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Speaker 1

00:00

-♪ ♪ -♪ ♪ We're gonna dive straight in with our main story this week, as it concerns a topic that's been at the forefront of the news over the past year.

Speaker 2

00:11

Tonight, inflation nation. Inflation's grip on American consumers not letting up. It's called Lunch-flation, Booze-flation,

Speaker 3

00:19

Milk-flation. Meat-flation is rocking the nation.

Speaker 4

00:23

Okay, first, a big enthusiastic nope to the word Meat-flation, which sounds less

Speaker 1

00:29

like an economic phenomenon and more like a slang term for

Speaker 4

00:31

a boner. It is honestly hard to think of a

Speaker 1

00:34

more unpleasant portmanteau than meatflation aside from maybe snart, which combines the words sneeze and fart, or Ronzo, which would obviously be the celebrity couple name if Ron Howard ever fucked Gonzo the Muppet. As you undoubtedly know, the U.S. Is experiencing the highest inflation of the past 40 years.

Speaker 1

00:51

And despite initial hopes that it would be temporary, prices are still going up. Over the past year, food is up 10.4 percent, electricity is up 13.7 percent, and gasoline is up 59.9 percent. So to be honest, it's probably a good idea to start making your gasoline at home in the morning instead of getting an expensive cup of it on your way to work. And in some cases, companies have tried to hide inflation by keeping their prices the same, but reducing the size of their products.

Speaker 1

01:20

It's called shrinkflation. And news outlets love to cover this, usually with the help of what seems to be the 1 go-to expert on the topic.

Speaker 5

01:28

There's almost no category of product except eggs, maybe, that hasn't been downsized over the past years.

Speaker 6

01:35

Consumer advocate Ed Dworsky is publisher of mouseprint.org.

Speaker 5

01:39

Crest 3D White went from 4.1 ounces to 3.8 ounces. Apple cinnamon Cheerios went from 20.1 ounces to 19 ounces. It's still called family size.

Speaker 5

01:52

The family must have gotten smaller. Here you've got 2 bottles of Gatorade. And these have just changed in the past few months. This 1 is the old 32 ounce 1.

Speaker 5

02:03

This 1 is 4 ounces less. They said they made it easier to grip. You know, give me a break. Yeah!

Speaker 4

02:12

You tell him, Ed! I love everything about that man, from his website, mouseprint.org, which is somehow not an online literary journal for writers who happen to be rodents, to his electrifying delivery of the word, eggs, to his utter refusal

Speaker 1

02:27

to tolerate even the slightest amount of

Speaker 4

02:29

bullshit from Gatorade. But, whether it's inflation, shrinkflation,

Speaker 1

02:34

or meatflation, rising prices are clearly a problem. Although hourly earnings were up 5.1% over the past year, overall wages fell by 3.6% when adjusted for inflation. And for those on fixed incomes or tight budgets, like students and retirees, inflation is especially difficult to handle and can amount to a life overhaul.

Speaker 7

02:55

Patty Beither just un-retired and got ready for her new part-time job.

Speaker 8

03:01

I thought I was done. I had worked it all out financially that, you know, I could afford it.

Speaker 7

03:04

With prices soaring, her retirement lasted 10 months.

Speaker 8

03:09

These are my fuel bills.

Speaker 7

03:10

In 13 months, it went up

Speaker 1

03:12

$150.

Speaker 8

03:14

Correct. My safety net is just gone. When do

Speaker 7

03:17

you see yourself retiring for real?

Speaker 8

03:19

I don't really see a time when I'll be able to retire again. Or entirely again. Which is sort of annoying and sad.

Speaker 1

03:26

Yeah, that is putting it lightly. It must be so frustrating to retire, think you're done, and then have

Speaker 4

03:32

to go back to work.

Speaker 1

03:34

That is the absolute worst case scenario of retirement other than, of course, moving to Florida. So,

Speaker 4

03:40

given that, it

Speaker 1

03:41

is hurting so many people right now. Tonight, let's examine inflation. What caused it, what we've done to address it so far, and what could happen next.

