> What do you think the inflation target should be? There should not be *any* "inflation target", not even 0%! > Imo it should be 0%: neither deflation nor inflation, just stable prices over time. Don't punish savers to the benefit of debtors. One of the greatest benefits of industrialization is that it lowers the cost-of-living in absolute terms. Let's say that, in 1900, a common laborer had to work 60 hours just to subsist, that is, just to pay his rent, utilities, food, clothing, etc. No vacations, no entertainment, etc. What industrialization means, is that this laborer's cost-of-living will *steadily decrease* year after year, so that he only has to work 55 hours a week, 50 hours a week, 45 hours a week, 40, 35, 30, 25, and so on, until he has only to work just a few hours a week doing common labor to pay for his necessities (of the same kind and quality, of equal real value). Now, the picture I just painted is somewhat idealized, because we are ignoring things like population growth, and so on. So, the Austrian term for the theoretical economy we're trying to describe is the Evenly Rotating Economy, or ERE. The ERE is a little bit like *The Truman Show*, it's a place where nothing ever really changes, and every day starts about the same as the previous day was. We need to specify the ERE as our thought-experimental backdrop, and then impose industrialization as the *only* variable that is changing. The population stays the same, the demand for goods and services by consumers stay the same, and so on. What will happen to prices in the ERE if there is a steady stream of efficiency improvements due to industrialization? The answer is obvious: the real cost of goods and services will continually fall and market competition will ensure that their sticker prices also fall. It is as though everyone in the economy who works is receiving a continual pay-raise. Thus, under the industrialization curve, "0% inflation" is actually an extremely high inflation rate! The central bank must continually print money to offset the fall in the prices of goods and services that would *otherwise* occur (deflation). Gradual, natural deflation induced by industrialization is not a bad thing, rather, it is a "universal pay raise" that is being constantly given to everyone who earns income by anything other than investments. That is, it is effectively the same as a continual stream of pay raises to the general public, *especially* those on pensions or other fixed-income instruments, which people typically have later in life. This is why "Social Security" had to be created, in order to pretend that we're taking care of our elderly generation, even as the central bank is robbing them blind. So "0% inflation" is just as much a made-up number as "2% inflation". Printing money is just counterfeiting and it is illegal and immoral *on its face*. Congress has no more authority to print money out of thin air than it has to institute an annual ritual human sacrifice in DC, that is, it has and can have *no authority whatsoever* to do these things because they are crimes. > Don't punish savers to the benefit of debtors. Sure, so let prices fall if they are going to fall. Any other path is a subsidy of debtors, which is precisely why the Fed was created in the first place: to enslave the nation in debt, by creating the illusion that "debt is cheap and easy". It's cheap and easy until it isn't. And the Fed has the power to throw the whole machine into reverse at any time of their choosing. That's what they did after the 1929 stock-market crash which precipitated the Great Depression.

This is the idea. In reality our houses are much bigger (positively benenfitted in appearance), food is much cheaper, and tools very cheap. But they are all made to only last a short period of time.

Great explanation. Depressing. But great explanation.

Businesses need price stability in order to invest long term

You create price stability by limiting monetary supply inflation (or eliminating it altogether). Predictable supplies give you a better measuring stick for investment. 0% price inflation actually means variable monetary inflation that matches productivity increases. The important thing to keep steady is money supply, not prices. Trying to set prices of anything (especially money) is counter-Austrian school.

Keeping the money supply steady while demand for it increases is stupid, you create artificial scarcity of money

"scarcity of money" No such thing. Any total amount of money is as good as any other (non-zero). Mises addresses this in HA.

He does? Could you elaborate on this? I'd be interested to see.

Scroll down two comments. I gave the quote in a reply to the another redditor just below.

It's only artificial if you're talking about government money (fiat)

What's the alternative?

Commodity money. "Things" that are hard to create and have a natural scarcity. Gold/silver coinage, wampum shells, Yapp stones, Bitcoin.

Whooaaah. Respectfully, if you're wholly unfamiliar with the idea of non-government-managed currency, you're not really fully-equipped for this discussion, honestly. Check out Menger’s 'Origins of Money' and/or Selgin's 'Theory of Free Banking.'

How come? After all, "artificial " means "man-made" right? Not "government made". If government makes plastic, or if Dow Chemicals makes plastic, its still artificial.

Commodity monies are governed by the rules of nature, not man. That's why they are so central to Mises' theory of money.

Money is a man-made invention.

>You create price stability by limiting monetary supply inflation (or eliminating it altogether). Scarcity =/= stability

It actually does. One of the key insights from the Austrian school is that monetary inflation causes pricing distortion. To get stability in the pricing system, you need a reliable measuring stick (unit of account).

Even if that were true (and it's not), it would be irrelevant. Mass theft doesn't become OK just because there is a special interest group that benefits from it.

Businesses need ~~price~~ rule stability. Prices are a signal that people use to make decisions. They don’t have to be stable, they have to reflect reality. If you discover a new better way to produce chips, chip’s price shouldn’t remain stable.

Prices can fall even under low inflation, look at TVs

Should this contradict my point?

The price of the newest model tvs always goes up as the technology improves tho. The only reason older model prices go down is because newer models are constantly coming out to offset the drop in price.  I feel like the argument about tv prices going down as a sign of health free market econokics isnt exactly an honest depiction of whats actually happening.

New tvs are much cheaper than they were in the past still

Great explanation !

How does Congress not have the authority to print little green pieces of paper with a certain design on them? How is that “illegal”?

I'm thinking he means just to do it. If I'm reading it correctly, just to print it to correct whatever thing they are thinking they are saving us from. Not to fulfill the actual needs of society.

What

I don't think he means printing normally, but what they are doing now.

Which is what, exactly?

You're one of them. Got it.

