Inflation targeting - why 2 percent?

[pmbug]

Background and overview for how the 2% targeting came about.

 

[Joe King]

What we need is 2%/year deflation. For about a hundred or so years.

 

[searcher]

Target rate 3 - 4 percent maybe?

 

[pmbug]

Target rate 3 - 4 percent maybe?

No thank you.

...
You can also use the rule of 72 for expenses like inflation or interest:

If inflation rates go from 2% to 3%, your money will lose half its value in 24 years instead of 36.
...

The Rule of 72 – BetterExplained

 

[searcher]

From the link:

WASHINGTON (Reuters) - It wasn't volunteered, but Federal Reserve Chair Jerome Powell on Tuesday made his most extensive comments to date on the role corporate profits could play in lowering inflation, telling U.S. lawmakers it was possible for inflation to fall and workers' wages to keep rising for a time if companies and their shareholders took less for themselves.

Fed's Powell acknowledges slimmer corporate profits could help curb inflation

 

[Joe King]

Our politicians should try that approach. Ie: taking less for themselves.

 

[<SLV>]

They aren't to far from their 2% target. Looks like the banking crisis caused a blip.

Dashboard | Truflation

The Truflation Dashboard provides a real-time calculation of the US inflation rate and the price indexes for the separate CPI categories used to measure price inflation

app.truflation.com

 

[pmbug]

 

[Joe King]

"2% inflation targeting has been BS from the start."

Well of course it is. The fed has repeatedly said that one of their dual mandates (there's three, actually) is stable prices. Imho, that means zero percent inflation.
Ie: prices stay the same.
....and the word's definition agrees with me.



What is the best definition for "stable"?

: firmly established : fixed, steadfast. stable opinions. b. : not changing or fluctuating : unvarying. in stable condition.

Nothing in the definition applies to anything the fed has ever done, when it comes to prices.

Way I see it, there's no reason as to why gold couldn't still be $20/ounce,, other than for the idiots that have allowed criminals to represent us in government for at least the past 5 or 6 generations.

 

[nickndfl]

2% is the number most people will not notice their currency is being purposely devalued.

 

[WinkWink]

 

[SilverSamurai]

Pernicious evil
Presented as a virtue
Karma percolates

 

[pmbug]

...
With the national debt approaching $35 trillion, there are only two ways out of the situation — defaults or printing more money, McDonald told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News.

"The only way to get out of that kind of debt hole is if you keep inflation above interest rates. That's how you monetize the debt," McDonald said. "That is why [the Federal Reserve] needs a much higher inflation target. It'll [be] a slow, manageable default. But it's the only way out of this colossal debt hole."

In order to tame inflation back to 2%, the Fed needs to keep raising rates, but it can't do that without triggering a 2008-like financial crisis, McDonald pointed out.

"[Powell] should raise rates another 150 basis points. But if you push rates up from here, you will very quickly bring on a financial crisis much worse than Lehman," he said.

Fed will have to raise its 2% inflation target

The Fed will have to cut rates to avoid a banking collapse and a brutal recession. However, first, it must raise the no-longer-attainable 2% inflation target. "[The Fed] will start circulating the white papers and working with other central bankers worldwide to pitch this in a group setting," McDonald noted.
...

https://www.kitco.com/news/article/2024-05-10/dramatic-re-pricing-across-all-financial-assets-coming-fed-moves-away-its-2