Speaker 1

03:49

And let's start with how exactly we got here, because you've probably heard a lot of explanations flying around.

Speaker 7

03:55

This is Bidenflation, a 39-year high created by Joe Biden.

Speaker 9

04:00

Make no mistake, inflation is largely the fault of Putin.

Speaker 6

04:02

The supply chain is the catalyst at the end of the day.

Speaker 10

04:05

Inflation is not caused by the bill back better or the bipartisan bill, it's caused by corporate greed.

Speaker 1

04:11

Yeah, there has been a flurry of finger pointing, with many tending to place the blame on whatever they were already mad at. With some Democrats blaming corporate greed, Republicans blaming Joe Biden, Biden blaming Putin, and your dog presumably blaming the vacuum cleaner. And here is the interesting thing.

Speaker 1

04:28

Aside from the dog, they're probably all at least a little bit right. Because the truth is, there is no 1 cause of inflation. At the best of times, it involves a multitude of factors. And the situation that we're in right now has been an unprecedented perfect storm.

Speaker 1

04:44

And to understand that storm, it might actually help to pause for a moment to talk about the mechanics of inflation. Very basically, it happens whenever there is too much demand for too little supply. If people have lots of money to spend, they usually want to buy more stuff. But if there is not enough stuff to go around, then the price of that stuff goes up.

Speaker 1

05:03

I'll give you an example. Let's say that every single person in America suddenly wins the lottery, and everyone now has $40 million to spend. What are they going to do? Well, I would assume that they do what I would, which is immediately buy this $1, 500 Emerald Patina Fountain statue of

Speaker 4

05:19

a frog spreading its unnaturally long legs in a manner that seems offensive, but I'm not exactly sure to whom. Now, by

Speaker 1

05:26

the way, the frog comes in 2 sizes, large and giant. Now, obviously, if you win the lottery, you are springing for the giant 1. But here is the problem.

Speaker 1

05:35

There are currently only 3 of them left in stock. So the statues are likely to get more expensive because everyone suddenly wants 1, as they all have more money to spend, but there are only 3 left. Basically, high demand, not enough supply, and that's how we get frogflation. So, too much money chasing a limited supply of goods can lead to inflation, and some on the right have seized on the too much money part of that idea to suggest that inflation is really just down to 1 thing.

Speaker 6

06:04

When you put 6000000000000 dollars of fiscal stimulus into the economy as President Biden and Democrats did last year, you're gonna end up with big-time inflation. The March stimulus package literally manufactured inflation. This inflation is caused by Democrat policies, didn't just happen, this is the Democrat tax on the middle class.

Speaker 1

06:23

Wow. That is some pretty heavy fire there. Calling something a tax on the middle class is 1 of the best ways to make it look bad, just after calling it a close associate of Prince Andrew. -♪

Speaker 11

06:34

And I'm gonna love you

Speaker 1

06:34

♪ -♪

Speaker 11

06:35

And I'm gonna love you...

Speaker 1

06:35

♪ Blaming Biden's stimulus package has become a common refrain on the right when discussing inflation, and the reality is, there is a kernel of truth to it. Thanks to the pandemic era stimulus bills, people did have more cash on hand. But that is not the only reason.

Speaker 1

06:51

As strange as it sounds, many people saved money during the early days of the pandemic simply because we were all stuck at home. By 1 estimate, households actually accumulated 2 and a half trillion dollars in excess savings during the pandemic. And to the extent that people were spending money, it mostly wasn't on services like flights or hotels or restaurants. Instead, it went to goods like furniture, appliances, or, I don't know, Some steamy watercolor rat erotica.

Speaker 1

07:17

I'm just describing what most people did in 2020. And what's more, the notion that our economy would be fine if not for Biden's stimulus completely ignores what it would have looked like without it. Because it not only protected low-income workers who were in real trouble, it also helped us avoid a COVID-induced financial crisis. And while, with hindsight, most economists would say that we could have made it more targeted and precise so that we didn't increase the money supply any more than we absolutely had to, it is very important to note that according to 1 estimate, without the American Rescue Plan, the economy would have come close to suffering a double-digit recession in the spring of 2021.

