The Great Resignation? More Like the Great Renegotiation
Why is the central bank inflation target typically 2%?<p>Well if you target 0% and any actual result below 0% happens, that&#x27;s deflation which is a disaster for economies.<p>If inflation is say 10%. Maximum employment is near certainly impossible. Debt will be expensive and the economy crawls to a halt. Who wants to pay 10% interest on their student debt?<p>So where in between do you have a good price stability? It tends to be around 2%. It allows for error in measurement, it provides safe cushion.<p>The USA is at 7% inflation. This means the central bank is not doing their job. They by mandate should have drastically increased interest rates. Inflation almost certainly is out of control now. Looking at central bank balance sheets that are very far from balance, and looking at money supply M2. There&#x27;s a solid 40% inflation coming. Lets say it sticks to 7%, this inflation will last probably 4 years.<p>When inflation is so high and interest rates are not. The people winning are those in debt. Which is the government and youngins. However, it also means you cant save money. You must spend money as soon as possible. Tourism is dead for many years.<p>Flipside, what does this also do? It pressures salaries. You are making 7% less this year but you&#x27;re making 115% less the next year. So anyone in demand will be in demand and be able to buck the inflation curve.<p>The people most hurt by high inflation are those who just retired. They no longer can demand more $ for their productivity. Their &#x27;safe&#x27; investments are way below inflation. They don&#x27;t realize yet they cant afford to be retired.