« The Weeds

Why everything is (still) so expensive


If you are frustrated with how expensive everything feels right now, you’re not alone. Inflation has fallen from last year’s high, but prices haven’t. And while the rise in prices of goods has slowed, people are pretty unhappy with the economy right now. But a lot of experts are saying the economy is in a good spot right now. So why doesn’t it feel that way? Weeds host Jonquilyn Hill discusses with Vox senior correspondent Emily Stewart and Mike Konczal of the Roosevelt Institute. 

Read More:

Inflation in the US isn’t the issue. High prices are here to stay. - Vox 

Sign up for The Big Squeeze newsletter - Vox 

Submit your policy questions!

We want to know what you’re curious about.


Jonquilyn Hill, host

Sofi LaLonde, producer

Cristian Ayala, engineer

A.M. Hall, editorial director of talk podcasts

Want to support The Weeds? Please consider making a donation to Vox: bit.ly/givepodcasts

Learn more about your ad choices. Visit podcastchoices.com/adchoices

This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
It's the weeds, I'm jungle. In hell this weekend, I made my weekly track to the grocery store. I didn't get a time, but one of my friends was coming over for a girl stay and because our boat saving up for some big life expenses, we decided to have a more budget. Frightening, hang just some wine, some cheese, maybe some shock who to reorder tin fish at my place and even though it was a much cheaper option than say bottomless brunch, it wasn't necessarily cheap some faggot pieces, some go cheese and top an odd like a small assorted thing of cured, meets and some groups and look I get that go keys and baggage aren't exactly essentials. I also understand that I live in DC a pretty expensive city, so I get if people dont have a ton of simple
for me and my grocery bill. But the fact of the matter is no matter where you are day to day life just costs more than it used to I'm, not the only one who's noticed. In fact it came up when I had some trouble with my grapes at the I'll check out. My brothers are so expensive waving. It really is. I want to know why everything is so expensive prices, on a lot of minds right now, according to some recent pulling from yahoo financing and ipsos eighty eight percent of registered voters, they pulled say that inflation has been unusually high and most of them have noticed the biggest impact on food prices. The federal reserve has noticed too. In order to cool down inflation. The fed has been raising interest rates right now there,
tween, five point: twenty five and five point: five percent. It may not sound like a lot, but it's the highest. It's been in about twenty two years ago, a soft landing doing just enough to cool down all that spending. We did over the past couple of years and slow inflation down, but not doing so much that it throws us into another assessed
and by experts metrics its working. The economy is bouncing back. In fact, the bureau of labour statistics really stated this week. That shows the consumer price index is down, and it really makes you wonder if things are getting better, why does everything still feel so expensive why our dollar stretching further to help? Explain I called a vocs rapporteur. My name is Emily Stuart and I am a senior correspondent at box. I write about money, but also the federal reserve was seeking a soft landing for this inflation that we ve been having. How has that shaken out? You care really talk about this in the past tense, yet this is ongoing, so it does look like there are signs that we could be headed
wears a soft landing, which basically means the economy slows down. We don't go into a recession. There are definitely signs that the economy will slow down and that we won't go into recession, but I don't. I am always too afraid to predict anything, and I do think you know at this point. It is still a little bit too soon to tell so we'll see what does it mean to stop inflation? What does that? What does that even mean in the first place? So I guess I'll say here: we don't necessarily want to stop inflation right. The federal reserve says we want two percent inflation over the long term, that's kind of how we define a healthy economy. What we want right now is to stop high inflation, so the high rate of inflation and the way that the fed does, that is by raising interest rates, which hopefully slows the economy down, hopefully take some money.