Speaker 1

07:57

So, 2 things are likely true here. The government stimulus did contribute to inflation, but it was also a necessary intervention. And the much bigger point is, inflation clearly isn't just about the stimulus at all. After all, it's not just a problem here in the U.S.

Speaker 1

08:16

Britain and Germany have seen inflation rates hit 4 decade highs, and in 7 Eastern European nations, it's now expected to surge past double digits. And in Japan, it's had particularly dramatic consequences.

Speaker 12

08:29

We're at an aquarium in Hakone.

Speaker 13

08:31

The effects of inflation can be felt here too. With the rising price of feed, they've chosen to use the cheaper mackerel. How are the penguins reacting to the new feed?

Speaker 13

08:50

She tries to coax it to eat. The penguin doesn't like it.

Speaker 4

08:59

No! No it does not and I do not blame it! I love absolutely everything about that. My new favorite genre of news segment is now footage of what appears to be a large flightless bird being a massive bitch, which, now that I say

Speaker 1

09:12

it out loud, would be a pretty accurate title for this show. But, also remember, demand is only 1 side of this equation. The other side is supply.

Speaker 1

09:23

And to quote my therapist, let's come back to that frog spreading its legs statue. Because in that scenario where everyone won the lottery, If there happened to be enough frog statues for everyone to buy, then there wouldn't be any imbalance between supply and demand, and prices would remain stable. But remember, there are only 3 giant statues left in stock, and if for whatever reason, they can't make any more, the price of the remaining statues will then go up. Especially because there aren't actually 3 of them left anymore, because I have 1,

Speaker 4

09:52

and it's right over here.

Speaker 14

09:54

Look at it! Look at my beautiful frog statue! And crucially, Crucially, what that

Speaker 4

10:01

means is, there are now only 2 of the frog statues left. Except to be honest, there aren't 2, because I have another 1 as well, that is right over there.

Speaker 14

10:11

Look at my second frog statue!

Speaker 4

10:14

What an absolutely perfect pair! And what that means is, that the last remaining frog statue is gonna be worth an absolute fortune, which to be honest, is very good news for me, because I did get that 1 as well. Here it is!

Speaker 4

10:27

I'm rich!

Speaker 14

10:29

I've got all the frogs! I've cornered the frog statue market! I am good at business!

Speaker 14

10:36

But look...

Speaker 1

10:38

The larger macroeconomic point that I'm making is, demand is certainly a factor, but a smaller supply also leads to inflation. And generally speaking, we've had diminished and disrupted supplies of a lot of consumer goods, primarily because, thanks to COVID, factories overseas have been shut or have slowed down considerably. Take, for instance, bicycles.

Speaker 1

10:59

There has been a massive bike shortage over the last couple of years, thanks in large part to lockdowns and slowdowns disrupting bike production in China, where roughly 90 percent of all bikes sold in the U.S. Are produced. Meanwhile, demand for bikes soared as shoppers tried to stay active during lockdowns, meaning that just a few months into the pandemic, we were already seeing stories like this.

Speaker 2

11:21

Bike shops across the country now seeing skyrocketing demand and supplies dwindling. In Albuquerque, New Mexico...

Speaker 9

11:28

This is actually the only 1 we have right at the moment.

Speaker 2

11:31

And in New York City... Have you ever seen a bike shortage like this before? No.

Speaker 15

11:35

Never. I'm selling way more pink and purple to guys, because they're just like, whatever, it doesn't matter what color it is, that's... It is what it is, It's a bike.

Speaker 1

11:46

It's true. The bike shortage even broke down gender stereotypes. But interestingly, interestingly, while pink and purple bikes attracted a new male demographic, penny farthing bikes maintained their traditional customer base, fancy mustachioed perverts.

