The Fed is talking about letting the inflation rate rise above its 2% target.

[Mauser]

https://www.bloomberg.com/opinion/articles/2020-07-17/the-fed-is-setting-the-stage-for-a-major-policy-change


"Having learned a hard lesson in the last recovery — don’t tighten monetary policy too early"

"In practice, that means the Fed will not just emphasize actual inflation over forecasted inflation, but will also attempt to push the inflate rate above its 2% target. "

basically the article says the fed has some missed time to make up for since we had a period of lower than 2% inflation, well need say for example 3% inflation to make up for that lost infation.

money printer go brrrrrrrrrrrrr

I think this is good news for crypto currencies. The higher the inflation will get the more people we will see trying to find different currencies to USD. Bitcoins and others can only profit from this.  After the last crisis the inflation was fairly low we can still see some higher prices in the future without inflation getting out of control. But with 3% and interest rates on bank savings near 0% we should definitely move more into cryptos.

[chip1994]

I think it is also normal. This will only happen this year, hopefully vaccines will be available soon so the economy does not suffer any more. next year, if the epidemic is under control, the inflation rate will still return to normal, don't worry. If Mr. Trump still wins the next presidential election, the economy will surely grow stronger. he is helping Americans get all they have given away and America will be great again.

[exstasie]

If you hold your savings in dollars and then after decades find that it can purchase only a small fraction of the real estate or gold that it once could, I think that's a very important measure.

In other words, CPI doesn't tell us how much you lose by keeping your savings in dollars. That's a metric everyone should be aware of.

I guess this is the part I don't understand then, because this is exactly what the inflation rate tells you.

No, the inflation rate only tells you how fast the price of consumer goods and services are rising.

In 1967, an ounce of gold was worth $35.50. Today, that same ounce of gold is worth $1,940. The price has risen by ~55x against the dollar.

Meanwhile, according to the BLS's handy CPI calculator, inflation has only gone up ~8x over the same period of time. https://www.bls.gov/data/inflation_calculator.htm

Those aren't exactly the same.

Focusing solely on the inflation rate is a good way to deceive people about how quickly their money is being devalued.

[fillippone]

<...>

Focusing solely on the inflation rate is a good way to deceive people about how quickly their money is being devalued.

Even if CPI is a bad indicator for the cost of living (view the graph in my post earlier in this thread), people greatly underestimate the power of compounding of tille numbers on long enough period of time.
Do you know how much CPI rose in the last 20 years? 40%.
This means that of you don't earn 40% more than you were earning in the year 2000, you actually lost purchasing power, or if your investment portfolio hasn't grown  as such, you lost wealth. Same thing goes for your long term investment, real estate etc.

A lot of people don't understand this.

[fillippone]

After a while, also maistream newslet get coverage of the issue.
Nothing new, only a good wrap up:

Jerome Powell’s Coming Inflation Speech May Weigh On Dollar and Boost Bitcoin: Analysts

U.S. Federal Reserve Chair Jerome Powell is expected to bolster expectations of inflation during his keynote speech at the Jackson Hole Economic Policy Symposium on Thursday.

According to analysts speaking to CoinDesk, that could ultimately lead to further drops in the dollar and greater buying power for bitcoin traders and investors.

• The Fed chief is expected to signal tolerance for higher inflation during the speech, with the central bank having mostly missed its 2% inflation target since 2012.
  “Powell has previously stated that he doesn't think inflation is a significant risk and is prepared to see it overshoot to meet his objectives,” Charlie Morris, chief investment officer at ByteTree Asset Management, told CoinDesk over WhatsApp.
• A more relaxed approach to managing price pressures could power a stronger rise in long-term inflation in the U.S.
• “The major impact for crypto out of this symposium would be a change in monetary policy and further depreciation of the U.S. dollar, which could propel bitcoin higher,” said Matthew Dibb, co-founder of Stack.
• Inflation is expected by many in the cryptocurrency space to be a driving factor for bitcoin gains, as it's perceived to be a hedge asset similar to gold.
• The symposium, attended by central bankers, Federal Reserve members, economists, financial organizations and academics, among others, will be held virtually this year.

Dubious correlation studies on the last bullet points.
Powell has the gargantuan task of not letting the curve go negative, or inverted, thus preserving the huge money manager hedge fund industry, while keeping the long end of the curve not too steep to preserve the stock market rally, that it is not going away before elections, and third to invert the money velocity trend, now at historical minimum.
Good luck to him (/sarcasm) .
Bitcoin fixes that.

