They are saying that future price levels are going to rise while existing debt levels will stay the same. This is a situation most companies would find favorable for expansion.


The Bank of Japan is holding its interest rate even while boosting its inflation target. If nominal interest rates stay the same and inflation rises....the real interest rate will fall. This is a situation most companies would find favorable for expansion.


Cash will be worth less in the future, but real assets producing goods/services which sell for an increasing amount each year (thanks to inflation) are now more valuable. Right now, in much of the world, the problem we face is not enough production of stuff and not enough people employed to produce that stuff.....this policy makes the business of making stuff look better. And the business of sitting on cash look worse.


If you do not have a job, do not intend to work in the future and live off the money stashed under your bed....this is a bad policy for you.

The definition of inflation means to increase the money and credit supply. Some people think that it means an increase in prices. But the distortions in the market are just as bad as the increase in prices. The Austrian School of Economics explains this.

 

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inflation = an increase in the general price level


this is the definition that everybody is working off of when the word is used.

I know that is what people think. That is probably why we are in such a mess. The increase in prices is a predictable consequence from the increase in money supply and credit. Again, read up on Austrian Economics. It isn't just a theory.

 

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From the FOMC Minutes:


"The Committee also stated that it is prepared to adjust the size and composition of its securities holdings as appropriate to promote a stronger economic recovery in a context of price stability. A few members observed that, in their judgment, current and prospective economic conditions—including elevated unemployment and inflation at or below the Committee’s objective—could warrant the initiation of additional securities purchases before long. Other members indicated that such policy action could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2 percent over the medium run."

 

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Whats the point of having a savings if theyre going to do this on purpose?

Inflation is more likely to hurt wage earners than capital owners. That said a small amount of inflation helps an economy adjust to lower real prices. In an economy without inflation wages (when they go down) tend to adjust down all at once.

 

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We are in a huge mess because we have a commonly understood meaning for a word...and you wish it meant something else? I dont think so.


Increasing prices has a long correlated history of economic success. The last 20 years we have seen a big slowdown in price increases...and fairly stagnant growth. Very inconvenient facts I know.

Here they are saying the FED might take action to keep inflation at the same target they had in the past. This should probably be interpreted as a soft reduction in the inflation target, the opposite of what japan is doing, since they seem to be saying 'only a few members think that maybe we should try to keep inflation from falling below 2%'.


Stating that they will definately take action to achieve a higher interest rate going forward would be a very different policy.

Yes I know, I wanted to clarify the Fed position so we're all on the same page.

 

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