A Conspiracy of Counterfeiters

[Captain Oates 911]

Why do we need "inflation targets"? Other than "the Fed thinks it's a good idea".

So that the middle class can't gain an advantage through the depreciation of their mortgage liabilities at the expense of the 'job-creators' (paris hilton, col gaffi etc)

[mawilson 2,133]

Real median wages haven't risen over the last three decades.

They would have risen if we had zero inflation or deflation.

[luckytxn 2,265]

Hard to believe that some actually think that inflation is good. I also live during Carters time and it was miserable. That is why they started a misery index and that led to thankfully a one term presidency. People are idiots to think inflation is good.

[mawilson 2,133]

People are idiots to think inflation is good.

It's good if you have no savings and are up to your ears in debt... which sadly describes 50 percent of Americans.

[luckytxn 2,265]

It's good if you have no savings and are up to your ears in debt... which sadly describes 50 percent of Americans.

Really? So now with less money to service that debt or possibly no extra money than that debt that was serviceable before but becomes crushing is a good thing?

[mawilson 2,133]

Really? So now with less money to service that debt or possibly no extra money than that debt that was serviceable before but becomes crushing is a good thing?

Real assets (real estate and such) tend to appreciate with inflation, so if you were underwater on your mortgage before, you'll have positive equity when the dollar depreciates.

[Usui Takumi 1,562]

Hard to believe that some actually think that inflation is good. I also live during Carters time and it was miserable. That is why they started a misery index and that led to thankfully a one term presidency. People are idiots to think inflation is good.

Mild inflation is the ideal. There have been very few periods of deflation in the US since the 1900s. While inflation during the Carter administration was not hyperinflation it was still very high. It was partially caused by oil costs, but generally the Federal reserve was to blame because they had no desire to tame inflation.

Edited August 30, 2011 by Sousuke

[mawilson 2,133]

Mild inflation is the ideal.

Why? What's wrong with having a currency that doesn't lose value over time?

[Mr. Big Dog 10,747]

They would have risen if we had zero inflation or deflation.

Not necessarily. It's about the share of national income that goes to wages and salaries. That share continues to decline which explains much more why real incomes aren't rising than inflation does. We've had long periods of very moderate inflation over the last few decades and times when there was no inflation at all. And yet, real incomes haven't gone up for most Americans.

[Usui Takumi 1,562]

Why? What's wrong with having a currency that doesn't lose value over time?

Nothing per say, but if say a currency was maintained in a neutral position there is no buffer against deflation which is also harder to control than inflation.

[mawilson 2,133]

Not necessarily.

Inflation allows employers to modestly raise wages in nominal terms without actually paying more in real terms. As a result, many people who get pay raises believe that their wealth is increasing, regardless of the actual rate of inflation.

It's much harder to do when there's no inflation, or indeed, deflation.

[luckytxn 2,265]

Real assets (real estate and such) tend to appreciate with inflation, so if you were underwater on your mortgage before, you'll have positive equity when the dollar depreciates.

What difference does it make if the real estate appreciates? The payments are still there but harder to pay as your pay is now being stretched to pay more for everything due to inflation.

Mild inflation is the ideal. There have been very few periods of deflation in the US since the 1900s. While inflation during the Carter administration was not hyperinflation it was still very high. It was partially caused by oil costs, but generally the Federal reserve was to blame because they had no desire to tame inflation.

The ideal is no inflation to the common people.

[Mr. Big Dog 10,747]

Real assets (real estate and such) tend to appreciate with inflation, so if you were underwater on your mortgage before, you'll have positive equity when the dollar depreciates.

Which would help the housing market. Which would help the job market. Inflation also helps exports and stifles imports. Which also helps the jobs market and the trade balance. Not the worst that could happen as far as I'm concerned.

[Mr. Big Dog 10,747]

Inflation allows employers to modestly raise wages in nominal terms without actually paying more in real terms. As a result, many people who get pay raises believe that their wealth is increasing, regardless of the actual rate of inflation.

It's much harder to do when there's no inflation, or indeed, deflation.

In periods of deflation, people tend not to have jobs. High unemployment rates tend to push wages lower more than offsetting the potential real wage gains workers could have from deflation. The last sustained deflationary period was the Great Depression. I don't know that anyone would suggest that real incomes rose during that period.

Edited August 30, 2011 by Mr. Big Dog

[Dan J 277]

What difference does it make if the real estate appreciates? The payments are still there but harder to pay as your pay is now being stretched to pay more for everything due to inflation.

The ideal is no inflation to the common people.

I've seen my wages increase 10%+ each year much more than inflation. But then i'm not working a low skilled manufacturing/service job. The only way low skilled workers can actually put wage pressure on employers is by unionizing. A single person is too easy to replace. Inflation is going to be around no matter what. Since employers are not interested in paying employees more, what are the workers going to do about it?