have the economy and and kind of pulls everything off. So the inflation comes back down to where we want it to be. Inflation has lowered it's not at that fed goal of two percent. Yet, but what is the major driver of inflation? as we know it right now. I think it safe to say it's not the interest rates, because those are higher right yeah. So, basically, if you go back to the way at the beginning of the pandemic- and I will clarify this with- there is not entirely agreement on what has ever cause this current inflation. There are certain things you have certain people that are me things, so the stimulus checks that did all of it. So I guess I will offer that qualify air, but if you think back to early in the pandemic, the sort of inflation was that
There are a lot of supply chain. Kinks people were buying a lot of goods which were more expensive. You can think back to when lumber really took off and prices the story kind of tell myself it's like. We were all sitting at home, bored and kind of had the same idea to fix up our houses and buy a bunch of stuff whether it was dumbbells or a new deck and so early, and when inflation started take off. That was a big problem. Then, of course, we also have russia's invasion of ukraine. That has a huge impact on energy prices. Now the story has changed a little bit. So if you think early on the story, around inflation was goods. Now it is more services, it's also shelter. It's also housing. If you look back to September's inflation numbers, the bureau of labor statistics says that at least a big portion That was what shelter and housing. So it is changing and you think is also important to say again. It is slowing down, inflation is slowing down, but it is still higher than where we want it to be. What happens if prices just dropped right now, like
I don't know, I don't know if you're headed to the grocery Store- or you know, looking to buy a house like the idea of everything just magically being cheaper is really appealing, but what impact would waving that kind of magic wand have on the economy? So when you talk to economist about this, but they say is that we don't want deflation, which would mean a broad based drop in prices that would very likely come with a recession that would come with huge amounts of unemployment. One preside. Talk too said: listen like we saw this after the first world war and it was basically a depression, so we don't want deflation and that being said you know, some prices will bounce up and down a little bit, especially handling commodities. Like you think, back to earlier this year, everybody was talking about how eggs were really expensive right. The prices of eggs have come down. There is
Well, there may be the housing market, we could see. Prices come down, but I think by and large we're not going back to twenty nineteen in terms of what things cost. I guess like the good news. There is we're also not going back to twenty nineteen, hopefully in terms of how much workers
we're making at their jobs, these prices are higher than they used to be. And you know the point of raising these interest rates was to get us to spend less money so that prices would stop going up. Have these rising prices had an impact on our spending habits or are we just you know? Are we still buying things like we were in the pandemic? I mean one thing that I think has been interesting to watch over the past few years is that consumers really have kept up spending we're going to get some retail sale numbers this week. I think after we've recorded in a couple of days, but if you look at September retail sales came in strong. You know I kind of joke, sometimes with friends that people are really angry about spending money on their vacation, but then they still spend money on their vacation. The big question is that we don't really know
how long this will last like. There are reasons for concern. Credit card delinquencies are up, we see savings rates going down. Consumers have also started to say that they expect inflation to be higher, which is not good, because that could mean inflation does become higher because it sometimes becomes the expectations game. If I think prices are going to go up, then I ask for a bigger wage bump. Then a business increases prices more, but I think the story by and large is like. Yes, this is painful. Yes, this is really hard. The cost of living in the united states
it's expensive? At the same time, consumers really have been paying in there, and companies have even been saying it. An earnings call saying you know: we've thought the consumers were going to trade down the Heaven they've stuck with us, as we've increased prices. Why aren't we spending less? What is going on with us psychologically like what is wrong with us? Why won't we stop? I mean good question. I think, and I think that is kind of the thing that when you ask the economist about it, it is a little bit puzzling, but I do think to you. People did really save money during the pandemic because you couldn't go out right. Maybe you got a similar track. Maybe you've got unemployment and you're actually making more money with unemployment. People did have money to spend. we also want to spend their money. It is, I think, also important to note that wages have gone up to especially for people on the lower end of the income spectrum, which I think is something we don't think about. Sometimes there doesn't come off in the media. Maybe in me our own social circles, right that it's like a wide and get
These are all things are more expensive or whatever by in view of working hours, yeah. All of a sudden, you had a lot more options to go to different jobs and I'll, send your your wages went from ten dollars an hour to fifteen and that's a big jump, but why people are kind of spending through this? Oh, it's so hard to say, like I think about my own habits and the guy. I am the person that is mad about their plane ticket and saw by that plane ticket, and I think I don't know- maybe the and has it's all just like you know what smoke em. If you got them you only living. you gotta. Have these experiences, you never know what'll happen, you just gotta go for it here. Really I don't know I mean it is. I think the wall street journal had a story. Awhile ask about how expensive, like it was to have fun or whatever, and that's true, but again like how many people went to go, see beyond say or taylor. Swift people are
Like angry, but they're still spending their money, and you talked to some economists who will say you know you look at the polls and everybody in polling society economy's terrible. The economy is terrible and then you look at their own actions and they will say, are people are spending right and you also see people say well, I personally am ok financially, so it like the consumer is weird in the same way. You say the voters are weird toward consumerism. Like I'm a weird consumer too, I'm glad you brought up wages because I would love to know how they compare to the cost of living right now, like you know, it seems like a good thing. Like wages are up All who were in these low wage jobs are now making livable wages and can participate in the economy in this new way, like that seems like a good thing, but it still, it never feels like.
