Posted on 12/10/2022 4:36:43 AM PST by EBH
The Federal Reserve has raised interest rates six times this year in its effort to lower inflation—currently at 7.7%—to what it considers to be the ideal level of 2%. But how did the central bankers decide that 2% is ideal rather than some other number?
It’s a question several Fed critics have raised. On Friday, Bank of America was the latest to weigh in on the matter, saying bluntly, “there is nothing special about 2%.”
The Fed has company in its 2% inflation target. Several countries have the same target, seemingly giving more confirmation that 2% is perfect.
Bank of America, however, has a different take, saying that the Fed could be reluctant to adjust its 2% target to some other number because it would undermine its credibility.
“Moving the target the first time it is seriously tested undercuts central banks’ credibility, raising real concerns about a slippery slope,” Bank of America’s global economist, Ethan Harris.
The Fed’s 2% target was officially adopted in 2012. But the Fed and other central banks had used it more informally amid the high inflation in the 1970s and 1980s.” The target has provided “buffers” for policymakers by leaving room to cut interest rates during a recession while also largely eliminating the risk of deflation,BofA said.
“Suppose the neutral real policy rate was 2% and underlying inflation increased to say 3% during a boom,” Harris wrote. “Then to make policy restrictive the central bank would raise the policy rate to above 5%. If and when the next recession came, they would be able to cut rates by more than 5% before hitting zero. By historic standards, that seems like an adequate buffer.”
“The evidence is that steady 4% inflation imposes very small additional costs compared to steady 2% inflation. Either way the economy adapts.”
(Excerpt) Read more at msn.com ...
that number has been floated for many, many, many years as the target.
Translation - we need high inflation so that people can never get ahead by saving. “You will own nothing and be happy”
All of us that saved and invested for retirement have been suckers.
It is obvious to anyone who knows anything about psychology, economics and boiling frogs.
People are willing to put up with a little bit of theft if they don’t notice it too much and can’t do anything about it, but they do have a breaking point.
Fiat money as a reserve currency is b.s.
Take it from a red neck who managed not to be brainwashed by the Cornell Econ department (which was reasonably tolerant of diverse view points all things considered).
Tying the currency to a single commodity makes the most sense and silver probably makes less sense than gold (Pax, William Jennings Bryan and Fred Dubois).
Arguably McKinnley was the last Republican with a really good economic platform—although from Harding on, I’m willing to forgive at least Coolidge, Ike, Reagan, and Trump because having to build on the wreckage of the early 20th century amendments (esp. income tax which divorced taxation from representation), Wilson, FDR, and LBJ, esp. after confirmed by Nixon and Ford, is a thankless task.
I’m glad the worst of the silver ‘pubs joined the dems.
They want low rates of inflation to depress debt servicing costs on the national debt. We are now paying $400 billion a year on the $31 trillion national debt. It is expected to rise to a trillion dollars a year by the end of the decade.
Each percent rise of the interest rates that affect the interest paid on US T-bills adds hundreds of billions to debt servicing costs. Government has a vested interest in keeping interest rates artificially low. Inflation must be controlled. And Wall Street sees inflation as a threat as well. With high interest returns on T-bills, people will choose them instead of stocks. Less risky.
The entire global economy has been based on cheap money with low interest rates that are artificially maintained. The dollar is the world’s reserve currency. Higher interest rates on US T-bills sucks money out of the global economy.
Well isn’t that what needs to happen? Suck some of the loose cash out of the system?
How about they shoot for 0% inflation like Eisenhower? I don’t want another tax hike on my income without voting for it.
High inflation lets people know what is going on. If inflation is at 2% and savings gives you 1.5%, many people will think that they are getting ahead by 1.5% when in reality they are falling behind by .5%.
There is a good scene in Shenandoah that is vaguely relevant in an economic libertarian sense.
I can’t find it on you tube, but here is another good Libertarian scene.
https://www.youtube.com/watch?v=Q0ltarHohrk
That government governs best that governs least—but also governs honestly. ANdrew Jackson knew his stuff when taking down the Bank of the United States and he rid the country of the national debt—no debt at all in the last full year of his term, very little the year before and not much the year after.