Speaker 4

12:02

All of which helps explain why,

Speaker 1

12:03

last year, the average retail price of bike products was up 43% compared to 2019, which means essentially 1 thing, if you are the sort of person who stayed active and exercised during lockdown, inflation is your fault, and you're a terrible, terrible person. The point is, inflation truly was a perfect storm going into the year, and it seems like everything that's happened since then has only made it worse. When Biden said inflation is largely the fault of Putin.

Speaker 1

12:33

That is clearly not true. Inflation was happening before Putin even invaded Ukraine, so that's just not how time works. What is true, though, is that Putin definitely exacerbated the problem. The invasion of Ukraine greatly impacted food and fuel prices as the world cut off its oil purchases from Russia, driving gas prices, which were already rising, up to outrageous levels, perhaps best summed up by this guy.

Speaker 3

12:58

Bro, I just got a brand new fu... I just got a new car, my first car. Now I see what you motherfuckers are talking about with these

Speaker 16

13:06

gas prices.

Speaker 3

13:07

My shit was on empty. I put 20 bucks in the fucking... In the fucking tank.

Speaker 17

13:12

Look at this shit. What the fuck?

Speaker 3

13:16

This is what? 20 fucking dollars gets me? Are you fucking kidding me?!

Speaker 4

13:22

Yeah! If I had to bet, I'd say 80% of a gas station employee's job right now is to talk people down from exactly this situation. The other 20% is, as always, tracking down some of the bluest drinks you've ever seen. Now, is it a good idea to sell those in the same store where you sell antifreeze?

Speaker 4

13:40

Not for

Speaker 1

13:40

me to say. So, Putin invading Ukraine didn't start this inflationary cycle, but it is making it worse. And the same can be said of corporate greed.

Speaker 1

13:50

It is absolutely true that some companies are taking advantage of this environment to drive up prices, and they're getting record profits in return, and that is infuriating. But, most economists will tell you, that's not what caused inflation in the first place. After all, it's not like corporations only just got greedy in the last 2 years. Companies will shamelessly profiteer the exact same way that a dog will make an absolute meal out of

Speaker 4

14:15

its own ball sack. If left to its own devices, that's unfortunately just what it's going to do.

Speaker 1

14:21

So, to recap, rising prices are due to a ton of factors. A pandemic, a stimulus, change spending patterns, supply chain issues, the war in Ukraine, to name just a few, and anyone loudly saying that 1 thing is the cause of inflation is either lying, or has absolutely no idea what they're talking about. And the fact is, whichever combination of things got us into this mess, The entity that many are looking to get us out of it is the Federal Reserve.

Speaker 1

14:49

1 of its key duties is to keep an eye out for things that can destabilize the economy, like inflation, and control it by raising and lowering interest rates. Very basically, the Fed could increase how much it costs for banks to borrow money, a cost that they then pass along to businesses and consumers through higher rates on things like mortgages and credit cards. And the higher the interest rates, the less inclined people and businesses will be to borrow, and the more inclined they'll be to save. Essentially, the Fed could indirectly influence how much people are spending.

Speaker 1

15:20

So, when it comes to the demand side of the economy, they have some real power here. And the fact is, in this current crisis, it did arguably take too long for the Fed to raise interest rates. That's something that its chairman, Jerome Powell, basically admitted at a congressional hearing in March. Just listen to him explain that the Fed initially saw early signs of inflation as being due to a temporary supply shock that would simply resolve itself.

Speaker 15

15:45

What the textbook says is, the shock's gonna come and it's gonna go, and you shouldn't react to it. Hindsight says we should have moved earlier, and that that turned out to be wrong. Not maybe conceptually wrong, but it's just taking so much longer for the supply side to heal than we thought.

Speaker 1

16:00

Yeah, he's right. The standard textbook of economics says that if there is a supply shock, you let it resolve itself organically. Unfortunately, and in fairness to the Fed, the pandemic was totally unprecedented, so the standard textbook just didn't apply.