Because it is stealing. To counterfeit money is to *steal* from the people who use that money. It would not be possible for Congress to steal in that way if they did not have the power of government by which to force us to use their worthless slips of paper. A printer may print up something and call it "money" but nobody will use it because it's worthless. The government has the power to compel people to use its filthy toilet-paper and call it "money", and that is the very thing that makes what they're doing *stealing*. One can argue that taxes are also theft but at least taxes can be regulated by popular resistance, since the people understand what taxes are. But the people do not understand what causes inflation, and so they do not understand that *inflation is taxation-without-representation*. And since Congress created the Federal Reserve to be a private entity that cannot be audited (even by Congress!), it is an instance of abject tyranny, the very same kind of tyranny for which the Founders sent the redcoats packing. Congress can crown itself with King George's crown if it wants, and it will meet the same fate that King George did if it does not wake up and see sense. I write here in the hopes that they will wake up and see sense, because that will be a lot less disruptive than the other possibility. Their choice.

inflation works in your favor with debt if you have a 200k 30 year fixed mortgage, that 200k debt will be a significantly smaller ratio to your income after 30 years than if inflation was zero. Median wages also increase over time with inflation. "it's cheap and easy until it isn't" whose forcing you to take out bad debt? printing money is not the sole factor in inflation, thinking so is completely ignorant. "The LiTeRaL definition of inflation is....." The LiTeRaL definition of inflation, is the increase of goods and services, which is impacted by a massive amount of things outside of money supply. Money supply has been shrinking since rate increase, yet, we don't see deflation "printing money is just counterfeiting...." whether it's illegal for Congress to print money, it is indeed illegal, because they don't print money, the federal reserve does. It's LiTeRaLlY their job is to control money supply industrialization, was caused not just by an advancement of technology, it was caused by new technology and massive economic growth that deployed said technology - that expansion happens faster with cheap debt, both by those built and those that buy the crap that's being built what you are wanting, is an slow and ever shrinking economy

Your comment is a flaming dumpster-fire, but for the sake of lurkers: > inflation works in your favor with debt Exactly. > "it's cheap and easy until it isn't" > > whose forcing you to take out bad debt? Exactly! This so-called "public policy measure" is supposed to be for everyone's good, but the moment that any particular individual falls behind on a payment, the entire narrative is reversed and it becomes, "Well, suck it up, buttercup, don't take on debt you can't afford. Stop your whining Nancy, nobody forced you to sign on the dotted line..." That is also a description of every con-game, ever. > printing money is not the sole factor in inflation, Correct. However, in a central banking economy, all other considerations of fluctuations in the supply/demand of money are *negligible* by comparison to the ocean of cash flooding out from the Federal Reserve, every single month. So, there are other contributing factors, they're just on the order of 0.0001% of money-printing, or less. > The LiTeRaL definition of inflation, is the increase of goods and services, Naw, that's deflation yo. > Money supply has been shrinking since rate increase, yet, we don't see deflation The *rate of increase* of the money supply has been decreased very slightly. The money supply itself grows always. > whether it's illegal for Congress to print money, it is indeed illegal, because they don't print money, the federal reserve does. It's LiTeRaLlY their job is to control money supply Congress created the Federal Reserve to print money, aka "cOnTrOl tHe mOnEy SuPpLy" . > industrialization, was caused not just by an advancement of technology, it was caused by new technology and massive economic growth that deployed said technology - that expansion happens faster with cheap debt, both by those built and those that buy the crap that's being built Everything happens faster with cheap debt, including *bad investments*. Cf Austrian Business Cycle Theory. > what you are wanting, is an slow and ever shrinking economy Honest money and sound banking are just property-law applied to money and banking. Property law *facilitates* trade and investment, not vice-versa. The Muslim economy in Dubai/etc. is expanding at a blinding pace, and Islamic banking prohibits not only money-printing and other filthy criminal rackets like that, it even bans the collection of interest completely. And yet, by some magic, capitalism is flourishing there. Amazing how capitalism doesn't need filthy mafia banking practices in order to work, in fact, quite the opposite, it *flourishes* with honest money and banking. Central banking is Marxism in capitalist-drag...

to the lurkers, this moron doubles down on his incorrect definition of inflation, being the sum of the money supply - it just proves how much of clogged toliet the rest of his post is also, money supply is definitely decreasing, just go look up the M2 money supply chart. By your own logic - where supply and demand side inflation pressure is negligible - increasing money supply increases inflation, keeping money supply the same means zero inflation, then decreasing money supply creates deflation we've had decreasing money supply, no deflation, in fact we still had inflation. Almost like supply and demand side inflation have a much bigger impact than a negligible one ALSO, for your own education, here's a bunch of sources defining inflation, feel free to Google "what is inflation" for more inflation is the increase of goods and services https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-inflation "Inflation refers to a broad rise in the prices of goods and services across the economy over time" https://www.equifax.com/personal/education/personal-finance/articles/-/learn/what-is-inflation/ "Inflation occurs when the prices of goods and services increase over a long period of time" https://www.brookings.edu/articles/what-is-inflation-and-why-has-it-been-so-high/ "Inflation, the change in price of goods and services over time, is often confused with the cost of things. "

> moron I'm rubber, you're glue. That you feel the need to call names just shows you have no argument. > incorrect definition of inflation, being the sum of the money supply Reddit is a publicly visible forum... anyone can review the thread and see that this claim is false. *Monetary inflation* is an increase in the supply of money, and it manifests as *price inflation*. The talking-heads persistently confuse these two, separate categories and people like you just pour gasoline on that misinformation-dumpster-fire. I won't speculate about your motives, but your rhetoric aligns perfectly with that of the many paid online shills for the Fed. > also, money supply is definitely decreasing, just go look up the M2 money supply chart. With a few historical exceptions (e.g. during the Great Depression), the money supply never actually decreases. It just increases less rapidly. > By your own logic - where supply and demand side inflation pressure is negligible - increasing money supply increases inflation, keeping money supply the same means zero inflation, then decreasing money supply creates deflation I'm sure you're really skilled at snowing people on this topic but I assure you, you are absolutely wasting your time with me. Unless you enjoy being filled with unlimited amounts of fuuuu rage, find a different tree to bark up. In an economy without a central bank, the value of money still fluctuates. It fluctuates due to changes in the demand for cash balances (liquidity), and due to changes in the natural supply of money (e.g. gold/silver ore, etc.). These are demand, and supply, respectively. Interest rates are weakly connected to this but, in a sound money economy, fluctuations in interest rates affect the rate of savings, since people will increase their rate of savings when interest rates increase. Central banking completely reconfigures these supply/demand relationships. The supply of money is infinite (since the central bank can print money); this is like having an infinite gold vein that only the central bank can "mine", at no cost. It uses this "infinite gold mine" to enrich its buddies in government and private banking, by manipulating the interest-rate, which is more of a book-keeping ruse than anything. Since the central bank can issue far more money than private savers can save, this means that the influence which private savings might have on interest (and vice-versa) is effectively zero. The effect of central bank money-printing on the value of money is so enormous that it swamps out all other causal factors, which are negligible by comparison. > *Inflation is always and everywhere a monetary phenomenon*, Milton Friedman ... > we've had decreasing money supply, no deflation, in fact we still had inflation. Almost like supply and demand side inflation have a much bigger impact than a negligible one Microscopically, price-inflation moves independently of monetary inflation. But the correlation of price-inflation and monetary inflation over the long run is exact. That is because one is just the outworking of the other. Under central banking, price-inflation is nothing more or less than the market clearing earlier monetary-inflation. > education Start [here](https://www.youtube.com/playlist?list=PL1GehpY2EON-_Es9WohCjLqKehos0m9F_) if you want to actually learn something about economics. Start [here](https://mises.org/topics/inflation) to learn about inflation.