Enough money like how are wages comparing to the cost of living. Have they? Finally, caught up yeah, so this year wage growth did catch up with inflation. So that's good and again, as I mentioned before, and the lower income workers were the ones who really have seen their wages go up significantly. You know you think, back to two thousand twenty two. There was a reason that every restaurant had a help wanted sign out. We sometimes read that as bad, that's good, because that means that restaurants have to compete for workers. We want that to happen. the issue here, I think sometimes psychologically, and who knows how to say. Is that when I get a re, is, I think like it's, because I'm so awesome and my job and I m so good? I don't necessarily tribute that broader economic forces that are also my coming
it doesn't want to lose me, maybe or if a competitor were to want to come, get me they would have to pay me a little bit more so sometimes. What happens? I think with wages is that we really attributed to our own personal qualities, and we really see inflation as something that happens to us, and so the way we experience, those things is is pretty different yeah. It's like I got that raise because I girlboss really hard and not because there was a set of circumstances where my company was making enough money to give me that money exactly exactly and then we just don't quite compute those things the same way. What are you hearing from economists about what needs to happen to make things affordable again? What are some of those ideas? You're hearing about it's really all over the map. At this point I was talking to somebody the think tank the other weekend, and one thing she talked about. A lot was like a public option right where the government provides an option, for let's say higher education, you're talking about free college or for child care. So that is one reason think about that.
A lot of economists, and this is really not my arena. Talk about building more housing. You know that way. If there's more supply, maybe the demand doesn't drive up prices so much. You also get people sometimes we'll talk about price controls. I will not get into that. That's a different episode of the week that we can add it to another day, yeah, so not for this, but you know there are different ideas, and I think you know right now, like the fed's plan is to really focus on inflation. It does look like they may be going to stop hiking interest rates now, but if things started going to have Well again, maybe they'll pick back up. You know there are no easy answers on this, and the economy is constantly changing, and you know one thing that somebody said to me a few months ago is: you know the economy has just been really weird for the past couple of years, and I don't know when it's going to become and weird centre. Maybe it was always weird and we just and think about it- ok keep the academy. Weird is not a bumper sticker, I'm going to be buying anytime soon at next. We get in
Spirits take on why the soft landing feels like its hitting our wallets. It's hard uncertainty is the driving force behind science, but it can also be weapon ized. There are as many fires on the opposite side of all. These knows they prediction. Oil companies have consciously used uncertainty. create doubt around climate change, alternative fuels don't provide a simple answer and they ve done this. In the face of clear mounting evidence, there is not a crisis. This was all part of the plan which oil companies explicitly laid out in a memo. It has since been called
victory my mom because it lays out what victory would mean for this coalition of industry is you're, saying there is actually a memo almost like a literal smoking gun. That says what victory means for us is to confuse the public and make them think that climate change is a real gas beds. That's not this week on unexplainable, a decades long campaign to use the power of science against it self follow unexplainable for new episodes every wednesday and we're back. It's the weeds, I'm John one hell to understand the nuts and bolts of why our economies in the stated then I spoke to my console- he's the director of macro economic analysis at the rosabella institute
it's a nonprofit centre, left think tank. One of the first jobs I had was to help understand what was going on with the great recession, why the recovery was so slow and so scurrying for the economy as a whole, especially people who are graduating into it, and so, when the next recession came up following the covert pandemic. In a position to argue that we wanted to have a robust and fast response and yo. Now we have the a different set of challenges which has from higher than expected inflation, but still of the same argument. I've been really focused on my career for for the last decade, so we know the federal reserve has been attempting a soft landing with raising interest rates. Do the soft landing work, or is it too soon to tell? I think the soft landing has been much we're successful. Then I think people thought it would be a year ago, it's tough to tell what's going to happen in the next six to twelve months. The argument isn't over yet, but there has been substantial progress a year ago,
