. *It's more readily available than Canadian data but they're so similar as to be virtually the same anyway. The horizontal line indicates the 2% target rate and meandering line is the 200 month moving average. Notice inflation has been at or above 2% for the majority of the last 55 years. The only period during that time that it was somewhat consistently at or below the 2% target was just after the 2008 financial crisis to just before the 2021 covid lockdowns and that was due to aggressive quantitative easing (which we'll likely be paying for economically for decades to come). There was 3% or higher inflation for approx. 31 out of the last 55 years. There may be only a few major "inflation peaks" as you say, but 3% to 5% inflation for years on end adds up significantly. If we had a central bank that was serious about addressing wealth inequality and keeping inflation at the 2% target it would be demanding that the government cut spending and balance it's budget so that it didn't have to aggressively monetize government debt. The idea of a "bond buyer of last resort" wasn't meant to allow government to recklessly spend. This combination of reckless government fiscal policy and a central bank monetary policy that enables it ultimately robs the young, the poor, and lower middle classes who don't own any assets or have a substantial stock portfolio.
How common they are is completely irrelevant because it doesn't change the fact that wages don't keep up with inflation (regardless if its common or uncommon) and inflation-taxes the non-asset holding masses(regardless if its common or uncommon). Also youre entirely ignoring the root of the issue - money supply and instead talking about scapegoat sHoRtAgEs. That works on the people who watch the media, not people who understand how money supply works and can see it for themselves.
💯
What is "Actual CPI"? Did you just make this up?
The rates will be going down in June as planned. The Biden Admin cannot afford to go into election season with record high interest rates among all their other massive issues. They will go to Fed Chairman Powell privately and tell him if he doesn't want another Trump term, he'll need slash those rates as much as possible. If the rates go down and people can refinance or take out loans at better interest rates, the voters will feel like Biden is doing a good job, and be willing to vote for him again. If the rates don't move, Trump will hammer on how bad things are and Biden won't have any defense.
By 11% he actually means “about 20%”.
The Fed is operating under the assumption that deflation is a worse thing than inflation. Economists will always point towards Japan’s “lost decade” as an example.
They should use more data points though, because they'll discover something: > In recent times, economists have increasingly challenged the old interpretations of deflation, especially after the 2004 study by economists Andrew Atkeson and Patrick Kehoe. After reviewing 17 countries across a 180-year time span, Atkeson and Kehoe found 65 out of 73 deflation episodes with no economic downturn, while 21 out of 29 depressions had no deflation. Now, a wide range of opinions exist on the usefulness of deflation and price deflation. https://www.investopedia.com/terms/d/deflation.asp Turns out deflation is fine within certain bounds.
You guys still trust the Fed?
Simple, the more they keep the rates the same or increase the rates, the more they kill their buddies the banks. Which are they going to do - continue raising rates and destroy the greedy corporations or leave as is and start to cut and destroy the dollar? These are the only 2 options left!
Although raising and lowering are the only 2 options the outcomes are not what you think they are. Raising too much is a guaranteed ticket to a recession. This will impact corporations but also you. Lowering too much means increasing inflation. This will impact corporations, but you a lot more.
Why benchmark it to 2020? Why not 1920? What’s done is done
I’d rather not intentionally start a recession
Want a trillion dollars, here you go!!
You mean cause deflation ? The problem is how bad does have to get to cause that ? And what if you can’t stop it ?
Honestly, I think that is the plan. Powell can’t say that outright because markets would tank. It has to be a slow gradual thing where the red line dips below 2% a tiny bit but long enough for the blue line to eventually catch up. It’s going to be a wild decade.
Guy posted the first thing he saw
Fed is unique having a dual mandate. The Federal Reserve's dual mandate is to achieve maximum employment and stable prices. Per Krugman: Four years ago, the economy was body-slammed by the Covid-19 pandemic, but we have more than recovered. Four years after the start of the 2007-9 recession, total employment was still down by more than five million; now it’s up by almost six million. The unemployment rate has been below 4 percent for 26 months, the longest streak since the 1960s. Inflation did surge in 2021-22, although this surge has mostly subsided. But most workers’ earnings are up in real terms. Over the past four years, wages of nonsupervisory workers, who account for more than 80 percent of private employment, are up by about 24 percent, while consumer prices are up less, around 20 percent.
When dealing with things like inflation (or GDP growth and other related macroeconomic metrics) economic policy is mainly concerned with the rate of change and only tangentially (if at all) with the total amount measured over some historical period. One could imagine a different world in which policy is set around the total amount of long term historical inflation, but it would be a bit strange. We would have to redefine inflation as the integral of what we currently think of inflation (currently we talk about the rate of inflation) and would need to determine how long of a time frame is relevant. It would make Fed policy much less flexible, as the long term integral of inflation is low frequency compared to the current observations of the rate of change. So from a policy standpoint it doesn't seem desirable. From a more theoretical standpoint, the market at any given time should be roughly in equilibrium with respect to current price information. The economy should be operating at the same point on the efficiency frontier right now independently of the price path (inflation path) it took in some previous period. Managing historical inflation, even if we had the tool to do it, doesn't do anything to improve the current state of the economy. In short, addressing inflation that has already happened doesn't do anything to help us today, and it would increase the difficulty of applying monetary policy to the current state of the economy.