[jaysabi]

basically the article says the fed has some missed time to make up for since we had a period of lower than 2% inflation, well need say for example 3% inflation to make up for that lost infation.

money printer go brrrrrrrrrrrrr

From their Keynesian standpoint, it makes perfect sense. These deflationary periods obviously kick inflation well below 2%. Why worry about slightly overshooting 2% on the upside if it could mitigate the risk of cutting the recovery short?

As far as money printing goes, I'm not sure it matters much. If the economy doesn't recover to 2% inflation (or takes longer to do so than expected) they will keep running their infinite QE program anyway. Money printing is just the norm now. It's not based on the actual money supply, it's based on the state of the markets.

They were still calling it a "recovery" 10 years after the last crash from the housing crisis and were worried about jeopardizing the "recovery" when we were posting the best employment numbers, stock market numbers and GDP on record.  The framing of it as a "recovery" long after it was recovered and was just a flat out booming economy is deceptive and designed to never have to raise interest rates, because the billionaire class in this country is addicted to cheap money and god forbid the Fed ever employ a sound monetary policy for fear of pissing off their republican backers.

[South Park]

Governments like inflation, because it is good for them.

They do the most they can to generate more inflation: negative interest rates, money injection, and so on.

Governments make a lot of money from inflation, due to inflation tax.

For example, you pay capital gain tax over inflation. Your asset is 3% more valuable one year later? You will pay taxes over that 3%, even if only 1% is real valuation and 2% is just inflation.

Not only that, governments get to enjoy to spend that money before inflation even makes its mark in the market which gives them a huge advantage over any other player in the market, think about it suppose that the whole money supply around the world is just 100 dollars, so all products and services of the world are worth those very same 100 dollars, but then the government prints 3 dollars this means they get to spend those 3 dollars before the market is aware of their existence and as such they get goods and services worth that money, but once those 3 dollars enter the market now all products and services around the world have to be divided by a money supply of 103 dollars effectively lowering your purchasing power.

[jaysabi]

Governments like inflation, because it is good for them.

They do the most they can to generate more inflation: negative interest rates, money injection, and so on.

Governments make a lot of money from inflation, due to inflation tax.

For example, you pay capital gain tax over inflation. Your asset is 3% more valuable one year later? You will pay taxes over that 3%, even if only 1% is real valuation and 2% is just inflation.

Not only that, governments get to enjoy to spend that money before inflation even makes its mark in the market which gives them a huge advantage over any other player in the market, think about it suppose that the whole money supply around the world is just 100 dollars, so all products and services of the world are worth those very same 100 dollars, but then the government prints 3 dollars this means they get to spend those 3 dollars before the market is aware of their existence and as such they get goods and services worth that money, but once those 3 dollars enter the market now all products and services around the world have to be divided by a money supply of 103 dollars effectively lowering your purchasing power.

While the mechanics of this example are correct, you have to realize that the economy is so much more complex and the absolute numbers are so large that a change like this would take an exceedingly long time to show in prices, and the bet is that the economy can recover and grow to absorb most of the new money put into circulation before the effects of rampant inflation are felt.  For the most part, this has been a pretty good trade off.  The US does not have out of control inflation and has done a good job measuring the risk of inflation against all the new money put into the economy.

[fillippone]

Just in case you want to follow Jerome Powell sending USD full brr and full inflation:
https://www.youtube.com/watch?v=Eig-NOwTpbo


ENDED NOW.
First reaction. They are crazy.

They are focusing on unemployment.
They used to focus on the headline number of employment, easing rates when number of employment deviated from "his maximum level" or raising where employment were running toward full employment.
They said they now realise the headline hides very different situation where skilled, more productive workforce is at full employment, while lower wage, unskilled workers have been consistently struggling to find an employment. Even the labour force participation is now running very low, meaning that a lot of unskilled worked just stopped actively seeking for work.

Now  they plan to be ready to let inflation running high to "help" lower wages labour force to find a job: not raising interest rates you allow firms to offer constant wages until full employment is attained.
This is nonsense, the low income workers will get slaughtered by inflation in the meantime. Inflation is an highly regressive "hidden tax" : poor people are going to be hit strongly, as a 4% increase in diaries expenses is going to hit them harder than upper classes being hit 4% on home theatre expenses.

IF you don't believe me, believe on the collective intelligence of markets: EURUSD, XAU and BTC all going the same direction.