Inflation was depending what your measuring about eight percent, the headline pc inflation, which is one of inflation across into entire economy was prices were increasing eight percent. Last year, now it's under four percent court we see which exclude some of the more volatile prices and what the federal reserve's really focused on. It tends to be more sustain and more persistent. That was between five and six percent last year. That's very high rate right now. It's under three percent for the last six months, there's some debate, whether it's a little bit closer to two versus three, but it still. a substantial step down in inflation, while the economy has been booming, gdp was four percent growth. Last quarter, unemployment been of below four per cent this entire time. You know a lot of economists said that you couldn't have that you needed the economy to slow down for inflation to even come down a little dead, much less. You know as much as a hat, so a lot will be figured out in the next six to twelve months, but there's been substantial progress that most economists did not believe was possible a year ago. Are you surprised we haven't had a recession
I was very optimistic about the potential for a soft landing, because the way inflation The labour market has evolved over the last two years, that there is a real, historically unique opportunity for inflation to come down much faster than people thought my basin, was inflationary been around for a year and a half and people are taken a quite seriously and all was so obviously connected. Just all the different things that happen. All the big societal dislocate since that recur during the pandemic? The locked down in the reopening that there was this historically unique opportunity for inflation come down. Is it enough for the fed to be happy? I think pretty close by the federal reserve has its own opinions about that, but in either way. It is surprised me. However, it's come down. Are we out of the woods I mean I was graduating from high school in like two thousand Nine, so that our word is very scary to me. Should we still be here?
cautious are worried that a recession could happen. I think the Feds watching both sides with Unemployment has picked up in the last couple months. It was three and a half percent, not full, but closer. Three point. Nine percent you met number does bounce around, but he's hired is increasing slowly this recovery, been so odd and you there's been some a reallocation. Labour markets is people of skilled, their jobs moved into better jobs. No demanded wage increases for working bad job that, as that settled, we imagine the labor market suddenly in a certain way, but yeah. That's definitely something people have been much more cautious about in the last month or two. A year ago, people were talking about the very very hot for market at the point where the powers of many others were. I do know is that too hard and departed? What would that mean? Now you don't hear that so much the more the economy is much more normalized, something that's just it's better than it wasn't twenty. Team, but it is not so off the scales people wonder whether or not that is sustainable and the other hand, There is the other outward re acceleration. Will inflation pick back up
and you know, will no more in january, because firms tend to really do their price resets at the beginning of the year, the large time fur info. Action is in the beginning of the year. Now we talk about seasonally, adjusted values all the time, but there's releases that and the year quirk. I don't think we'll see it this year, but you know we don't know and your consumer spending still remains. Quite robust. People are our spending money, which is great the economy to expand and end your productivity were making things better at making things that are more in line with inflation, press been able to come down, but you know then why she pick up a bit more still, also in many people's minds so make a lot of experts are saying: the economy is actually in a really good spot right now, but honestly, the vibes just they they feel off Why is there that disconnect? So, even though a lot of the numbers that are good at remain quite strong in a lot of the numbers that were were tougher are coming down a lot of people, a lot of voters, lot of consumers, a lot of everyday people,
we'll say that economies on the wrong track. They're, giving the president and the democratic party for negative number on the economy in the performance of the economy know why? Your way is that one of- It has so many plausible answers it's really hard to distinguish among them the question. The bad vibes is actually an international question among pure country, so there's pulling in canada has most people on saying that the country's on the wrong track. We see the same thing in australia and many other countries all have this kind of bad vibes question and all our peer countries have three things in common one as they went the pandemic. They had higher than expected. Inflation. Disinflation story really is an international phenomenon and theirs she'll banks of all pushed interest rates, much higher than they ve been in quite some time and on a surly high in decades. Long comparison, but the much higher than the increases were much more rapid than most people haven't living memory, same thing for the inflation, so any one of those things in all can cause people have you bad vibes,