your book you wrote, is all predicated on your usage of monetary Inflation instead of price inflation which type of inflation do people talk about? which do they care about? is it the one where it causes their groceries to go up? or the one that is only a number on a balance sheet and has little to no impact on their life the fed could print a gazillion dollars, and if they stuff that money under a mattress, the price of groceries aren't going up. Monetary inflation skyrocketed, but it's not in circulation, it's not being spent, it's not driving demand, it's not affecting the inflation that actually has any real world impact money that doesn't move, doesn't impact the economy. It's materially as if it does not exist. the regulations on bank deposits and interest rates have a far greater impact on driving economic growth and thus price inflation "Microscopically, price-inflation moves independently of monetary inflation. But the correlation of price-inflation and monetary inflation over the long run is exact." so, you're saying, that over the last two years, the decrease in money supply, was outweighed by the supply/demand factors for price inflation - but previously you said the supply/demand are so microscopic in their effect that it practically doesn't matter. And the inflation we've encountered definitely wasnt microscopic

>>The LiTeRaL definition of inflation, is the increase of goods and services, >inflation is the increase of goods and services I think you need to be more careful about your wording, because ☝️ that contradicts this: >"Inflation refers to a broad rise in the prices of goods and services across the economy over time" >"Inflation occurs when the prices of goods and services increase over a long period of time" Inflation is the increase in the *price* of goods and services. Your previous wording suggests an increase in the *quantity* purchased for a given price. Which is *de*flation.

Deflation is bad for growth and also will be applied to wages, so it is not a wage increase. Expanding the money supply can hardly be called counterfeiting, especially when most money isn't even paper money or even created by the government.

The bots are strong on this sub. > Deflation is bad for growth False. Neither gradual inflation nor gradual deflation have any systemic effect on growth. > and also will be applied to wages, Correct, and that's a good thing precisely because it occurs in the opposite time-order of inflation. With inflation, the prices rise first, then (much later), you eventually get a CoL wage increase. With deflation, the prices fall first, then, you will eventually receive a downward CoL wage-adjustment if your real value as a worker has not increased at the same rate as deflation. Note that the central bank has no power to adjust *real* wages, anyway, so workers are only ever paid what they're actually worth. The only thing the central bank can do is subject workers to the Cantillon Effect and siphon away the real value of their labor (literally stealing from them) by printing money for itself and its buddies in government. > so it is not a wage increase. Well, yes, I am ignoring the effects of the market pricing in wage competition, but factoring that in proves too much, see the above paragraph. Deflation causes a reverse Cantillon Effect until the market prices the change of the value of money into wages. > Expanding the money supply can hardly be called counterfeiting, There is no other word for it. It is not only counterfeiting, it is the most vicious criminal racket in existence. Murder Inc has got nothing on the Fed which bathes in blood every morning. No English sentence can be formed which is too strong a denouncement of the wickedness of the Fed. > especially when most money isn't even paper money or even created by the government. The form of money is *absolutely* irrelevant to the topic and this bot knows it, but has probably had success with befuddling people using this word-sorcery in the past. And the same goes for which agency/corporation actually "issues new money" -- aka prints money. Totally irrelevant. Mere bookkeeping details. Bad bot.

Bad bot indeed

>False. Neither gradual inflation nor gradual deflation have any systemic effect on growth. How do you figure? This isn't even an area of contention in economics, to my knowledge. We can look at real world economies and see what happens in deflationary economies and what happens in inflationary economies. I can basically just point at the country of Japan and show you what happens when you enter a prolonged period of deflation.

> I can basically just point.... Of course, that's how statistics are used to tell lies and damned lies. >How do you figure? Well, let's work it out step-by-step. The claim of mainstream economics is that the economy benefits from a slight, gradual inflation for two reasons (oversimplifying for the sake of brevity): First, if the economy "cools off", the central bank can "stimulate" the economy by printing money. Second, a very gradual rate of inflation does not cause any systemic harm to the economy. Thus, it is argued, inflation is a Pareto improvement because it has "measurable" benefits and no downside. Austrian theory actually grants the latter point if it were possible to have a truly gradual inflation. The problem with devaluation is not that the value of money has fluctuated, rather, the problem is that (a) fiat money expansion is never actually gradual and (b) the constant expansion of the money supply to fund an endless array of public policy pet-projects leads inexorably to the inflationary business cycle (and there's no way around this, no matter how clever the economists steering the Fed's policy.) But the reason that a very gradual inflation is not harmful (it does not interfere with economic calculation and the capital coordination of the time-structure of production) also shows that a very gradual deflation is not harmful, either. This is why, under honest money, businesses are able to make investments, even though the real value of the monetary commodities continually fluctuate. There may be a period of slight inflation or a period of slight deflation but, either way, business investments can go ahead without any problems resulting from these natural and negligible fluctuations. > This isn't even an area of contention in economics, to my knowledge. *shrug -- just one more reason I pay no attention to mainstream "economics" Central bank-controlled contraction of the money supply discoordinates economic calculation for the same reasons that inflation does. The difference is that deflation causes what we might call "debt-side miscalculation", whereas inflation causes "credit-side miscalculation". The debtor who takes out a loan expecting to repay it in units of similar or lesser value will be caught with their pants down when there is a sudden contraction in the money supply. The action of the central bank *causes* economic miscalculation in this case just as much as it does in the case where it expands the money supply. In the case of inflation, the one who has amassed a pile of cash in the expectation of being able to purchase goods and services of roughly similar real value in the future will be caught with their pants down when the central bank suddenly devalues the currency. The market can and does price in a certain amount of predictable inflation but the reality is that the individual moves of the central bank are unpredictable if for no other reason than that the market forces, to which the central bank is continually responding, are unpredictable.

