Inflation: Last Week Tonight with John Oliver (HBO)

we're going to 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 tonight inflation nation inflation's grip on american consumers not letting up it's called lunchflation boozeflation milk flation meat flation is rocking the nation okay first a big enthusiastic nope to the word medflation which sounds less like an economic phenomenon more like a slang term for a boner it is honestly hard to think of a more unpleasant portmanteau than meat flakes and aside from maybe snot which combines the words sneeze and fart or ronzo which would obviously be the celebrity couple name if ron howard ever gonzo the muppet as you undoubtedly know the us is experiencing the highest inflation of the past 40 years 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 and gasoline is up 59.9 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 it's called shrink flation and news outlets love to cover this usually with the help of what seems to be the one go-to expert on the topic there's almost no category of product except eggs maybe that hasn't been downsized over the past years consumer advocate ed dwarski is publisher of mouseprint.org chris 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 the family must have gotten smaller here you've got two bottles of gatorade and these have just changed in the past few months this one is the old 32 ounce one this one is four ounces less they said they made it easier to grip you know give me a break yeah you tell them ed i love everything about that man from his website mouseprints.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 to tolerate even the slightest amount of from gatorade but whether it's inflation shrink-flation or meat-flation rising prices are clearly a problem although hourly earnings were up 5.1 percent over the past year overall wages fell by 3.6 percent 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 patty byther just unretired and got ready for her new part-time job i thought i was done i had worked it all out financially that you know i could afford it with prices soaring her retirement lasted 10 months these are my fuel bills in 13 months it went up 150 correct my safety net is just gone when do you see yourself retiring for real 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 yeah that is putting it lightly it must be so frustrating to retire think you're done and then have to go back to work that is the absolute worst case scenario of retirement other than of course moving to florida so given that it 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 and let's start with how exactly we got here because you've probably heard a lot of explanations flying around this is biden inflation a 39-year high created by joe biden make no mistake inflation is largely the fault of putin the supply chain is the catalyst at the end of the day inflation is not caused by the billback better or the bipartisan bill it's caused by corporate greed 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 aside from the dog they're probably all at least a little bit right because the truth is there is no one 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 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 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 dollars to spend what are they going to do well i would assume that they do what i would which is immediately by this 1500 emeralds patina fountain statue of a frog spreading its unnaturally long legs in a manner that seems offensive but i'm not exactly sure to who now by the way the frog comes in two sizes large and giant now obviously if you win the lottery you are springing for the giant one but here is the problem there are currently only three of them left in stock so the statues are likely to get more expensive because everyone suddenly wants one as they all have more money to spend but there are only three left basically high demand not enough supply and that's how we get frog flation 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 one thing when you put six trillion dollars of fiscal stimulus into the economy as president biden and democrats did last year you're going to 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 wow that is some pretty heavy fire there calling something a tax on the middle class is one of the best ways to make it look bad just after calling it a close associate of prince andrew 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 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 one estimate households actually accumulated two 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 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 covert 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 one estimate without the american rescue plan the economy would have come close to suffering a double-digit recession in the spring of 2021 so two 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 britain and germany have seen inflation rates hit four decade highs and in seven eastern european nations it's now expected to surge past double digits and in japan it had particularly dramatic consequences we're at an aquarium in hakone the effects of inflation can be felt here too is that i know with the rising price of feed they've chosen to use the cheaper mackerel how are the penguins reacting to the new feed [Music] she tries to coax it to eat the penguin doesn't like it no no it does not and i do not blame it i love absolutely everything about that my new favorite genre of new segment is now footage of what appears to be a large flightless bird being a massive which now that i say it out loud would be a pretty accurate title for this show but also remember demand is only one side of this equation the other side is supply and to quote my therapist let's come back to that frog spreading its leg 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 three 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 three of them left anymore because i have one and it's right over here look at it look at my beautiful frog statue and crucially crucially what that means is there are now only two of the frog statues left except to be honest there aren't two because i have another one as well that is right over there look at my second frog statue what an absolutely perfect pair and what that means is that the last remaining frog statue is going to be worth an absolute fortune which to be honest is very good news for me because i did get that one as well here it is i'm rich i've got all the frogs i'm calling the frog statue market i am good at business come on the larger macro economic 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 kovid factories overseas have been shot or have slowed down considerably take for instance bicycles there has been a massive bike shortage over the last couple of years thanks in large part to lock downs and slow downs disrupting bike production in china where roughly 90 of all bikes sold in the us 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 bike shops across the country now seeing skyrocketing demand and supplies dwindling in albuquerque new mexico this is actually the only one we have right at the moment and in new york city have you ever seen a bike shortage like this before no never i'm selling way more pink and purple to guys because they're just like whatever doesn't matter what color it is that's it is what it is it's a bike 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 all of which helps explain why last year the average retail price of bike products was up 43 compared to 2019 which means essentially one 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 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 but i just got a brand new phone i just got a new car my first car now i see what you are talking about with these gas prices my was on empty i put 20 bucks in the in the tank look at this what the this is what 20 dollars gets me are you kidding me yeah if i had to bet i'd say 80 percent 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 not for 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 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 two years companies will shamelessly profiteer the exact same way that a dog will make an absolute meal out of its own ball sack if left to its own devices that's unfortunately just what it's going to do 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 one thing is the course 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 to get us out of it is the federal reserve one of its key duty 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 can 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 can indirectly influence how much people are spending 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 what the textbook says is the shock's going to come and it's going to go and and you shouldn't react to it hindsight says we should have moved earlier and and that that turned out to be wrong not not maybe conceptually wrong but it's just taking so much longer for the supply side to heal than we thought 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 in fact the only textbook applicable to this situation was oh the whole world shut down what do we do oh god oh 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 for instance here is jim cramer the answer to the question what if a garbage can full of cocaine and business school pamphlets wish to be a real boy making that very argument in november of last year the bottom line i don't think pal 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 pal's way team transitory is going to win i say stop freaking about inflation okay setting aside the fact that he's speaking with an 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 very well because here he was just six months later doing a full 180 with a very different tone i think that pal may not understand we got to break this we got to break it now because this was the week where you realized that it is just inflamed and it is not going away uh and i i was i was just kind of just i i looked i was shocked i just didn't know that it was as bad as it is it's in every aisle the inflation's in every aisle wow that was a pretty dramatic turnaround he went from loudly unconcerned about rising prices to full-blown inflation easter in a matter of months and quick question what exactly is going on with this expression right here that is 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 and there isn't really a road map for what to do next as one wall street journal columnist has said economic models that worked for decades broke down during the pandemic and alternatives have yet to emerge now one 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 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 that in china that are closed due to covid i suppose jerome powell could lead an army of economist into luhansk but i'm not sure anyone wants to see that and historically that hasn't been the fed's role 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 i mean 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 i want every american to know that i'm taking inflation uh very seriously and it's my top for domestic priority i know you got to be frustrated i know i can taste it no no no no no no no no never say that again that may have 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 the 1970s but but to be fair i do get why biden is taking this approach americans view inflation as the top problem facing the u.s 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 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 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 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 oh also 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 was a huge difference between the surgeon telling you the surgery went well and it went well ish 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 which 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 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 they see it you know like when we're when i'm in line and i'm like you know calculating in my head and looking at my groceries right like like literally like 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 um you know 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 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 of rubber balls that are inexplicably sold there and cause absolute mayhem 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 one 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 we could also expand rental assistance something 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 himself and there is still a lot of uncertainty here but there are there are also two things that we do know for sure one it's going to take a difficult combination of monetary policy supply chain recovery and time to bring supply and demand back into alignment and two that if everyone does win the lottery in the future and does suddenly want some frog statues i just made the smartest investment of all time i'm the warren buffett of frogs you