but the economy, all three together, I think helps explain why this isn't just united states phenomena. That said, I think there are some: u s specific things. We all one point two people are anchored on twenty nineteen prices. They think of that is a natural price line and especially not only are precious higher in general, but the prices are civilly much higher for housing and automobiles and food and things where people are probably very price sensitive and I think a lot about what the number is. I think when people think of lowering inflation, it means that prices will fall and I think, as we can- I'll, see you know when we go to the grocery store or try to buy a car? That is not the case. What happens if those prices do come down? so one hand you have individual prices which may increase from a fall. So, for instance, the price of eggs have fallen quite a bit this year and the price of a television I believe, has fallen as well. That's going to come and go and some prices will fall, maybe even quite dramatically as things were normalized
overall spending and overall inflation, the economy you the fed, wants a pause of inflation rate, because, if believes it's a good hedge against really deep recessions depressions. When you look at periods Prices would fall like in the late nineteenth century, like under a gold standard. You, you had really severe recessions, very severe depressions, not in the way we haven't had since, essentially the great depression. We can argue about threats others in so you wouldn't see overall prices falling. Unless spending had dropped dramatically and you wouldn't have that without a recession and lots of unemployment. Now, relative price changes, if their dramatic as they were doing, really can cause overall inflation to increase, because some things the prices go up in other things, prices don't fall necessarily for a variety of reasons, and so, when you have big twelve chefs, like the shift from services to goods, as we saw in the reopening israel's people got fewer Jim memberships, about more homes in equipment that can have a cascading a fact, but
The re normalization back doesn't cascade back the other, it doesn't cause more prices to fall and so you know we are going to have a higher price level compared to twenty nineteen, though the growth rate is slowing quite dramatically back to some. That's more like the trend we ve had for several decades. The Feds goal is to get two percent inflation and we aren't there yet, but we are getting close sir, and you know, I think it's something people think about every time they look at their credit card. statement- or you know, looking at them housing market and trying to get a mortgage when are interest rates going to come down again are the are: is this where interest rates are to stay for awhile? That's a huge question. It's a question: that's not just relevant for everyday consumers were thinking about auto loans or mortgages,
which for wall street and financial markets were small changes in interest rates, can have huge impacts on winners and losers in the financial markets. So, right now the fed has interest rates around five and a half percent. The federal reserve itself has said that it expects long term interest rates. Once you know, inflation has come down to get closer to two and a half percent. That's almost a three point. Difference, there's a big active debate about when it is appropriate for the fed to start cutting financial markets because they're trading against past our future rates of interest, believe that those cuts will start next summer, given the slow down inflation and given the way that the labour It has slowed not into it's alliance recessionary but slowed enough. That people are starting to worry. There is an argument to moving that forward, but the idea is that, starting sometime next year, the federal start to cut rates now the fed is, that if it says it's gonna cut too much. People might start spending more money and might be inflationary, so there is a kind of had gained them I reserve is playing with businesses
as an and wall street financial markets who might pay very close attention to those kinds of things, but at the end of the day the fed has rates in a very restrictive period. The fed understands interest rates to be too high to where they should be. When things calm down and things are kind of saddle and the federative clearly feels burnt missing how high inflation would get that said, a lot of people are where they're going to can overreact here and wait too long to renin interest rates, and so that's that's. The battle right now is is less about where inflation is right now, because I think it's come down quite substantially, that's more about. When should the fed react next and there the FED sounds more I think the underlying economic data might be. Is the fred being sort of reactionary here they being more pro active when it comes to these interest rates? I don't know it just seems lake at they didn't catch this before it happened and
wait. How are they playing this now that we've gotten to this place that we're in so you can tell the members, the federal reserve who vote on these interest rate decisions feel very burnt because they thought inflation would be much lower and less persistent than it was last year. They thought it would be, you know not peak as high as it didn't go away, much quicker and instead took an additional year for what they thought would happen to. Essentially, happen. In the meantime, there very nervous that there are going to miss the call again and that inflation might reeks tolerate or might not continue to come down at a level that is coming down at their worried. Media economic actively might pick up more and ass. Such you can tell with the speeches of people like chair jay powell- they really are emphasizing that in just a couple months of good news is not enough for them to want to cut interest rates. That said, we're past a couple of months, we're now closer to six months of good news, we're starting to get news. The senate.