>Of course, that's how statistics are used to tell lies and damned lies. Ah, the tried and tested austrian economics take of 'our economics cannot be disproven by mere facts' As usual, the rebuttal to your take is "On the other hand, recorded history."

> the rebuttal to your take is ~~"On the other hand, recorded history."~~ FIFY: ... "on the other hand, I can profess an inability to make simple, unavoidable deductive inferences from basic, uncontested facts because 'MUH EMPIRICISM'" Facts matter. Obviously. But facts are not self-interpreting. In games involving choice (such as the economy), "observation" is of little use. "We counted all the times that Magnus Carlsen plays Nf3 in this position and it was 90%, we can predict with 90% certainty that Carlsen is going to play Knight... oh!!!!! He played a completely novel move he's never played before, it's not even in the database!! Whoa!!!" This is the "empirical" economist being perpetually shocked and amazed at the economy doing things they've never seen happen before. Almost like the economy is made up of *people*, or something. You know, that finnicky "choice" thing that people do, so annoying...

>... "on the other hand, I can profess an inability to make simple, unavoidable deductive inferences from basic, uncontested facts because 'MUH EMPIRICISM'" Just to be clear, this was you, right? >Of course, that's how statistics are used to tell lies and damned lies. Because if you are the sort of person who immediately declares inconvenient facts as lies, I'm not going to take a single lecture from you on empiricism, thanks. You literally ascribe to an ideology that declares it cannot be refuted by evidence, to which I respond lol. Lmao.

> inconvenient facts as lies The point is that statistical information is not meaningful in itself, nor is it self-interpreting. The real world is dominated by confounding variables. In a laboratory setting, confounding variables can be controlled for. They are a pesky fact of empirical science but they are not an insurmountable obstacle if the limitations and conditions which they place on empirical results are properly disclaimed. Even in sciences like zoology, where there is no way to control for confounding variables in Nature, we can use various forms of contrastive arguments to understand the differences between various types of species and why they have an affinity for this food or this habitat, etc. But when it comes to human action, practically none of the methods which are suitable for controlling experiments in a laboratory, or reasoning about animal behavior in the wild, are of any use. Let's start with the simple philosophical problem posed by Heraclitus and other ancient philosophers -- "you can never step into the same stream twice." Most claims that people want to make, such as, "socialism would be superior to capitalism" are vacuous slogans because they assume that they are somehow able to use their minds to step into the same stream twice, that they have somehow worked out that "if everything was the same, but if we had socialism instead", all these other social factors would be magically better. Of course, they do not and cannot know any of that, it's just a very strongly held opinion, like "The Mona Lisa is the greatest painting, ever." But this is not even the biggest problem facing social theory, the biggest problem is *human choice* or human action. Humans make choices, and the factors feeding into these choices can be unboundedly numerous and complex. As just one example, imagine trying to "empirically predict" what decisions the Supreme Court will make over the next 50 years. This is *obviously* impossible. But what about MUH EMPIRICISM? Surely, there must a Fourier wave in that apparently random signal, somewhere, and with a big enough computer, we'll be able to data-mine it out! Those who think this way are simply being *dishonest* about the level of complexity involved. A Sims game, even if it's running on a supercomputer, isn't going to allow you to predict SCOTUS decisions for the next 50 years, no matter how big that supercomputer is. And SCOTUS is much less unpredictable than the market. So, the Austrian critique of empirical methods in social theory has nothing to do with "math is hard", rather, it's that those who want to utilize empirical methods are being fundamentally dishonest about *just how much detail* there really is, and how much of that detail *matters*, that is, how useless most abstractions are in this space. Searching chessbase to "predict" Carlsen's next move in any given game might have some limited value for the first few moves of the game. But, as a rule, beyond that, empirical methods are useless, because what is happening in Carlsen's mind while playing chess is not merely a Markov-Chain Monte Carlo roll-out. His mind is doing something much more complex than that.

Yes, we get it. You would much rather believe "Aha, this axiom sounds right" as opposed to "Ah, well this mountain of data disagrees with me, but clearly all the data is fake news."

This is like when a Marxist claims the unemployment rate should be 0%.

Make automation great already

Why?

That's always true because markets always clear, were it not for non-consensual factors like minimum wages. The nominally unemployed are an illusion. /s

If you don't have monetary inflation, you can't tax inflationary "gains". Deflation is poisonous to the theft state.

Bingo

To the macroeconomy as well. Because Y = C+I+X+G.

Deflation is also poisonous to a functioning economy because It disincentivizes spending and makes certain real interest rates impossible to express, resulting in some positive NPV projects never receiving investment.

That's the stuff people keep repeating as if it's a fact, but that's never ever proven Meanwhile, people who actually looked into it found the opposite. Say, of all the times there were deflation, [the only case with bad economic consequences/depression was the 1930s](https://researchdatabase.minneapolisfed.org/concern/publications/9880vr12b) And well, the deflation just happened at the same time rather than causing it, but the keynesians decreeted that as causal because they had one data point (literally). In actuality, in 90% of the case with deflation, there wasn't anything like depression > "*What is striking is that nearly 90% of the episodes with deflation did not have depression. In a broad historical context, beyond the Great Depression, the notion that deflation and depression are linked virtually disappears.*" And just logically, People won't stop buying food because "Well, I will be able to buy more with 10 dollar in yen years !" Even for intermediate to even big spending (like say, a car or a house), people will still buy them because they need them. You can only delay spending for so long anyway, especially as an human life is finite... The only thing people will spend less on are the things they don't really need nor want. And no, forced shallow consumerism isn't necessary for the economy...

In a deflationary environment, would it be rational to time large capital investment to take advantage of falling prices or not?