[South Park]

Not only that, governments get to enjoy to spend that money before inflation even makes its mark in the market which gives them a huge advantage over any other player in the market, think about it suppose that the whole money supply around the world is just 100 dollars, so all products and services of the world are worth those very same 100 dollars, but then the government prints 3 dollars this means they get to spend those 3 dollars before the market is aware of their existence and as such they get goods and services worth that money, but once those 3 dollars enter the market now all products and services around the world have to be divided by a money supply of 103 dollars effectively lowering your purchasing power.

While the mechanics of this example are correct, you have to realize that the economy is so much more complex and the absolute numbers are so large that a change like this would take an exceedingly long time to show in prices, and the bet is that the economy can recover and grow to absorb most of the new money put into circulation before the effects of rampant inflation are felt.  For the most part, this has been a pretty good trade off.  The US does not have out of control inflation and has done a good job measuring the risk of inflation against all the new money put into the economy.

While you are correct when you say that this is going to take a lot of time in order to be reflected on the prices of goods and services the reason the United States has not an inflation out of control has to do with the dollar being the reserve currency of the world, literally all countries of the world combined have trillions dollars underground not using them, if at some point the market loses the faith in the US dollar you can be sure that they will begin to spend those reserves creating rampant inflation.

[exstasie]

Now  they plan to be ready to let inflation running high to "help" lower wages labour force to find a job: not raising interest rates you allow firms to offer constant wages until full employment is attained.

This is nonsense, the low income workers will get slaughtered by inflation in the meantime. Inflation is an highly regressive "hidden tax" : poor people are going to be hit strongly, as a 4% increase in diaries expenses is going to hit them harder than upper classes being hit 4% on home theatre expenses.

What did he say exactly? It's a 3.5 hour video. I don't think "moderately" above 2% target, which is what I am seeing quoted, is intended to mean 4%.

From the perspective of an unskilled worker, which is the greater evil, 3% inflation or being unable to find a job?

Rock and a hard place. I don't envy Powell's position. Keeping the bond, equities, and housing markets artificially propped up, keeping the bottom from falling out of DXY, and actually addressing the systemic needs of the labor market? No easy feat.....

[fillippone]

Now  they plan to be ready to let inflation running high to "help" lower wages labour force to find a job: not raising interest rates you allow firms to offer constant wages until full employment is attained.

This is nonsense, the low income workers will get slaughtered by inflation in the meantime. Inflation is an highly regressive "hidden tax" : poor people are going to be hit strongly, as a 4% increase in diaries expenses is going to hit them harder than upper classes being hit 4% on home theatre expenses.

What did he say exactly? It's a 3.5 hour video. I don't think "moderately" above 2% target, which is what I am seeing quoted, is intended to mean 4%.

From the perspective of an unskilled worker, which is the greater evil, 3% inflation or being unable to find a job?

Rock and a hard place. I don't envy Powell's position. Keeping the bond, equities, and housing markets artificially propped up, keeping the bottom from falling out of DXY, and actually addressing the systemic needs of the labor market? No easy feat.....

You can find The full text  it here:

Regarding employment
 

Moreover, as the long expansion continued, the gains began to be shared more widely across society. The Black and Hispanic unemployment rates reached record lows, and the differentials between these rates and the white unemployment rate narrowed to their lowest levels on record.
<…>
With regard to the employment side of our mandate, our revised statement emphasizes that maximum employment is a broad-based and inclusive goal. This change reflects our appreciation for the benefits of a strong labor market, particularly for many in low- and moderate-income communities.23 In addition, our revised statement says that our policy decision will be informed by our "assessments of the shortfalls of employment from its maximum level" rather than by "deviations from its maximum level" as in our previous statement.

Regarding inflation:

<…>
our new statement indicates that we will seek to achieve inflation that averages 2 percent over time. Therefore, following periods when inflation has been running below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.

In seeking to achieve inflation that averages 2 percent over time, we are not tying ourselves to a particular mathematical formula that defines the average. Thus, our approach could be viewed as a flexible form of average inflation targeting.26 Our decisions about appropriate monetary policy will continue to reflect a broad array of considerations and will not be dictated by any formula. Of course, if excessive inflationary pressures were to build or inflation expectations were to ratchet above levels consistent with our goal, we would not hesitate to act.

Of course they are not going to tie their hands with a formula while the want flexibility to keep pumping the asset bubble up.

[audaciousbeing]

Inflation of 2% is something I would jump on if given the opportunity considering that above 11% that we are battling with over here. Economy differs though and the real impact of the increment should not be on the basis of statistics or the basis of graphs plotting but rather how it affects the common man on the street trying so hard to make ends meet or the guys finishing school and trying to get a job but the economy is not providing one for them and that is the real struggle.