Speaker 1

16:14

In fact, The

Speaker 4

16:15

only textbook applicable to this situation was, oh, fuck, fuck, fuck, the whole world shut down. What do we do? Oh, God, oh, fuck, fuck, fuck.

Speaker 1

16:22

And it is not like the Fed was alone in calling this wrong. Most economists thought inflation would go away on its own. And some of the loudest voices on Wall Street were arguing against the Fed raising interest rates because they, too, thought that inflation would be transitory.

Speaker 1

16:36

For instance, here is Jim Cramer. The answer to the question, what if a garbage can full of cocaine and business school pamphlets wished to be a real boy? Making that very argument in November of last year.

Speaker 18

16:47

The bottom line, I don't think Powell needs to slam the brakes on the economy. Despite what you hear from the inflation nieces and the media, the weight of the evidence is finally going Powell's way. Team Transitory is going to win!

Speaker 18

17:01

I say stop freaking about inflation.

Speaker 1

17:03

Okay, setting aside the fact that he's speaking with intensity level there, best described as Patti LuPone admonishing a rude audience member, it's pretty clear that this clip, much like Jim Cramer himself, has not aged

Speaker 4

17:15

very well, because here he

Speaker 1

17:16

was just 6 months later doing a full 180 with a very different tone.

Speaker 19

17:21

I think the pal may not understand. We gotta break this, we gotta break it now, because this was the week where you realize that it is just inflamed, and it is not going away. And I-I was, I was just kind of just...

Speaker 19

17:36

I-I... Look, I was shocked. I just didn't know that it was

Speaker 16

17:39

as bad as it is. It's in every aisle.

Speaker 20

17:42

The inflation's in every aisle.

Speaker 4

17:44

Wow! That was a pretty dramatic turnaround. He went from loudly unconcerned about rising prices to full-blown inflationista in a matter of months. And quick question, what exactly is going on with this expression right here?

Speaker 11

17:56

That is

Speaker 1

17:56

not the face you make when you're concerned about inflation. That's the face you make when you're watching a giraffe give birth. The fact is, a lot of smart people, and Jim Cramer, read this situation wrong.

Speaker 1

18:08

And there isn't really a roadmap for what to do next. As 1 Wall Street Journal columnist has said, economic models that worked for decades broke down during the pandemic, and alternatives have yet to emerge. Now, 1 thing that would really help is if we knew the extent to which this is a supply or a demand problem. If it's more about too much money or not enough stuff.

Speaker 1

18:29

Because if it is too much money, the Fed can impact that pretty easily. What they'd want to do is raise interest rates significantly enough to curb spending and slow growth, but not so aggressively that it would then trigger a painful recession. But if it's about not enough stuff instead, If the major issues are things like supply chain disruptions, the effect the Fed can have is drastically reduced because the Fed can't stop the war in Ukraine or open factories in China that are closed due to COVID. I suppose Jerome Powell could lead an army of economists into Luhansk, But I'm not sure anyone wants to see that, and historically, that hasn't been the Fed's role.

Speaker 1

19:06

So, the question of whether inflation is caused more by supply or demand, basically determines how much influence the Fed has to improve things. Unfortunately, even economists don't really agree on which is the bigger driver here. Meaning the truth is, inflation may not be fully within our control right now, which isn't to say that Biden hasn't been out there promising to combat it and showing empathy for Americans who are struggling, sometimes in the weirdest way possible.

Speaker 9

19:34

I want every American to know that I'm taking inflation, very seriously, and it's my top domestic priority. I know you gotta be frustrated. I know.

Speaker 1

19:45

-$1.5

Speaker 11

19:45

BILLION DOLLARS I can taste it.

Speaker 21

19:48

No, no, no, no,

Speaker 17

19:49

no, no, no, no, no, no!

Speaker 14

19:51

Never say that again! That may have

Speaker 4

19:54

been the single grossest thing I've ever heard come out of Joe Biden's mouth, and that is saying a lot, because I've heard the stuff that he used to say in

Speaker 1

20:01

the 1970s. But to be fair, I do get why Biden is taking this approach. Americans view inflation as the top problem facing the U.S.