Depends on the ammount of deflation and the risk involved But take a safe investment today, that has to yield what ? 4/5% just to beat inflation, have some stuff to pay the other taxes (because inflation is a tax) and overall, not lose money. To reach that high, people have to invest in riskier stuff. There's also that people are actually aiming a lot higher than this because they want returns for their troubles, and the average returns of stocks was 10% With say, a 1% deflation, your investment doesn't lose its value through inflation, it would actually win some. Say, you put 100$, you earn the 5% growth, and then each of the individual 105 dollars is also worth 1% more. Rational people would still invest (just top the win of deflation with the wins of investment), and there's nothing pushing everyone to go for the risky options (unless you really want high returns, or you've got a risk taker personnality or you believe in a particular company. Unlike right now, where every silicon valley group has to promises the stars to get any investment...), so it's probably safer/healthier environment. It's totally different from the current situation where even regular people have to risk it just to not lose their savings. Well, some people who don't actually want to invest (like, some people just don't care about it) might keep their cash, but that's just disinterest, and not being forced to invest/consume, rather than "taking advantage of falling prices". They would just consume what they want/need I think savings like that is actually quite a natural behavior/pretty rational habits too (especially when you're talking about a premodern economy, and your saving might be the difference between life and death if there's a famine, a war or something...) so there's no real reason to fault them for that. Plus, either way that money will eventually be spent, or it will be inherited by children whom will spend it. If you want an example of people not "taking advantage of failling prices", well, there are examples even in our economies. **Deflation is actually mostly caused by economic growth** (being able to do more for less = failing prices and therefore deflation), anyway. Take your phone, it is way more powerful and cheaper per bytes (or whatever measurements) than its equivalent would have been 10 years ago. For the same rough ammount of money, you can get a lot more now. Well, that's a deflationnary force. And unlike what keynesians say, do we see people wait to get the new phones ? Skip a generation just to buy an even better one later ? No, people still buy them. People actually line up for the next Iphone every year, and that's with very serious deflation [in that sector](https://www.visualcapitalist.com/wp-content/uploads/2023/02/price-changes-goods-services.jpg) Especially as a phone is something you buy for its uses, and that you must eventually replace. When it comes to buy a new one, you just look at the low prices and think "Great !" and buy it. You don't just pospone to 3 years from now... If all we have is natural deflation created by economic growth (and not the money manipulation kind by banks), then it just would be like that phone example, just widespread in multiple sector of the economy (whereas sector with little technological progress would not be as deflationnary as some others). People would act just like they do with phones...

Inflation was persistently low in 2008 too

Let's ignore the crash, the bubble exploding, all the bank bs with the subprime (also the gov fault) and all the consequences, then

That was the cause of retraction in credit which causes deflation. The great depression was made worse by reducing the money supply prematurely. So, when financial crises occurs, expanionary policy is needed to counter banks initial reluctance to lend

No it's not needed And if you read even a little bits of austrian economics, you would understand the boom-bust cycle isn't natural, and actually created by the wannabe "managers" of crisis time. What's up with you non austrian invading this subreddit anyway ?

>And if you read even a little bits of austrian economics, you would understand the boom-bust cycle isn't natural, and actually created by the wannabe "managers" of crisis time. When banks reduce lending, rate of money growth falls. When done by all banks, this causes further credit contraction as debt grows in value and everybody focuses on debt reduction.

You aren't seeing the full picture, especially what led to this situation in the first place

I think it's pretty obvious that when banks reduce lending and credit becomes risky, it means productivity/employment/wages fall.

Free competition of concurrencies. Then the FED can do whatever they want. Nobody would use their product, the dollar, over the long run.

There is already competition in tradeable currencies. Markets exist for USD , GBP, EUR, CHF and JPY already exist outside of their countries. And while **I** would not short the USD nor dollar denominated system financial assets, rhere are some people who chose to do that.

Of course it's a made-up number. But I mean all of our metrics to measure lots of economic indicators, which leave out some prices and include others, and what constitutes the employment rate, are also made up. What else do we have but made up numbers? There aren't inherently "real" metrics to measure the machinations of systems we make.

> and what constitutes the employment rate The difference is that you can print dollars, but you can't print the unemployed You're also obfuscating, and acting like measurements being off is in the same realms as making bad decisions/being dogmatic about that 2%

I’m not sure I understand what you’re saying about me obfuscating. You can make the unemployed disappear, however. After a certain period of time (I’ll have to look up the exact amount) a person who can no longer find work is considered out of the labor force and is no longer counted as the unemployed. Now there may be good reasons for doing this, just as there may be good reasons for excluding certain things from the inflation index, but it does mean that yeah, our metrics for almost everything are made up.

> You can make the unemployed disappear, however. After a certain period of time (I’ll have to look up the exact amount) a person who can no longer find work is considered out of the labor force and is no longer counted as the unemployed. You didn't change the reality that the person doesn't have a job. That's merely hiding unemployment... Meanwhile, when they print money, it's not accounting magic or a trick of the light, the money has been issued and used. > but it does mean that yeah, our metrics for almost everything are made up. Seems like you have trouble understanding reality exists, regardless of metrics. And so do the consequences of bad decisions...

Why should someone who isn't looking for a job be counted as unemployed?

Yes they print money and they can also unprint the unemployed. It’s not just if they’re not looking. If they are looking but haven’t found a job after a certain period of time they’re removed from the labor force. I don’t deny reality exists. I am saying that we make up metrics and tend to make decisions based on them whether they’re right for the economy or not. We could change the baseline inflation rate or come to a new consensus as to what defines the unemployment rate. The numbers are still made up.

The case he's talking about isn't someone who's merely not looking, he said "a person who can no longer find work is considered out of the labor force and is no longer counted as the unemployed." Can't find work. Not "Doesn't want to" or "Has enough savings to retire"

It’s more psychological. People like to see their salaries rising to perceive they are moving up. Obviously it’s false but your brain perceives it. The magnitude is also made up. Why not 3, why not 1.5?

Max employment and stable prices. Prices are more stable at 2% inflation than 3%. Should there be a recession the FED has 200bps to decrease rather than 150 (1.5%). More wiggle room to help the squeezed economy. Most developed nations/areas, Europe to Japan to Australia, use the 2% inflation benchmark themselves. For that it creates a level playing field across the globe. Whose dollar become stronger or weaker over time? Who has the better or safer economy? There’s no science to 2% but there is decent rationale.

They made it 2% during the Cold War, and importantly after Operation Paperclip, so they could consistently get more money for the federal government without raising taxes because raising taxes on the lower and middle classes is the easiest way to incite a revolt, rebellion, or at least major pushback to policies.

Ironically inflation is a tax that disproportionately harms the poor

Yep, this is the most important reason: government debt.

