Where Did 2% Inflation Target Come From? Ex-Central Bank Chief Explains Origins | Don Brash

The Reserve Bank of New Zealand (RBNZ) was the first central bank in the world to introduce inflation targeting, implementing an inflation target of 0%-2% in 1989. Don Brash was the former governor of the RBNZ during this time, and discusses why this policy was introduced, and its impact on central banks' monetary policies around the world.
*This video was recorded on June 3, 2024
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0:00 - Intro
0:50 - Origins of inflation target
8:35 - Rationale behind 2% target
11:00 - Influence on other central banks
12:55 - Money supply target
14:25 - Economic shocks
16:22 - Lag effect of CPI
10:35 - Central bank coordination
21:42 - Fiscal dominance
23:40 - New Zealand economy
27:50 - U.S. vs. China
33:38 - Ukraine War
#economy #centralbanks #economics

[@joshskinner2777]

Great to hear Dr Brash on your show David. I have a huge respect for what he's done for New Zealand.

[@fillmorehillmore8239]

I like these insider guests.

[@hanzn6784]

Govt: You need to maintain stable prices Fed: By stable prices we assume you mean prices that go up every year

[@jarekpiotrowski742]

central banks have been a disaster for middle income citizens

[@graceamsterdam5404]

I enjoyed this interview, thank you gentlemen. Always interesting to look at topics from different views, times, geographics.

[@geoffgjof]

Wow. So it was just the result of a politician speaking before any strategy was thought up? 😬

[@______638]

Certain "economists" insist The Fed has stated in its own words that it is not a 2% annual target, but a 2% target "over time" withthe time component never being explicitly stated. This makes the entire notion of a specific targeted inflation rate inobtainable.

[@jamesscott1437]

Well done David for having this excellent guest on :-) I would watch another interview on Mr. Brash on your channel if you had him back. Great questions for him by the way, well done!

[@geoffgjof]

Please don't shorten your videos. The long form allows a great conversation where a lot more data geta communicated.

[@corneliuschristian6547]

Very interesting interview, thank you.

[@Steve-ho5zj]

Excellent questions.

[@kiwimikeb1]

Wow, impressed to see a fellow kiwi on your program. Good work, Don Brash in my view is a good man and knows his stuff.

[@davisutton1]

He presided over the Mixed Capital Index (MCI) which combined the exchange rate and inflation to determine monetary policy settings. This proved to be a very crude tool and was later abandoned. That said, Brash seems to be a more honest and decent person than he was in his earlier days.

[@mutantryeff]

As long as how the inflation rate is calculated being a lie, does it matter?

[@azdjedi]

The CPI is always exactly what CNN tells you it is. Shhhhh....

[@user-eb3pi4tv9k]

Because they need to devalue the debt and anything more than 2pc would freak people out, bad enough we lose 10 pc of our money every 5 years, inflation target should be zero.

[@mth469]

We're in for a hell of a storm on the markets, judging by Daivd's hair. Hair-ologists are watching the situation closely.

[@marcusaurelius6012]

Like you, l base my trading decisions and forecasting on the state of Dave's hair. Bit rough today, but other days, it's on point. AAA+ rated

[@Dencell]

Population growth is usually around 1.5% per year, and people are needed to produce stuff, so the economy usually grow at a similar pace. So increasing money supply at around the same rate will give you stable prices. But clearly central bankers are totally failing at this, because prices are rising at 7% or more per year whatever the CPLie might say.

[@kenmoersen128]

Great question, perfect timing for me. Thanks….. 1:36

[@ShaniaSuperFan]

Oh..... I thought it came from the same place as the 6' Rule, and had something to do with a pangolin and a bat having sex.

[@Rawdiswar]

Legit lol

[@dumbfoundedagain]

Thank you Mr Brash, I totally agree with everything you have said !

[@jbl6338]

Great guest! Have him on again!

[@7minutosconlabiblia145]

Thanks 🙏🏻

[@James-il3tq]

US has entered new era of fiscal dominance where government deficits so high it overrides central banks. When the Fed increases rates in this new era it can actually INCREASE inflation by governments deficits increases (need to borrow more to pay interest on debt). This causes governments to spend more which the central banks have to monetize the debt. Central banks are no longer independent nor is their primary role anymore to keep inflation (government reported currency debasement) around 2%/year. Primary role to keep liquidity in markets and banks, 2nd role to monetize government debt, 3rd role inflation and unemployment. Phillips curve has never worked by the way. END THE FED!