A pox on Van Buren.
But who would only save and invest with savings accounts? That would be a very poor decision.
“The evidence is that steady 4% inflation imposes very small additional costs compared to steady 2% inflation. Either way the economy adapts.”
—
They’re testing the water for normalizing high inflation. First 4% per year will be ok, then 8%, then 20.
If you think that makes little sense, what do you think of the 55% of American adults who carry at least some credit card debt?
Having some money set asside for ready access makes some sense.
I think having a paid off house with a little used line of credit makes more sense.
Suck money from the system while Biden injects trillions into the economy thru government spending.
The woke Fed is owned by the banks and other special interests. Wall Street is more important than Main Street. The central banks rule the global economy, but some things are even beyond their control. Expect a Deep Recession starting sometime in the 1st quarter of 2023.
It’s really simple: Banks hate inflation, but with zero inflation people don’t need banks; they can keep their money in a hole in the ground. So 2% is simply a number that is significantly above zero, but still quite low by paper-money standards. BofA is just covering Biden’s ass now by emphasizing the arbitrariness of the number.
Since the third quarter of 2021, credit card balances have risen by $121 billion. That’s a 15% increase, the largest year-over-year jump in more than 20 years.
With the increase, Americans’ credit card debt stands just $2 billion below the record set in the fourth quarter of 2019, when balances stood at $927 billion. Thanks to rising interest rates, stubborn inflation and myriad other economic factors, it’s likely just a matter of time before credit card balances surpass the 2019 record.
Though balances aren’t quite at record levels yet, they’re still light years above the $480 billion seen more than 20 years ago in the first quarter of 1999.
https://www.lendingtree.com/content/uploads/2022/11/ccs-chart-3-5.png
This is some pretty heavy stuff.. Put on your tinfoil hat.. :)
The Rothschilds were Ashkenazi Jews, Khazarians, “they’re arguably the most influential Nephilim Hosts of the Common Era,” Sangar said, “the Rothschild family and their Khazarian mafia have gained a foothold in almost every country since the mid-1700s.”
The patriarch for the Rothschild banking dynasty is Mayer Amschel Rothschild. He partnered with Adam Weishaupt who instituted the order of the Illuminati. Together Rothschild and Weishaupt developed a seven-fold plan for world domination:
1. Abolish all national governments
2. Abolish all private property
3. Abolish inheritance
4. Destroy patriotism
5. Destroy Christianity
6. Destroy the family unit
7. Create a one world government or a new world order
This plan has become the blue print to carry out the Nephilim agenda, Sanger said, this was rolled-out, at least, by Rothschild and Weishaupt in 1776. This is essentially the play book of a Colour Revolution – destroy history, destroy the family unit. This is also World Economic Forum with a dash of communism.
The government has been doing all in its power to cause prices to rise at least 2% each year. This is not the job of the government. It has no right to take actions that cause the currency to lose value.
Inflation is all benefit for the government. The rising numbers fool the folks into thinking that the economy is growing. The government can pay off its debts with less valuable dollars. Rising salaries cause bracket creep and higher taxes. Savings lose their value, punishing anyone who acted prudently and worked to save money so as not to become a burden. Politicians get cost of living raises, and so don’t care.
The same way the Treas. Dept. came up with the $700,000,000,000 bank bail out in 2008....they took SWAG!!!
Yep. And inflation is better than deflation.
There is something special about 2%. It’s the amount that people on SS can stand. While SS goes up with inflation, savings and pensions do not. At 2% retired people have an optimal chance of surviving financially. Below 2% and the SS goes bankrupt. Too much over 2% and the retirees do.
The story is correct that its a number that has its victims and beneficiaries. But with 2% they are nearly equally split. The one inflation that hurts the government most is medicare costs. That hurts everyone all the time.
Once women’s suffering was permitted 100 years ago, societal destruction was virtually assured. The cultures that are still around in 50 years will only be those run by men.
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