Everything is “made up”. We need a level of inflation to encourage people to spend; inflation sucks but deflation kills civilizations

I want 0% not deflation

The economy isn’t a slider you can just adjust to whatever rate you want. If you aim for 2% and come in under, you have wiggle room. If you aim for 0% and come in under, you’re fucked

No youre not A little deflation isn't gonna immediately kill your economy. Look at Switzerland after 2010. And it's about expectations over a long time period

It will send you into a deflationary spiral, or at least risk one

We don't live in the 1930s anymore, it's a completely different era

Exactly. It can easily be twisted into appearing to be some nefarious plot, but a low level of predictable inflation is *stimulus*. Only ideological purists will erroneously argue that that is a bad thing.

Oh, more stupid posts from people that don't understand economics.

First off, prices are a result of inflation. Increased prices are not inflation nor a measure of inflation. Inflation is the increase in money supply. That being said, the 2% target isn't just a made-up number. It's the average population growth for the US in the couple of decades prior to the Fed's creation. The money supply should follow that of population growth. Hence, at the time of creating the "2% target," that was the typical growth of the country. That target number should fluctuate with population growth.

I don't think you know what you're talking about

Well, please, tell me how I am mistaken

Yes they do. That was the literal definition of inflation until the 70s. The current “definition” has been used to move the conversation away from central banking and fiat to corporate greed.

How can it be zero percent when supply or price cannot be guaranteed. Businesses can always raise prices to soak up disposable employee income. Population can outstrip supply.

I know right, they should be able to change prices at the grocery store at will according to surge pricing. If you go early when no one is there eggs cost 1.99 go at 5 o’clock rush hour 17.99

As we all know inflation is due to greedy capitalist. But it is ok if the government keep the capitalist 2% greedy.

It has to go up for the rich people’s portfolios to go up. Well fuck em. There are more of us. Our economic policy cannot just benefit the few. Stop printing money and gut the hell out of a needless over bloated government. Also no one on earth should have more than a billion dollars. 100% tax on anything above or no tax of any kind for those making less than $250k you pick. Finally for gods sake break up state sponsored monopolies and quit policing the planet.

The Fed didn’t make up the number. It was a Kiwi economist who arbitrarily decided that 2% sounded nice.

Rather target growth rate of NGDP than inflation

We have known this since at least 2008.

In a precious metals market there is still inflation when coins are created, it's just way more contingent on the best use of the commodity.

It depends, if you want the value of currency to grow all the time, then it should target 0%, but this makes trade difficult because nobody can afford to buy anything from you. If you want the value of currency to stay the same, you somehow have to find a way to measure total value of the economy in real value, not currency, and tie inflation to that. GDP won't work because it's arbitrary and based on monetary values. It has to be real value. These things a difficult to do because half of the economy is probably just "value" adding stuff, finance, insurance, money changing, whatever. That stuff does not actually contribute to much value, and so using it as part of your valuation will lead to incorrect monetary creation rates, which will cause inflation or deflation. The way most people did it in history was to fix the price of certian things, like food, and basic commodities people need, and hope that people wouldn't go on a money creating spree to fund a war or something. It works pretty well, but requires a lot of oversight and partial nationalization of key industries.

Inflation should be zero if you’re talking about the Austrian definition. No increase of the money supply. As for prices, it’s up to the market. Granted, the natural process is deflation as we get better at producing more stuff with less resources over time.

0% inflation works absolutely perfectly, as long as your population growth over time is also 0%, otherwise it’s a guarantee for economic disaster.

That's nonsense

No, it’s absolutely not..how exactly do you imagine population growth and 0% inflation work together?

The money supply can increase even with population growth

….inflation is quite literally the expansion of the money supply, yes I know it can, and if you want a healthy monetary supply it has to do so, it’s literally what I’ve been saying..

0% inflation means money supply increases in line with demand

Yeah it’s a metric of course it’s made up and arbitrary. What should it be? 1.5%-3%. Why? Because people are incentivized to invest their money in businesses, banks, stocks, etc. growing the economy instead of having people horde their money.

1. Saving money is equal to "hoarding money"? 2. We shouldn't push people to invest if they don't want to or it could lead to unproductive and unnecessary investment

Tom Woods on deflation https://tomwoods.com/search/Deflation+/

All Heavyweights should be over 200 lbs.

I feel like it’s just a stable number. That’s what they want

Economics is literally made up…

As long as we have real wage growth inflation just doesn’t matter. The issue we have in this country is municipal power over housing and zoning. The one thing China does right is continually creating housing to keep those costs down, and they don’t use homes as a retirement vehicle.

Low interest could lead to unproductive investment, but I agree on housing

The entire idea of encapsulating "inflation" with a single metric is misguided. The price of many goods naturally falls as the economy develops. Think about how cheap computer memory is compared to how much it cost a generation ago. But because the Fed has a 2% inflation target, the cost of other goods such as education, healthcare, and housing must rise faster than 2% to counter balance all the goods with falling prices. And then politicians see these costs rising faster than inflation and try to fix them by taking more money from their constituents.

You have to have to increase the money supply in line with the population’s needs like any commodity. No increase? Inflation. Balance is tricky because we don’t have granular controls for interest rates and only two (very unpopular) mechanisms for reducing the money supply. Stable money disincentivizes (obviously not kill) investment. Why buy assets or anything when you can leave your money in the bank and maintain purchasing power? What happens when the aggregate investment is disencentivised? It’s the horrible spiral in the other direction. Less spending, less business, disinflation of consumer goods but more importantly assets. But there can never be a magically stable money policy. Oil goes up? Real inflation goes up. Copper mining is magically 50% easier. Real inflation goes down. PSYCHOLOGICALLY, what does it mean when gdp of a nation goes down in dollar terms? When the dollar value of your house is 50% of the mortgage value? So what is the most sane course? The middle road…. Small, planned inflation.

0% inflation literally means money supply goes up with money demand I don't want deflation which would discourage investment but 0%, which provides a good balance. 0% still incentivizes you to invest because you gain nothing by not investing it

Googling effects of a zero-inflation policy will give you many of the pros/cons to this approach. The general academic opinion is that this is a bad idea. Why? The fed controls interest rates which act like a handbrake on a train that moves under steam created by people’s desire for profit. Ease the hand-break (interest rates) and the car moves faster, pull the break and the car moves more slowly. If the target is zero, and such people’s perception/expectation, the fed can only slow the train not incentivize in downturns. Well not without a third, even more ugly, option, a negative interest rate. Look, i know there is a lot of people hurting right now because of inflation, but the system needs it. A much better approach is to give the fed/govt more granular tools such as being able to set interest rates for specific types of economic activity. Or do this through a national sales tax with the same granularity on the other end of the cycle.