[@geoffgjof]

Why do you think Yellen is offering mostly short term treasuries right now? Once the recession is evident and the Fed cuts rates, then she'll offer more long term to help take advantage of the larger spread that will still be there because of stagflation.

[@dumbfoundedagain]

Fabulous interview thankyou

[@PolicyFailureIsExpensive]

"Would a zero percent devaluation be better for living conditions?" "Let me talk about some guy's name I forgot." Great answer.

[@dumbfoundedagain]

Mr Don Brash has some very solid insights and political views

[@jaynawilliams8923]

Even 2% inflation is bad for WE, The People, because compounding.

[@cocopuff7038]

It going to get worst in the US June 9 the agreement between Saudi oil pegging to the Fiat US Dollar ended GET YOU PHYSICAL GOLD AND SILVER NOW.

[@andrewking9435]

Money supply drives prices and CPI, not expectations! Amazing or maybe not so, that central bankers are not Austrians rather Keynsian

[@lorishemlof2602]

We should ban fractional lending (or printing of money) for existing (second hand) housing to eliminate inflation. While increasing QE for house building to increase the supply of the leading determinant of general inflation (housing inflation).

[@tow.JanWinnicki]

Amazing story and well-presented. New Zealand was always an extremely progressive nation so this comes as no surprise to me. Serwus!

[@dilatedtime]

Yea but why 0 to 2 !?!! Why such an arbitrary number/range!?!?!?

[@1Bob4All]

This gentleman's approach to Ukraine would suggest that a strong country could encourage some of its population to populate a neighboring country, near the border, and then use that population to justify their expansion to the loss of the weaker neighbor.

[@1Bob4All]

@@lowtech_1 Ukraine did not have weapons any closer to the border than Russia and they both had for decades. How would invading resolve the concerns? The invader moves the border and their neighbor is even more defensive.

[@daxter7913]

😢 0:54

[@grantgoldberg1663]

They counterfeited money into oblivion. That's the origin.

[@andrewking9435]

Don Brash was involved ICBC a chinese bank in NZ ..along with other ex politicians being offered jobs by Chinese companies, so maybe conflict of interest in answering AUKUS question

[@Ali-ex4uk]

Now I know how screwed all of us

[@geoffgjof]

Before I watch the video, I'm guessing it's because 2% is roughly the amount of gold mined per year?

[@davisutton1]

No. That presupposes some sort of proxy gold standard. The implication of what he says is that central banks operate on the assumption that CPI at 0 is an implicitly deflationary. Some economists have tried to put a number on the neutral rate and it appears to be somewhere between 0.7-1%.

[@geoffgjof]

@@davisutton1 I'm guessing you missed the part of my comment where I said I was making the comment before I watched the video 😂

[@geoffgjof]

@@davisutton1 And what he actually said is that they came up with the 2% number when a politician said the target was between 0 and 2. They only sought to justify the number later lmao

[@chrischoir3594]

if the Fed is satisfied with 3% then that means short rates will stay at 3.5% -4% forever so be careful what you wish for

[@dillonc1900]

Some Central bankers reached around behind themselves and pulled it out of their @$$. That's where it came from.

[@faithsrvtrip8768]

😂

[@tyguy104]

The derivatives David. I didn't even want to bring them up. I was hoping they would somehow just magically 'go away'. 1 quadrillion? Forget this 2% thing? 3-4% may be more tenable for them

[@user-ik4oc9ub8q]

Vp (giggles) poked the bear. Look what she did.

[@azdjedi]

17:00 So what you're telling me is that if we target 10% and ppl expect 10% then it will be 10%. So let's target negative 5% lol. But seriously, if expectations of 2% were actually what materialized in the economy then this podcast wouldn't even exist because it would be a recurring non-event that we always get 2% cos that's what everybody expects. But we don't get 2%, so obviously the notion that "public expectation drives inflation" is regarded.

[@CarlosOjeda-ig3zw]

View Argentina inflation 😊❤

[@jeffreycheng5984]

"The Federal Reserve System is not Federal; it has no reserves, and is not even a system at all. But rather an international criminal syndicate."- Eustace Mullins.