Speaker 1

20:10

Ahead of the midterm elections, ahead of every other calamity facing the country, including Ezra Miller. And there is an argument for trying to raise public confidence. Once an inflationary cycle starts, simply the expectation of it can keep inflation going. For instance, as the cost of living rises, workers might demand higher wages to cover that, which in turn, raises the cost of labor, leading businesses to charge higher prices, leading to still more inflation.

Speaker 1

20:37

It's basically a vicious cycle. That is why the worse our inflation expectations are, the worse it can get. And that may help explain why the Fed, albeit late, is now taking some big steps. It recently enacted the biggest increase to interest rates since 1994, and it's all but certain that it will raise them again next week.

Speaker 1

20:57

Meanwhile, Jerome Powell has been trying to reassure people that the Fed has things under control, although he has also notably gone from talking about trying to engineer a soft landing for the economy to something slightly different.

Speaker 15

21:09

So, I would say there's a, there's a, you know, there are a number of plausible paths to having a soft or, as I've said, soft-ish landing.

Speaker 4

21:18

Oh! 0, so we're aiming for a soft-ish landing now, are we, Jerome? The thing is, "-ish, " isn't exactly the most reassuring suffix to hear when you're discussing something so serious. There is a huge difference between a surgeon telling you the surgery went well and it went well-ish.

Speaker 1

21:35

And look, I don't know where things are going to go from here exactly. I am not a monetary policy wonk, even though my clothing, glasses, haircut, and general vibe would strongly beg to differ. Although for what it's worth, there have been some small encouraging developments recently, among other things, gas prices have been dropping, and long-term inflation expectations recently ticked down after the Fed's intervention.

Speaker 1

21:59

Most economists Now expect this wave of inflation to pass in a year or 18 months, although that is by no means certain, and importantly, that's an incredibly long time for those suffering the most, because for all of our discussion tonight of supply and demand curves, it is really important to remember that inflation's effects are anything but abstract for those that it's hitting the hardest. Like this woman describing shopping with her kids.

Speaker 2

22:22

They see it, you know, like when I'm in line and I'm like, you know, calculating in my head and looking at my groceries, right? Like, literally, I have my calculator out, like, doing the tax, and, like, what is this gonna come to? And, or I'm putting things back as we get closer in line, you know?

Speaker 2

22:37

You know, and my oldest daughter is, like, looking at me, and then, like, she's putting something back, and, like, it just... It just, you know, breaks your heart a little bit.

Speaker 1

22:46

Of course. Kids shouldn't have to worry about putting food back on the shelves because they can't afford it. Kids should do what they are meant to do at the grocery store, go over to the big bin

Speaker 4

22:55

of rubber balls that are inexplicably sold there, and cause absolute mayhem.

Speaker 1

23:00

So the next year is likely to be very hard for a lot of people, which is why what we should definitely be doing right now is helping them. 1 of the best ways to help low-income families would be to pass a refundable child tax credit for those who need it. And I know that that might be hard, especially in an atmosphere where government spending is being blamed for fueling inflation, but it could be narrowly targeted, while also fully offset with higher taxes on higher earners.

Speaker 1

23:25

We could also expand rental assistance, something that economists say would have a minimal impact on driving inflation further up, while also keeping people in their homes. Look, things are obviously pretty bad right now. Families are struggling, penguins are pissed, and Jim Cramer looks like he just shit himself. And there is still a lot of uncertainty here, but there are also 2 things that we do know for sure.

Speaker 1

23:48

1, it's gonna take a difficult combination of monetary policy, supply chain recovery, and time to bring supply and demand back into alignment. And 2, that if everyone does win the lottery in the future, and does suddenly want some frog statues, I just made the smartest investment

Speaker 4

24:05

of all time. I'm the Warren Buffett of frogs!

Speaker 11

24:15

You