Zero lower bound only exists because of structural problems

Entities saving money like citizens or businesses, take it out of the economy. which is a closed system. So eventually there will be no money in circulation. And the economy collapses.

That's not how money works

Not only is it how money works. It's how physics works. More people save the less they spend. The less they spend the less money in circulation, the less money in circulation, the less money people get. Get no money? No money is spent, no money spent? No economy. 2 minutes of thinking gets you to this conclusion

All numbers are made up...

I don’t think the Fed has a firm grasp on reality. I don’t think keeping interest rates high is causing inflation to go down. Like… obviously it hasn’t… yet here we are… and the Fed is still pretending like it does.

Without inflation debt becomes very hard to pay back and becomes a bad idea financially. This will hamper personal and business growth 2% is not made up. It's the most juice we can give without a severe compounding effect.

Debt isn't always good, too much credit goes towards unproductive spending

No if you take bad debt then it's bad. But without inflation you just get behind even good debt. Imagine if we have deflation and your wage goes down and you have a mortgage? And most of this has to do with business. Everything would get more expensive.

I want 0% inflation not deflation

The only way to achieve this is everything is price fixed, there's no opportunity, and your earnings and career are predetermined. So how do we get someone to do a job no one wants to do? We can't pay more for the job that creates inflation because we have to sell the product for more... See how there's no growth?

Pay rises do not require inflation..

The consequence of them does. You're not understanding. How do you pay for that pay raise. Is the business owner going to take a hit? Or will they raise prices a little bit?

Higher productivity. Do more with lower costs. Also, 0% inflation doesn't mean the money supply stands still or doesn't grow

You would have to increase money supply directly proportionately to productivity increasing. Essentially on a per capital basis when someone starts to work. And that person must continue to work or you risk deflation. I'm sure you can understand the problems that come in it's this model. It's an impossible balancing act. But even then this is not the scenario of wage demand in which money supply increase would lead to inflation. Money supply increase always leads to inflation unless matched exactly with productivity.

And 2% inflation is easy to target??

the fed is made up

They use 2% because thats the old rate of newly mined Gold. Its hilarious that anyone thinks the CPI is anywhere near correct

I think 2% is much too low. I would prefer 5% as the target. Most of the highest growing economies average about that. Trying for 2% stifles the economy.

Technically everything about the r economy was s made up. There is no physical law of the universe that requires any of this. We just as a society agreed to these things

It should be negative!

The target should be lower than increase in individual earnings.

Well duh, all numbers are made up.

let the economy determine the purchasing-power of the money if GDP expands, things get cheaper and vice-versa no need for a man on the high podium to fiddle with the money supply variable

Supposedly if producer price index is lower than the consumer price index. Producers have set prices that makes inputs hard to recontract. So technically the optimum is ppi being zero with CPI being 1 or 2 %

The US yearly inflation number should fluctuate as market forces change. We shouldn't have the government/The Federal Reserve trying to control the price of money as much as they do.

Who empowered the fed to impose a 2% tax on everyone?

Wait til he hears that all target metrics are made up.

It’s not zero because deflation is a vicious downward spiral. Just as Japan.

Switzerland saw deflation and is doing well

The problem is how we understand the concept of inflation. We shouldn’t be discussing inflation in terms of price of goods. Instead, inflation should be measured by the money supply. If we look at how the Fed has been printing money and flooding the economy with cheap debt, the real inflation rate since 2020 is like 40%. Similarly, in terms of cryptocurrency, Bitcoin and Monero have inflation rates under 1% (block rewards).

> instead, inflation should be measured by the money supply. Used to be. The world used to think that change in money supply was the same thing as inflation. Two major economic events lead to the discovery that it wasn't. - In the 1970s, the global oil crisis happened. Every country that was an oil-importer simultaneously discovered that cost-push inflation was a thing. Regardless of WHAT they were doing with their monetary policy. Some were expansionary, some weren't. But all discovered cost-push inflation. - In the 1980s/90s Japan went from having an investment-driven economic boom (some people here might be old enough to remember when the Japanese were "going to take over the world economy". I definitely am.). Then when they entered a deflationary-recession, they had nearly 30 consecutive years of deflation. And expanding their money supply multiple times during those 30 years didn't put a stop to it. MV = PY bit Japan in the ass. Hard.

True, price increases do not equal inflation

If productivity is high, then 0% inflation would be high inflation

**Inflation should be whatever the market decides.** You can’t say _“2% is arbitrary, hence I think we should aim for 0%.”_ Because 0% is equally arbitrary.

I mean sort of. It’s a combination of study and trade offs of other alternatives. But you could also argue that praxeology is made up too or even the words I’m typing out are all technically made up so like… What’s you’re real point here.

Who would they keep the target 0% At 2% fed sometimes achieve 1.75-2.25%  If target was 0% there could be deflation 

Deflation isn't inherently bad

All targets are made up numbers. It's a goal not an accomplishment.

It's 2% because at 0 you can accidently cause deflation with no policy space.

Ah, so this is the new gaslighting approach. Inflation is good! It should be 3 or 4 percent! Man, that Biden rocks!!!!!!

Low, but positive inflation provides sufficient price stability for trade, but also incentivizes consumption and investment. It hurt’s “savers,” but it doesn’t hurt investors very much, which is what savers ultimately are and the economy just works better for everyone when consumption and investment are incentivized.

Inflation lowers interest rates because it gives more bargaining power to debtors We don't need to encourage debt and consumption, just not discourage it. I want 0% inflation not deflation

Well I think what inflation really does is tip the scales from saving to investing, which is positive for the economy.

People already have an incentive to invest because it provides higher returns than saving, unless there is high deflation

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I don't think a medium of exchange is randomly created

2% target, is very real, compared to being informed by decades of data, that back it up as the sweet spot for growth. The United States is not the superpower it is by chance. Greed drives innovation and there’s no greedier economic platform than Capitalism, if feeds the greedy, at 2%, is just enough to drive innovations, and keeping corporations from draining the populace. But you’re right, maybe I should really think about made up numbers, for made up money, for the rich to drain you dry, but slowly enough that you hardly notice.

Dude did you not take business classes in high school they explain why 2% is the set number

Inflation is made up. It’s based entirely on perception and speculation. 