Really bad about news, it's a little bit troubling in some ways they haven't fully updated their view of the late. Market and prices in general from early this year and late last year, and so there are a venture need to update to what we ve seen in recent months. I think when they do hopefully they'll the sound a little bit more damage because it is absolutely reasonable to understand why they feel so burnt about everything, that's happened and why there being cautious here, but they can't that forever and they really do risk recession if they continue to much much longer. I wanna get in how come summers are reacting you know and alive the conversations I see online. The response that people have to folks complaining about say the cost of gross freeze or of gas is to budget better to just spin less money. Is this something we can purse
oh finance. Our way out of individually or you know is, is they're kind of nothing we can do at the moment. So it's tough right now because on one hand people feel poorly become if they're still spending a lot of money is a really big gdp growth number last year. That was driven by consumer spending. There are certain point that indicates they feel okay about their own finances, but worse about the economy as a whole, which one can understand as a matter of psychology, but that would still end up in these things. Where is very negative poll numbers, but people still spending quite a bit of money you know in so much as inflation is a societal problem or a problem of market structures in well. It's hard for devon individual response, as opposed to a public response or some sort of Acta response right. So you know you think about you. How much people are spending, but also the issue about. I chains about energy shocks that you went through the economy in the aftermath of
his invasion of ukraine. Those are very big things. It's hard for individuals to manage as people are act into a year. We see people changing their saving. Behaviors are spending behaviors anyone in digital doesn't change a thing, but in as more and more people do it. That has an impact in terms of policies that, in addition to what's going on in the conversation, we're having that, we would think of has been helpful. One is housing. You know. Housing has been a big source of inflation, the amount people pay for a house or for rental units- and you know we obviously are we're still down quite a bit of As you know, he felt quite a bed and there's a lot of different initiatives to try to make housing make there be Housing, that's more affordable and, I think that's a very important element of the inflation problem, but in general it's been about trying to handle this reopening, which you can the by industry should have done through a lot of different mechanisms and between that and patients of the? he's getting back on line you're semiconductors out there either.
Labour market sorry itself out. I think that is brought down inflation. Far more than the federal reserves, interest rate backs. Is it possible to have a car? I mean right now, that's technically good without sort like this concern over the price of things are: how do we have a good economy right now without hitting us in the wallet? I think the inflation we experienced is really the result of a few. Very big societal things that happened during the pandemic in the reopening. It's like very easy to forget dramatic at all was because people to want to put it behind us for good reason, but from everything from just basics, I changed shutting down and then being overwhelmed to complete global report. Jason of our energy markets in the wake of russia's invasion of ukraine, which also has a huge impact on food food prices to just you a lot of
people after the pandemic and with some money in their pockets, wanting top upscale their jobs and use the opportunity to find better jobs, especially as the labor market picked up very rapidly. You know all those are really big changes that aren't going to be happening every year and thus won't be causing the inflation that was part of the mechanism that helped adjust for all those, the vets, and so I think it's very easy to have a strong economy like we have right now with much less inflation. I think there's also an argument for inflation in the range it has been in the last three to six months to be kind of a better normal inflation, be in touch It range between two and three and a half percent. As like a lot of pure countries. Do it the two This information was kind of made up when economists first started thinking through the idea of inflation targeting the late nineteen nineties and for a long period of time many different economists thought that it was way too low of a level and that there's different ways, whether it's
