[WalterBright]

> arguably worse than inflation. When prices fall, people stop buying in anticipation of prices falling further. When people dont buy, economy basically stops.

The idea that 2% inflation is good for the economy, and deflation is bad smacks of the government selling the idea because increasing government spending via inflation is a way to raise taxes without raising taxes.

As for deferring spending because prices will be lower in the future is not economically any different than deferring spending because you want the gains from investing the money. The economy doesn't collapse when people invest for the future, so I'm skeptical of that theory.

[kldavis4]

> The idea that 2% inflation is good for the economy, and deflation is bad smacks of the government selling the idea because increasing government spending via inflation is a way to raise taxes without raising taxes.

I think the premise is that deflation is much much worse (and not amenable to the available controls that the Fed has available) and it is pretty impossible to reliably target < %2 inflation, so effectively the idea of "2% inflation" is the minimal possible amount of inflation.

[WalterBright]

Before the Fed took over the banks, 0% inflation was common and normal. Inflation netted out to zero for the previous century.

The very first year after the Fed took over, endemic inflation settled in.

> and not amenable to the available controls that the Fed has available

We had deflation in the Great Depression because the Fed did not understand their role in creating money.

[vharuck]

>The economy doesn't collapse when people invest for the future, so I'm skeptical of that theory.

Investing is different from storing cash in your mattress for a rainy day. Investment is effectively buying things now (labor, machines, supplies, property) in order to produce something more valuable later. So that money stays active in the economy. Even if you're buying stock from somebody unrelated to the company behind the stock, that person might use your cash to buy a house, pay donate to charity, or start a company.

[WalterBright]

But again, people are delaying purchases because they'd have more money later. With people not buying, the economy collapses according to your theory. But that doesn't happen.

BTW, all the money you have on deposit is invested back into the economy by the bank, less the reserve requirement.

[littlestymaar]

> all the money you have on deposit is invested back into the economy by the bank, less the reserve requirement.

Please read how the money system works before talking on the topic, you really are embarrassing yourself here Mr Bright.

Banks aren't lending their customers' deposits (because you can't lend your liabilities…) and reserve requirements are in federal funds, which is a specific type of currency, it's not the same dollar as the one their customers have in deposits (which again, are on the liabilities side of banks balance sheet).

[littlestymaar]

And yet you have all the crypto tokens being used as securities instead of the currency they were supposed to be, and that's because of this exact reason!

[ketchupdebugger]

you are not going to defer on everyday necessities, but you can defer on big item purchases. If you are in the market for an EV, and the report is that EV's are getting cheaper every year. You may just defer that purchase as long as you can. If you are in the market for a house and the report is that housing prices are increasing by 10% every year, you regret not buying that house yesterday.

[WalterBright]

And yet if you invest the money, the EV gets cheaper for you every year.

[nah_no_not]

Quoting: "The idea that 2% inflation is good for the economy..."

Two goods (A and B) both were aviable for US$100 in 2019.

First A: 2020 inflation added +1.4% so good A cost $101.40 2021 added another +6.8% so good A now aviable for $108.30 2022 adds um ~8% A now costs $117,- 2023 added another ~3.6% buy good A now for $121,- (!!!)

Wow! Some may think, the price is up 20%

Now take good B everyear inflation adds +2

so good B costs also $100,- [Liste:] 2020 = $102,- 2021 = $104,- 2022 = $106.10 2023 = $108.24

"quoting": "Government selling an idea to raise spending -cos inflation is a way to raise taxes without raising taxes."

...or -marketing-(crossed) to sell stability over "Control" ?

now that became political...(wayback)

hint: //wiki/Starve_the_beast

"Starve the beast" is a political strategy employed by American conservatives to limit government spending by cutting taxes. Economist Paul Krugman summarized: "Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government's fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit.

regards...

[WalterBright]

Without republican votes, we now have an unsustainable budget deficit. What do you suggest?

[littlestymaar]

Get back to Nixon's era tax rates and deficit is gone…