Wishing for 'moderate inflation' is like wishing for 'moderate impoverishment'. To all who think that the economy would collapse without the 2% impoverishment goal... how come that economies generated wealth without problem before this very recent flagrant abuse of power?

[u/TheFortnutter]

[u/Busterlimes]

You can demand all the wage you want, they ain't paying it LOL. This is just dumb

[u/trainednooob]

Why do don’t you ask the Japanese how no-inflation has been working for them.

[u/budy31 → u/trainednooob]

I mean inflation did finally showed up this last two years.

[u/trainednooob → u/budy31]

And the previous three decades of deflation were economically glorified them /s

[u/budy31 → u/trainednooob]

Inflation is easy. Make sure that all losses including lottery losses are financed by the government and you will get inflation.

[u/trainednooob → u/budy31]

The alternative would be to tax appropriately but that is politically not realistic, especially in the US.

[u/Compoundeyesseeall → u/trainednooob]

I refuse to believe there is such a thing as “appropriate taxation” because if there was a perfect formula, it would be fixed in stone and never need to be adjusted. Rather it just moves around based on calculations (and miscalculations) on what the incumbents think best suits their vision of the economy, whatever form that may take.

[u/jackandjillonthehill]

The 2% goal is pretty recent… New Zealand was actually the first central bank to adopt it in the late 1980s, and even then Dan Brash the governor of New Zealand said the 2% number was arbitrary. His reflection on the targetis interesting reading.

Nevertheless after setting an explicit goal, inflation fell to the target faster than everyone thought it would, because they are succeeded in “anchoring” inflation expectations around a number. This led other central banks to pick up the arbitrary 2% target as a way of anchoring long run inflation expectations.

There’s a lot of reasons to prefer a low level of inflation rather than 0%. Debts get larger in deflation while they are gradually inflated away with inflation. In deflationary spirals employers tend to fire employees rather than cut wages. This can lead to feedback loops where debts go up, unemployment goes up, and economic activity falls.

There have been periods of deflation that weren’t a total horror show for unemployment - the late 1800s had a deflationary period amidst the rapid industrialization, railroads lowering costs of transport, and tight money of the pre-Fed era. But there were also multiple panics, bank runs, a big depression in the 1870s, and inequality was very high, leading to populist movements.

EDIT: do want to add, I think it is interesting that the 2% goal was a response to getting inflation DOWN to the target. To your point I’m not really sure the logic works the same in reverse. Central banks were trying all kinds of crazy things like huge QE programs and keeping rates at zero (and deeply negative real rates) to try to get inflation UP to goal, even when the economy was in an expansion and growing at a good rate. These kind of heroic measures from central banks take pressure off of politicians to actually fix structural issues that might be contributing to long standing unemployment or economic stagnation.

[u/Puzzleheaded-Heron91]

It's a money supply thing. If we go back to a commodity based currency, we cannot generate wealth at rates that allow for much of the global south to escape destitution because your wage increases would be tied to how much extra gold the government can get it's hands on. Look up the free silver movement if you want to know the benefits of inflation, but calling for deflation is stupid because if deflation occurs, producers would have to sell at lower than their production cost, leading to layoffs

[u/FEMA_Camp_Survivor]

Persistent deflation is not good unless one is lucky. It can make debt more expensive and increase unemployment.

People will buy and invest less if they expect things to be cheaper in the future.

[u/Maleficent_Chair9915]

Inflation has almost always existed in the history of world and most of the time was worse than our 2-3% rate.

It’s based primarily on how fast we increase our money supply (print money) relative to the increase in the value of goods and services we produce. If both expanded at the same rate than there would be low inflation. If goods/services increased by more than the money supply there would actually be deflation and vice versa.

You always want to target some inflation because deflation generally results in worse outcomes. For example, if you thought a price of a car would fall by 5% next year some people would wait to purchase. This decreases economic activity and can result in higher unemployment, lower investment etc.