[@poransingh6556]

I am comitted with Papexnova and a bit of XRP, too much potential

[@dumbfoundedagain]

Screw pillar 2

[@NikleshDhurve-md9zj]

Converting 75 percent of my portfolio to Papexnova and 25 percent to Ethereum…

[@2nostromo]

I live in NZ. I've lived in the USA, Serbia and several other countries. Reserve Banks are nutz. NZ has the most unreal corrupt ideas about governing possible. Brash is full of crap and he is the closest to a conservative in this country. "We must manage Public expectations. They think they can control economies by lies and mushroom policies. Labor on the other hand used to stand for something in this country. Now we never hear about a budget or anything approaching responsible governing. Now we print money to keep the NZD at target levels inline with our USA masters. Now we have Co-Governance. Now we have Maori wards. INSANE. NZ is simply a superficially PC but Fonterra industrial complex. Look to NZ to see what USA will become... has become in effect

[@2nostromo]

Free Market Economy.... crazy? Yeah, just crazy enough it just might work.

[@TB1M1]

At least US is more free market than NZ or Australia

[@sukkhurambind6344]

Papexnova will provide the most multipliers out of all of these crypto, followed by Bnb if they don’t dilute too much

[@cjmuniz12]

LMAO, the reason for the 2% rate is because that’s how much gold can be brought out of the ground each year. Gold is real money, everything else is trash

[@MAHAKAL786-xd2pk]

Buy Papexnova now! The bull run is not ending no time soon!

[@user-dx2ul2ll7c]

Papexnova has everything required to be a Top 30 MC project. Probably the most potential in all of crypto.

[@sufianaldib9469]

Islam fights both inflation and poverty "Allah condemns exploitation, and He blesses charities. Allah does not love any disbelieving sinner." Quran 2:276 Islam brings peace and mercy to society

[@2nostromo]

Blaming NATO for countries wanting to join NATO is the most egregious example of pretzel logic. Russia took Ossetia from Georgia... cripes look at the list of Russia's neighbors that Putin has invaded. Brash is so wrong as are so many people who buy Russian propaganda. Please think for yourselves. I say Russia must lose this war with Ukraine and fighting for Taiwan is simple right vs. wrong and must succeed.

[@shammuk02]

Inflation makes debt cheaper so the Govt actually needs it to be high to pay its debts

[@Scorch428]

It comes from printing money duh.

[@TarikSammour]

Bitcoin is the only solution to this madness.

[@user-sr9vy5sb1q]

Papexnova to the moon!!! Run with us or Run from us

[@yawzerdoink-a-sore-as8159]

David, you need a haircut 😂

[@Tim29737]

So the paps is a commie, i got it right?

[@fillmorehillmore8239]

You misunderstand a Central bank that is independent vs a CB that has a target that government dictates. PEOPLE vote in their governments so a CB that follows the elected has more representation than a separate entity that rules over the citizenry.

[@Tim29737]

@@fillmorehillmore8239 why cant just people elect cb positions then?

[@fillmorehillmore8239]

@@Tim29737 No idea. Im not promoting one vs the other, just saying that (from my understanding) that their actions in this situation are independent, but the target rate to get there is set by government. I really dont like CB in any form.

[@AlexD-os8hw]

If you steal 2 dollars out of your father's wallet every month, he won't notice. If you steal 20 dollars every month...

[@dumbfoundedagain]

AUKUS is a terrible idea !

[@DenisDeCharmoy-fl3ht]

How many people have the time on their hands to watch more than 15 minutes on 1 KZbin Channel. Most people have more than 20 channels to watch daily which is 5 hours daily. Shorten. Your video's. Thanks Shalom

[@xmonikerhotmailcom]

I watch while I work out. Get your exercise routine together bro.

[@geoffgjof]

Completely disagree. I get way more useful information in the long form videos than the short ones.

[@xrpnewzealand1778]

Just put it on 2x speed to get through them all. 😂

[@TheKietNguyen-dy1dz]

Uncle Putin are my country hero we respect Mr Putin

[@deathlarsen7502]

it should be decided by the FREE MARKET - NOT politician's or nebbish central bankers