Is the Fed artificially keeping the inflation rate near 2%?

[dozu888]

that's gonna be a hard pass.

which makes it right. the least crowded and the most uncomfortable trade is usually the right trade.

 

[dozu888]

Uh huh.

you are terrible and speechless.

 

[morganist]

As you all should know, one of the fed's main jobs is to keep the inflation rate at close to 2%. Is this an arbitrary number? In that case, could it create investment opportunities because they are creating a fake situation in which inflation is mandated to stay near 2%? Similar to how people have found investment opportunities when one country chooses to peg their currency value to that of another country. This creates a fake situation and it will create investment opportunities when this fake situation unravels itself.

Regardless of the central bank interest rate the free market interest rate will increase if inflation rises to compensate for the lost value of the money invested. In short if inflation rises interest rates tend to rise anyway regardless of the central bank rate. There is a whole school of economic thought called Austrian Economics which states the interest rate should not be altered by a central body but follow the natural rate set by banking institutions to reflect the risk or cost of borrowing. The Monetarists believe the interest rate should be altered to hit the inflation target which I think has been set to help with long term financial forecasting, read the article below.

http://morganisteconomics.blogspot....-greatest-contribution.html?q=milton+friedman

Regardless there are other methods of controlling inflation that have been used including fiscal policy, pension policy and other techniques of monetary policy. Read the article below to find out about using pension policy.

http://morganisteconomics.blogspot.com/2019/03/pension-pumping.html

Read the below article to find out how the central bank operates.

http://morganisteconomics.blogspot.com/2012/12/macroeconomics-and-banking-have-central.html

The below article may also help.

http://morganisteconomics.blogspot.com/2012/10/is-way-central-banks-view-inflation.html

 

[Amatrue]

you want to buy the stuff that does not produce a yield (or as little as possible), and also is perceived as the most risky.

that's the asset that is the most miss-priced, to the cheap side.

that makes no sense

 

[dozu888]

that makes no sense

exactly. if it made sense to a lot of people it wouldn't be a good trade.

 

[ground zero]

In regards to the original question, the easy answer is yes and they have been for decades, ever since Reagan took office after interest rates went crazy during the Carter administration. The formula for calculating inflation was changed and presto, perpetually low to no inflation. The current formula doesn't allow for the inflation rate to stray outside the 1.75 - 2.25% range, with perhaps a rare exception. Along with employment, GDP, crime, etc,... really none of the numbers the Fed puts out,... are an actually true or accurate representation of reality. But it doesn't matter, because perception is everything. As President Nixon said, if the people(referring to the masses), see it on TV they will believe it.

 

[ironchef]

And none of his posts were relevant to the original post.

Also, if you can't use your profits to invest in something else, then it is not the same. Unless you're going to say he can use margin.

What good is a bar of gold sitting next to you if you can't use it at the grocery store?

And unless those stocks you picked are the best picks every single year for the rest of time, then you are losing out on the opportunity cost of not being able to invest in other things.

You can use your portfolio in your brokerage as collateral to borrow and buy real estates.... As the value increases you can buy more.....

 

[morganist]

You can use your portfolio in your brokerage as collateral to borrow and buy real estates.... As the value increases you can buy more.....

In the United Kingdom you can get a type of pension called a SSAS Small Self Administered Scheme that enables you to borrow or buy into your business to support it using your pension fund, it is however only available to company directors or senior managers. There is a lot you can do with pensions, which gives you a way out of the problems in the economy. See my work that has been successful in the United Kingdom as a contingency against those problems in the United States, if you are interested in my work you can view it at morganist economics.