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Inflation story on 60 minutes Australia
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reformedbanker
Posted 5/7/2023 13:00 (#10219403 - in reply to #10219193)
Subject: RE: Inflation story on 60 minutes Australia


I used to share a similar view and in fact many people do. It leads some to crypocurrency and others to Marxism.

Follow this logic further. The major over simplification that many assume with this thought pattern is that production is stable and constant. We are living in a period of immense innovation where if currency were fixed or even fixed to grow at the rate of population, it leads to net deflation. I figure out how to make widgets cheaper then you, I undercut you. This still happens today. TV's are exhibit A. That's where the basket of goods model comes in. Marx solved this through state ownership. Crypto doesn't. Even gold people need to remember they mine more daily.

I can buy parts of the arguement that the fed should have a goal of 0% inflation (where currency would grow at real gnp rate), but it still would create pockets within the broader economy of inflation and deflation all balanced out. We would still argue over that basket of goods. We would still have inequality, and likely more volatile labor markets (since this part of the mandate would be secondary). Which may be okay. But I'm not sure if the fed would be any more competent in managing this goal. And of course, Congress would somehow have to figure out their role as well and I don't think this can be done.

One step further, a lot of folks think without any inflation, the incentive to invest today is reduced, which inhibits gdp growth. So 2% becomes a goal for many. I'm not sure on this point. I guess it takes me awhile to form strong opinions.
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