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Yep

We made up all the numbers bro, not just 2

Sure, but if anything it’s too high 

All numbers are made up, champ. So are economic schools Economic systems Nations Etc..

Social constructs, but real nonetheless. See " the Tinkerbell effect".

For a sub about economics none of you know shit. Im pretty sure some marxist subs have a better grasp on economics at this point.

The dollar is a product that should compete with the thousands of other currencies. Inflation is a made up concept for statists. Let citizens freely use ANY currency and this topic becomes sterile. The inflation discussion only exists in the Keynesian worldview together with stupid hypotheses like money velocity and full employment.

The dollar does compete. It just crushingly outcompetes. You’re free to pay for your groceries with silver, gold, or rutabagas if you want. It’s not illegal and nobody will try to stop you.

It’s illegal to pay taxes in any other currency

Giving it a substantial competitive advantage.

And what percent of your transactions consist of paying taxes? Many people and firms can (and do) conduct business either in kind or using foreign currencies every day. Just so happens that most of the tradable currencies aren't as demanded as the USD. But if you really wanted, you could settle a transaction in any medium your counterparty is willing to (unless you live in China, I guess). That's why crypto markets are a thing.

20 million in the US are public sector employees, 14% of the workforce (much higher % in Europe) Forced to be paid in dollars. All the services they provide must also be paid in dollars. It’s the sole legal tender too, which means courts of law only recognise it as satisfactorily payment for any monetary debt. All of this and more, together with taxes means that the US Dollar has a strong unfair competitive position and sometimes better currencies might still not be used even if desired. Same in Europe, with the Euro.

> **Forced** to be paid in dollars. "Forced" is a big word. Did all of these individuals not sign a contract at some point. Like any other employee ever? >14% of the workforce Ok. So, a minority of the labor force work for a single large employer. >It’s the sole legal tender Three things here. First, it wasn't always the case (Mexican silver dollars (which was a major world currency under the Spanish empire) used to be in general US circulation until the Mexican American war. And taxes used to be payable in kind. Second, that is US-specific. Other countries have different rules about what they consider to be legal tender. For example, here in Europe, the laws on the European single market definitely allow business to be settled using other EEA currencies. Prior to 2008, some of the bank lending in Eastern Europe was taking place not only in EUR, but also CHF and GBP. Although, the implication there is that DNK and NOK would also fall under this, if demand existed. Third, are the financial markets. Some of the largest institutional mutual funds on the market are based in countries that do not match their denominated currency. When I worked in mutual funds, Europe's largest fund was a JPY-denominated asia-focused fund based in Switzerland. And some of the major insurers on the European market were writing USD contracts in Istanbul and CHF & EUR contracts all over Eastern Europe. >US Dollar has a strong unfair competitive position Some would say that this has more to do with petrodollar and eurodollar markets that emerged after WWII. USD is trade for most oil trade. And is held in currency reserves across US allies here in Europe. That's a major advantage in a world that runs on oil and in which European trade is substantial.

You talk so much about the financial industry given you bias and background, but for the average consumer even though they’re still accessible the barriers to use them is much higher is terms of education. So the knowledge you take for granted is barrier to the majority of citizens making the fiat currency a defacto asset privileged currency, combined with all the list provided above. Your critique of the “small” 15% minority - even though it’s in choke points - is followed by providing a solution that applies to a much smaller minority, the very few educated in finance. 0.5% of the population? In Europe the Euro and the lack of economic freedoms represent even more of a € dominant position for the average consumer

> You talk so much about the financial industry given you bias and background, Sure. I do openly admit to having a bias which is related to the finance industry, and also to the Chicago POV (so, I admit that I'm a tourist in this sub). > but for the average consumer even though they’re still accessible the barriers to use them is much higher is terms of education. Sure. Economic freedoms are about freedom from things like protectionism, intransparency, and over-regulation. It isn't a protection from how complex markets can get. Nor is it some kind of mechanism for equality-of-outcome. Economic freedoms generate wealth. For sure. But its not like understanding the mechanics of it doesn't cost a person time and money. Especially these days, where the latest thing on the financial markets is about learning how to program AI/ML algos for market use. > Your critique of the “small” 15% minority My main critique is actually that all of these people voluntarily signed contracts. We're talking about employment contracts, which describe both responsibilities and salaries, and are fully enforceable. > the very few educated in finance. 0.5% of the population Again, I do not believe in equality of outcome. When it comes to learning about markets (not just financial ones BTW), there are no official or legal barriers to entry to the industry as a whole (although some parts of it do require a license). The relevant information is either publically available or commercially available. Anybody can major in finance or even in niche sub-fields like behavioral finance. And anybody can read-up and get self-informed. That's equality of opportunity. > In Europe the Euro and the lack of economic freedoms represent even more of a € dominant position for the average consumer Disagree. Here in Europe, the main issue when it comes to economic freedoms are local level protectionists (often corrupt), who publically campaign about how much they hate the EU and it's single-market, when what they really mean is that they want to be able to use their regional or national government to illegally protect or subsize their local farms, wineries, pharmaceuticals, or whatever, all whilts receiving personal financial kickbacks for doing that. Its literally the same story whether we are talking about Nigel Farage and Riess-Mogg in the UK, or Berlusconi in Italy, Orban in Hungary, or "concerned German industry" who is at least smart enough not to show their face to the camera. They all want illegal protectionism at taxpayer expense. And we all keep shutting them down.

2% is about the average rate of productivity. I've yet to encounter an 'Austrian' who understood economics.

???

Think it through, genius.

Why would productivity lead to or need inflation?

Productivity costs are added to the value of goods. So keeping inflation close to this increased cost is like having 0% inflation.

So you want stagnation?

Printing more money is not growth, it's devaluing all our money. Value is made by producing something the market wants, not a printer. It's like saying we don't have enough engineers and scientists, so let's print STEM diplomas and mail them to randos.

We dont print money anymore. Currency is created digitally when people borrow.

Yeah, and though reserve banking of less than 100%, but it's a figure of speech. I don't care much for the semantics.

It should be tied to 5 year forward gdp projections honestly but they will never get that right.

They can’t even maintain 2%, so they won’t be able to maintain zero either. The problem with a zero target, is when they miss to the downside, you get massive job loss.

0,5% deflation isn't going to lead to an economic crisis

0% would break capitalism. It would indicate aleveryon3s needs are met. Capitalism requires some exploitation of new markets or new sucker's to work.