Channel: LastWeekTonight

Views: 5,399,046

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Id: MBo4GViDxzc

Length: 24min 23sec (1463 seconds)

Published: Sun Jul 24 2022

Reddit Comments

[u/TheBigIdiotSalami]

This might be the best episode. Three long term jokes managed to get wrapped up so nicely in one

[u/homer_3]

It's weird to see pundits talking about shrinkflation like it's something new and hasn't been going on for years and years. It's good that it's getting coverage but they should mention it's been going on for a long time now. Cadbury eggs being maybe the most well known example.

[u/Smellmyhand]

I will never get tired of the multitude of ways this writing team comes up with to compare John to a bird

[u/Driew27]

"I can taste it" hahahahha

[u/MyFriendMaryJ]

I have frog fountains for sale hmu$$

[u/violue]

Those statues were much bigger than I expected.

[u/mirh]

I see John seems to have caught penguinitis.

Anyhow, pretty good video especially in breaking one of the probably biggest taboo in the average joe mind: the world is fucking complex and you can't just finger point the first thought that flies in your brain.

I wouldn't really say economists read the situation too wrong though. It is that the situation is damn different to begin with now, with possibly the biggest war between "interconnected world economies" since half a century.

[u/no_milk_no_sugar]

When you see the frogs, you immediately know how the show ends.

[u/JohnGillnitz]

I miss the show when it is off. Makes my Monday morning.