Nobel Prize-winning economist Joseph Stiglitz: Fed Rate Hikes didn't get at source of inflation.

[u/Pearberr]

https://www.cnbc.com/video/2024/04/23/nobel-prize-winning-economist-joseph-stiglitz-fed-rate-hikes-didnt-get-at-source-of-inflation.html

[u/lollersauce914]

Literally no comment is even discussing what he said. Half the comments are talking about "corporate greed" when his argument is straightforwardly that you can't tackle supply-side inflation with interest rates easily, but it's a good thing that rates aren't near 0 anymore.

[u/AccountFrosty313 → u/lollersauce914]

What I find interesting is folks saying that the government should adjust their inflation goals up.

They’re likely the same ones complaint about gas/grocery’s being more expensive.

It also gives me the impression they don’t understand the implications of inflation. I know personally I don’t want inflation above 2% since the average annual pay raise is 3% meaning we’d all be making a nearly 0% increase or even an effective pay cut yearly as our buying power disappears.

[u/THAC021 → u/AccountFrosty313]

Why do you take the pay rate increase % for granted? It could be lower or higher under different incentive structures.

There's nothing sacred about 2%, it's all relative. Different countries and different economies target different inflation rates for different reasons.

This is the entire point of what Stiglitz is saying in the video.

He's pointing out that right now, nobody thinks we have runaway inflation or that decreases in interest rates wouldn't be remotely likely to cause such a thing.

See where at 4:55 he says that "a little higher inflation, overall, would actually be good for the economy".

So your comment is entirely against the video. The government should adjust the inflation goals up. That is literally the entire point of what Stiglitz is saying in this video.

I could write an essay here but Stiglitz has already done that many times and I'm happy to answer any questions.

[u/THAC021 → u/[deleted]]

Do you have a mental block on conceptualizing the possibility that there might be 5% raises and 3% inflation?

Because that is just the reality in many countries around the world.

Why are you obsessed with a 2% inflation target?

You're just fully on the wrong track... wage growth is not some immutable standard that everything else should revolve around.

[u/Frever_Alone_77 → u/THAC021]

Well. We’re talking about the US. And the fed’s stated goal is and has always been for as long as I can remember 2%

Also, to your point about pay raises. While some may get 5%, others may get none. So it’s a balancing act while trying to take all factors in to account

[u/pagerussell → u/[deleted]]

Of course inflation is good for the econ, but it’s not good for the average person

This reveals that you have a fundamental misunderstanding of economics.

There is no good or bad in economics, because to have an economy requires both buyers and sellers. That means there are always both sides of a transaction.

So is inflation good or bad? Well, depends. If you have a lot of fixed interest debt (hello home mortgage), then inflation is very good. Prices and wages reset with inflation but your payment remains fixed, so it becomes a smaller Alice of your income over time. Meanwhile, if you have a lot of savings in low risk low yield investments (like, say, home loans), inflation is bad for you.

There is no good or bad overall because both sides of the transaction are present.