Tight labor markets have raised concerns about the role of labor costs in persistently high inflation readings. Policymakers are paying particular attention to nonhousing services inflation, which is considered most closely linked to wages. Analysis shows that higher labor costs are passed along to customers in the form of higher nonhousing services prices, however the effect on overall inflation is very small. Labor-cost growth has no meaningful effect on goods or housing services inflation. Overall, labor-cost growth is responsible for only about 0.1 percentage point of recent core PCE inflation.
Your “hard currency” is inherently deflationary. This may seem good to you since it means your dollar is worth more tomorrow than it is today, but the same is true for everyone else’s dollars too. The net result is to discourage spending across the entire economy and that leads to much worst outcomes. There is a good reason that central banks aim for a small amount of inflation rather than zero or negative inflation.
I wonder if zero inflation and a wealth tax would be better. That way, the value of people’s money could be put to use instead of just disappearing over time.
I’m not an economist, just a guy who took all of two econ classes in college. That said, I think there’s an obvious answer to that question. The inflation target is a target. Central banks can’t actually set inflation unilaterally, or we wouldn’t ever see the inflation rates we’ve seen over the last couple of years. This is why we target a small rate of inflation. It’s easy to look at a 2% inflation target in a highly inflationary environment and think that we should be targeting 0%, but we really don’t want deflation.
Not sure what a wealth tax has to do with anything. I’m not inherently against it, but I don’t think it has a significant impact on inflation.
The idea of maintaining positive inflation is to stop people from hoarding money without investing it, right? A wealth tax would also have that effect.
Would it? Every variation of a wealth tax I have ever heard proposed is targeted squarely at the ultra wealthy class, virtually all of whose wealth is in stocks (i.e. investments) and as such would necessarily have to tax investments.
The problem is inflation forces you to take risk just to keep the value of your money the same. If a person doesnt want to take risk they should not be forced to do so. People who wanted to grow their wealth but understand the risks and decide to take them would invest.
I don’t think this is a real problem that people face. If all you want is to maintain your existing wealth, there are a wide range of very low risk options that will get you that. The overwhelming majority want to grow their wealth and take risks accordingly.
A good thing would be a net inflation of zero. A little deflation or a little inflation is not a problem. If your money 100 years from today is still worth the same you hace a good balance. Look at monero for example. It is inflationary as there will always be 0.3 monero per minute created. However some will get lost due to lost keys, etc. Also, as the supply increases that extra 0.3 monero becomes less and less of the total. So its asymtotically zero.