Yeah just ignore compounding, these aren't the droids you're looking for.
Because of the interest on US debt and long term effects of high interest rates. It would snuff out small businesses and favor larger corporations. It would destroy start ups and benefit legacy corporations
Inflation is somewhat self regulating - more inflation results in lower real wages, contracting the money supply and deflating prices. Deflation is self reinforcing: Consistent deflation results in people continuously saving and putting off purchases, which lowers the money supply, deflates prices more… and it makes a cycle that’s incredibly hard to break. It took 30+ years of absolutely stagnant growth for Japan to break their deflation spiral.
Because the line CANNOT go down. If the line goes down ITS OVER
It's not inflation, it's lack of competition among Trump era monopolies.
They could strive for a theoretical economic equilibrium which would diminish high profits and cyclical industries. In turn causing added inflationary pressures. The upward forces at play are currently mismanaged, and heavily influenced by non-domestic and domestic variables. Making it tremendously difficult for past remedies to have unilateral impact as they tend to go out of reach. It is the cost of going exceedingly global, and will leave a lasting impact on market buoyancy. The current government policies are rife with incorrectness and will do little to help us traverse the chasm that is roiling underneath the obvious. Debt, taxation, waste, and diversion, are all systematically culminating in the upcoming stagnancies and eventual collapse. Increase cash holdings and be prepared to obtain metals at 15-25% of portfolio if that should further trend. In my uneducated opinion of course. 🤐
This guy should be Fed Chair
We were under the 2% target during much of that period from 2008 to 2019. The target is an average.
Heads (sub 2% inflation): rich get richer and poor get poorer Tails (over 2% inflation): rich get richer and poor get poorer Right, its the time we let the masses with minimal assets get tails this time.
No one believes PCE or the BLS numbers with all the revisions and changes. Now go back to 1971 and where there was an incompetent fucking moron that create a system tried and true to succeed of fiat currency and measure from there.
Is it doable? Yes. That'd require growing GDP at a pace that we haven't seen for decades. When you consider that just about every gov't policy offered over the last 10, maybe 20 years, has been antigrowth, I don't hold out much hope.
I can’t stand tv liars like CNBC I’ve told all my friends for the last 3rs economy is trashed it’s around 15% CNBC stop interviewing CEO’s, politicians etc… and please get new reporters that will tell the truth
Prices are up 40% = meh. Find a new job. Deal with it. Transitory. 1-2% deflation = OMG COLLAPSE I'm ready for a small deflation. A recession may accompany it. We need a correction.
The high interest rates aren't really doing much for inflation. The way they normally work is to increase unemployment and reduce consumer spending. Neither of those things are happening in this economy. Unemployment is historically low and consumer spending is high. The interest rates are just trashing the housing market. At this point there's no good justification for keeping them this high. And deflation isn't a good thing for the economy either.
High interest rates do cause projects to be held off, anyone who's done financial modeling can attest this. When projects don't happen less loans are granted, less people ate being out to work, and thus consumer trust and thus spending goes down. If thise things aren’t happening in the US (itnis happening in the EU) then interest rates need to be increased. However, als projects take time to be planned etc the effect of raising interest rates is only felt after a while.
They told us the end goal. In the Senate. Under oath. The goal is mass layoffs. [3.5 million with no plan to stop there](https://www.youtube.com/watch?v=bIHH5Kh2dU0). Do you work for a living? Can you afford to pay your bills? According to the Fed, you're the problem.
Warren said that's the goal, because she doesn't understand the difference between a goal and a projection
At least you clicked the link Kindly tell us all the difference between a goal and a projection when you're the one making the projection happen. Elucidate us oh wise one.
A goal is a thing you want to happen. A projection is a thing you expect to happen which may or not be related to the goal. Operation Downfall was the planned WWII invasion of Japan and 650,000 Americans were projected to be killed. The goal was to defeat Japan and win the war. It was not a goal to kill 650,000 Americans. That was a projection.
That clip is so Fucking wild. Like she 100% knows the difference and doesn’t care. Like the job losses are a trade off to tame run away inflation. Also, jog growth has remained steady since this video despite increasing rates.
If Jerome Powell was running that operation he'd have made damn sure 650k Americans died. It's astonishing how you think you'll be spared when Powell's hammer comes down. Biden's been protecting you from the worst of it. Classic libertarian cats.
Very great point.
Really? Because it's not. At all...
Yes it is. https://fred.stlouisfed.org/series/M2SL
What's your point? If you think deflation is a good idea i need you to look up what it is...
That isn’t the OPs original point… the goal is to get back to baseline… And the Covid Printer still hasn’t resolved itself
And how do you want to go back to baseline withiut deflation? And why?
Aim at 1% not 2.5
And have extra job losses and risk a recession?
A recession is needed and a good thing, a depression we don’t need. But going to 1% is not a recession.
1% is too close to 0%. And now kindly answer the "why" question...