This is not true.
The 2% rate of inflation has nothing to do with gold. It is purely a construction by a New Zealand finance minister who recognized that cost of living increased ~1.7% a year. That finance minister then became a board member of the central bank of NZ and the central bank set the first inflation target of 2%, which caught on around the globe as a standard inflationary target.
This all happened in the late 80s early 90s.
That explains why they suddenly set it as an upper target. Doesn't explain why it "just feels right" to people.
You have to remember that the finance ministers of the time grew up under the gold standard. Even during the California gold rush, gold supply didn't increase over 1,5% per year.
Anything over 2% is de facto devaluation against commodities.
Did they grow up under the gold standard? This target was identified in the late 80s early 90s. Nixon revoked the dollars redeemability for gold in the 70s, and itâs not like the dollar was pegged to gold before he did that, he did that because they had already over printed them. The classical gold standard ended in the early 1900s, well before most finance ministers in the late 80s were born.
I grew up in Germany in the 80s and everyone was still talking about the gold standard and how the Deutschmark could be strengthened and the importance of the Bundesbank gold reserves.
Gold is still something central bankers think about a lot, and they still buy and buy and buy it. They're steadily repatriating it, on the down-low.
There actually is no evidence that, for instance, the ECB governors actually think their fiat is going to last forever, despite all the CBDC posturing (which seems to largely be a response to the digital yuan and Fedcoin and etc.). They're quietly stocking up gold reserves and trying to balance the per-capita amounts among the various member banks.
Theyâve been talking about it for 50 years now, and itâs been over 100 since it actually existed. Bretton woods wasnât a gold standard, it was a dollar standard, and the fed was already playing games and rehypothecating the gold countries could âredeemâ as soon as they could.
The gold standard isnât coming back because we live in a world where shipping 10tons of gold around is too slow a form of settlement. The central banks donât want to be constrained by some arbitrary commodity reserve, and the politicians want to be able to spend money whenever they want however they want.
Gold is useful for jewelry, and as a hedge for the bunker dwellers in the case of nuclear war. The gold standard is dead otherwise.
Yes, me also, ppl dont think about money, most of them do not even think about using alternatives, like btc, lets hope this changes.
Itâs not an upper target, itâs the target.
Iâm not sure what people youâre talking about for whom it âfeels right.â The bankers who use it to plan for their long term financial deals for estimating profitability? The exporters who expect to sell their wares for more? Equity owners for planning their ROIC? The worker saving their wage?
The ministers actually preferred a target of 0% to 1% (even closer to gold) and saw 2% as high, but politicians wanted more leeway and pressured them to push it up to 2% and eventually we ended up with the ECB "averaging 2%" in the mid-term, which allowed for inaction at 4% and led to the recent inflation break-out.
Since inflation rates were well above 2%, at the time, targeting 2% still resulted in a decrease, so the ministers went along with it and just stayed quiet when it crept below that, until it slipped into ZIRP and everyone started getting crushed by their debt. Then they reversed and it overshot in the other direction.
Fiat is simply not a commodity, so it needs to be tied to a commodity or replaced with one, or it'll always have these problems.
https://sites.lsa.umich.edu/mje/2023/09/04/why-the-2-inflation-target/