your targeting the level of spending in the economy are targeting inflation higher range. That would give a little more flexibility or not that between recessions and high inflation with the fat feeling very confused about what it should be doing. So I definitely think there's room for the economy. Be at this level of late. markets. This level of growth with much lower inflationary pressures. It just very unfortunate. We had to go through all these things to get there so now we know why things are so expensive, but how do we fix it? That's next, up after the break, support for the weeds comes from not another politics podcast from the hare school of public policy,
trying to keep up with the political news cycle in twenty. Twenty three can sometimes feel like staring into a black hole of information where hundreds of thousands of opinions and facts get sucked in and distorted. We know it's a lot, even if you're listening to the weeds every week, you all know in order for the average person to stay capital, I informed it can help to find and listened sources who are working to cut through the noise and offer perspectives that go beyond the headlines, not another politics, podcast ice do just that it was launched and produce. by the university of Chicago here, a school of public policy, its not opponents and politicians podcast. Rather it takes a certain data approach to analyzing hot button issues? They cover a wide variety of topics, episodes, but here are just a few that you can listen to right now, whether or not ousting incumbents improves their cause the extent to which white americans favour white politicians and what happens when fox news viewers tune in to see an end instead for a month
you, can listen and subscribe to day at harris stuck chicago don t use, slash nap, that's in a p p. It's the weeds, I'm drunk one hell and were back with my council. We ve been talking about inflation and things are better than they used to be. I wanted to If this was an instance of the market correcting itself, I believe that's right now. We have to be careful here because there is a lot of stuff the government helped coordinate. You know the international response to the energy, locations following russia's invasion of ukraine, whether or not it was the and shall engineering around the strategic reserves are there, and I was coordinated with key allies about how to get energy markets going. We know energy can have a really big impact on inflation, both in the price itself, but also as such, an employee
input to everything else. We make in the economy that that government response was real crucial and really important in making sure that the the fall out from that was contained, in particular, in europe where either even more dependent on energy from and and they are even more vulnerable to the dislocations introduced. There there's a whole wide range of government intervention, in government policymaking designed to help stem the brutal impact of those cost increases on energy and that that very state by state. But on that point the very act of an important government response, and I There is a lot of an energy and effort to trying to deal with these supplies in crisis. You there's a period where ear present by consent, a whole placidia law, students after the ports and backs to try to figure out how to make things work faster figure out where the block it is worth trying to figure out how they can move things fast,
and better, and I think there were some signs up that had a real impact and that you know we're now seeing it now where the price of goods, which was a big driver of inflation in two thousand and twenty one in twenty twenty two has been flat for the last six months, just as it had been, for you know a decade or two prior to the pandemic. So I think that one important part of the inflation question was really helped along through active government policy. One fix for this, at least for consumers would be to spend less, and we know that that could possibly lead to a recession is the real fix kind of us as consumers just kind of getting over it and accepting ok, we're not gonna have those twenty nineteen prices. Your coffee is now seven dollars and I'm going to be honest. That makes me upset. It makes me want to boost somebody I don't know who to boo but its upsetting, but like the end of the day I just going to have to accept. If I want to get a coffee, it's gotta be seven dollars amused.
Answer is yes, the price level is not going to come down outside of depression like event that sad as consumers and as citizens, there are certain parts of our lives that we should have access to independent of our ability to pay for it, be it health care solid retirement, education. Those are political challenges and our play a very important role, those, but so do governments and the price of housing and healthcare education might have skyrocketed and food, but there's no reason we have to put up with being in secure for most people now for a lot of elective purchases, be it like a coffee that might be more expensive now, that's as part of the reality of life, but Some people are upset because the price level as a whole has gone up, and that is a political problem with the different political problems, key things in people's lives.
