I've believed for a bit of time now that the only real reason for the FED to pursue a 2% inflation goal (and I personally believe inflation is far higher than 2%) is to reduce the US's increasing debt burden over time.
If the debt were far lower and more manageable, inflation wouldn't be as necessary a goal as a mechanism to try and reduce its actual value over time.
As this article discusses a bit, inflation is a great way to rob the middle and lower class of value in a way that the upper class is more able to avoid (though not completely) especially due to lack of wage growth at lower levels.
Or perhaps stated in a different context, the target inflation goal might be very different with a much smaller debt.
Now that the US (and many other economies) are addicted to near 0 interest rates, and with all the increased spending (regardless if anyone thinks the spending is "good" or "bad"), I have difficulty seeing how we can dig out of what appears to me as a bit of a hole even with the potential productivity gains the current spending is supposed to spur.
Raise interest rates at this time, and everyone takes a big hit especially as the US is spending a ton more so that's not really an option anytime soon. Keep them low and the only solution to the next economic downturn is to again spend our way out, only furthering the need to keep interest rates close to 0 (making this a bit of a vicious cycle).
No one knows where this ends (I certainly don't and I think any economist who says otherwise is lying whether they know it or not) but the rising cost of the majority of goods that people spend on (health, education, homes and rent) scares me quite a bit as a young adult looking at the next 20 years as I think about wanting to establish my life despite my own luck in having a high paying career in software engineering.
If the debt were far lower and more manageable, inflation wouldn't be as necessary a goal as a mechanism to try and reduce its actual value over time.
As this article discusses a bit, inflation is a great way to rob the middle and lower class of value in a way that the upper class is more able to avoid (though not completely) especially due to lack of wage growth at lower levels.
Or perhaps stated in a different context, the target inflation goal might be very different with a much smaller debt.
Now that the US (and many other economies) are addicted to near 0 interest rates, and with all the increased spending (regardless if anyone thinks the spending is "good" or "bad"), I have difficulty seeing how we can dig out of what appears to me as a bit of a hole even with the potential productivity gains the current spending is supposed to spur.
Raise interest rates at this time, and everyone takes a big hit especially as the US is spending a ton more so that's not really an option anytime soon. Keep them low and the only solution to the next economic downturn is to again spend our way out, only furthering the need to keep interest rates close to 0 (making this a bit of a vicious cycle).
No one knows where this ends (I certainly don't and I think any economist who says otherwise is lying whether they know it or not) but the rising cost of the majority of goods that people spend on (health, education, homes and rent) scares me quite a bit as a young adult looking at the next 20 years as I think about wanting to establish my life despite my own luck in having a high paying career in software engineering.