[zahlman]

> If we had the technology to maintain 0% inflation, we would do that. We can't, and rather than risk deflation we instead target low positive inflation.

I don't think this is quite right. My understanding is that a low positive inflation would be targeted anyway, because it stimulates the velocity of money; i.e. there's a downside to hoarding, since you need to beat inflation to come out on top. So people will be willing to invest to at least some extent in risk assets, or to buy things now rather than later.

Which, yes, makes inflationary spirals possible, but they've proven less damaging. The inflation numbers seen in regimes that actually collapsed as a result are absolutely dizzying; whereas the deflation seen in the Great Depression was... significant, but not nearly comparable.

[SR2Z]

The main advantage to keeping inflation as low as possible but positive is also that it makes interest rates cheaper. Individuals are incentivized to spend when there's inflation, but banks have a harder time writing loans because the interest rate on the loan is the product of inflation and the bank's desired ROI.

Low interest rates are a good thing because they allow people to explore new ideas and new businesses - the entire modern tech industry would not exist without ZIRP because the scale of investments has only gone up as technology has advanced.

[autoexec]

> Individuals are incentivized to spend when there's inflation

That's not what's happening currently. Inflation has driven up prices to the point where people can't afford to spend. They're forced to cut back on spending just to keep a roof over their head and food on the table. Inflation promises that things are cheaper now than they ever will be, but that just means that anything you can't afford you either have to go without or take an even bigger hit to your wallet after trying to save money at a rate faster than prices are increasing. That sort of thing leads to less spending.

Credit cards were the solution for many Americans for a very long time, but that was never sustainable and now the US has record amounts of household debt and homelessness.

Deflation makes things more affordable and so people buy more. Yes, they could horde all their wealth, but you can't eat money and it isn't much fun. When times are good why would anyone bother going without when they can easily get what they want today. Consumerism is strong enough to keep people buying things. Decreasing prices gives consumers confidence that they can make risky purchases and investments.

[xorcist]

> the entire modern tech industry would not exist without ZIRP

The problem with zero interest rate is that it doesn't incentivize better ideas. Why would you work to increase productivity if capital has no cost?

The period 2016-2021 was one where interest rates were the lowest, sometimes even negative, and you saw companies hiring endlessly, and acquiring competitors with no intention of doing anything their their products.

It is very hard to compete on talent and good ideas in such an environment when your all competitors are burning through loaned and venture capital (which itself is also largely loaned at some point).