are now price. The way they are not acceptable that we think it is unfair, unjust that people can have access to and that points to a political solution for those specific parts of our lives. The political challenges are really interesting because something that I've been thinking about is you know who is responsible for this. Maybe that's not the correct way to think about it. I mean we do have regulation, but overall we have a free market, but when elections come around, we really do look to our elected officials as risk possible for our economy like who is to blame in all of this Why should we be looking for some responsibility or for some change or for some solutions? It is definitely true. People, credit or discredit the president in particular, and the presents party for how the economy is doing. Sometimes, that's fair. Sometimes that's unfair. You know political party
is often can't do as much as they'd like to do to influence the economy one way or the other. It obviously is very hard to pass things through. Congress presence only has so many powers, you know they're, not a king. They can't just declare things and, as such you know, sometimes they get blamed too much for things that happen. On the other hand, presidents and parties do make choices and the president Biden, the Democrats made a bunch of choices, if they pushed a very strong stimulus to make sure that the economy had a robust recovery. I think- and I may talk to people in finance and people who aren't particularly political about this. I think the general consensus is that you would have most, if not all, of the inflation we still had. Even if President Biden hadn't done that, even if you had a divided congress that didn't do anything twenty twenty one, but we would have had unemployment several percentage points higher, maybe even one two or three percentage points higher would
We have the robust labour movement. We have right now. If unemployment was real, five, six or seven percent we compared appear countries actually have gdp, that's higher than what people projected it to be. In twenty nineteen, without the pandemic, which is pretty wild, the thing about you, gdp is not the same. well things, but it's an important thing and it's a precondition for many other things, be it. You know a strong labor movement, robust investments, robust public investments to address climate change. You know the fact that we have a a strong investing economy. I think, as a result of the choices that this president and party made now again, I think- and I see it, internationally, and I see it. You know in the way inflation has come down which makes me think that it wasn't too much demand that caused it to go up because it came down for the reasons that a lot of people thought it was a supply side. Issue came down that said, voters are blaming. The Democrats.
for inflation right now. If we continue to have another year of disinflation of solid investment, salad, wage growth, you will that change, possibly you're. All these things are just we so unique and so complicated in their own way. We just don't now, but on the fundamentals, the economy, king, through an incredibly traumatic event. our country came through incredibly traumatic event with strong labour market, robust investments and inflation is now was slowing down. So I think that's a remarkable achievement, even though it could have been worse, is like the worst political pitch ever, which is why no one asked me to do political magic. How do you I mean? I know there is no one asked you to do political pitches, bad. You know twenty twenty three is almost over, which means we gotta none of their election year around the quarter. If you
Leave it? How do you see the economy playing a role in politics? You know over the course of the next year. Is that going to be the issue is complicated. It's going to obviously be an important issue. There's also many important issues from democracy to reproductive rights, to our role on the international stage that are soda influence, voters as well. When it comes to the economy, I was going to depend on whether or not we're still going as strong as we're going right now or whether or not the fat reserves tipped us over and over and which is a real possibility, which is most yielding, is not more likely than not, but you still remains. Marginal possibility of your hand if the fed accepts how much equations come down and if it continues to come down, they may lower rates of finance. Markets believe that the lower rates next summer, so you could end up in a period in which rates are coming down to where the consumers might think very positive. about that again, we don't really have exactly the right empirical story about Consumers are so nato
the economy, but the things that might be causing it would probably get better in the next year, whether or not that changes anyone's mind. It's very difficult set, my counsel, thank you. So much For joining us on the weeds, I will be making my coffee at home for the foreseeable future. Briggs Romania and thank you for listening. not only is something that I know I'll have my eye on in the coming months, not only because of my credit card statement, but because of the upcoming elections to stay on top of all of the news had on overdue vocs dot com. And if you want to read more about money and capitalism, you should sign up for Emily's monthly newsletter pulled the big squeeze. The link is in the show knows, that's all for us today. Thank you too Emily Stuart and my counsel for joining me. Our producers so feel alone.
Christian I'll engineered this episode, serenest. So in fact, checked in our attitude. Directors, aim hall and I'm your host jungle and help this pot gets part of arts which doesn't have a pale on help is keep it that way by going to vex dot com, slash, give.
Transcript generated on 2023-12-08.