Inflation targeting - why 2 percent?

Welcome to the Precious Metals Bug Forums

Welcome to the PMBug forums - a watering hole for folks interested in gold, silver, precious metals, sound money, investing, market and economic news, central bank monetary policies, politics and more. You can visit the forum page to see the list of forum nodes (categories/rooms) for topics.

Why not register an account and join the discussions? When you register an account and log in, you may enjoy additional benefits including no Google ads, market data/charts, access to trade/barter with the community and much more. Registering an account is free - you have nothing to lose!

pmbug

Your Host
Administrator
Benefactor
Messages
15,899
Reaction score
5,477
Points
268
Location
Texas
United-States


Background and overview for how the 2% targeting came about.
 
Target rate 3 - 4 percent maybe?
 
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.

 
Our politicians should try that approach. Ie: taking less for themselves.
 
They aren't to far from their 2% target. Looks like the banking crisis caused a blip.


Screenshot_20230405_050054_DuckDuckGo.jpg
 
"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.
 
2% is the number most people will not notice their currency is being purposely devalued.
 
3683728w6isnrobh0.gif
 
...
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.
...

 
I think they chose "managed" inflation (in their hubris, they thought they could manage it) as an alternative to Negative Interest Rates - which, anyone rational will admit, are asinine.

ZIRP plus two-percent inflation, is basically a negative interest rate of two percent.

Plus, NIRs promote cookie-jar banking. Inflation is a negative bank rate that NO ONE who holds the currency, can avoid.
 
Any good ponzi scheme needs this inflationary component in order to keep it going
And yes 2% is the agreed level that we the people will not notice.
 
The 2% is a congressional mandate. I agree with others. Back then Congress probably thought they could steal 2% of everything via inflation because at the time there was no with holding taxes on peoples paychecks.

Without the fed and with holding taxes we get price stability. We also get a very tiny central government instead of the monstrosity it has become now. We also dont get central planning and welfare and so many other negatives and drags on society.
 
Nope. It is a policy the Fed decided upon themselves.
And it was originally 1%, +/- 1%

That's not really "2%"

That call it that now because they like operating at the high side, but have done so for so long, its become the new norm to say the target is 2%

What they should do if they wanna change it again, is to say, 2% +\- 2%.

That'd say that 2%is still the target, but it'll be looked at as an average rather than something set in stone.
It'd give 'em wiggle room while still "saying" that 2 is the target, but they are within acceptable range.
 

Paul Tudor Jones Gives DIRE WARNING..."All Roads Lead To..."​

26
 
Back
Top Bottom