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Coming up on The Problem...,
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we are gonna be discussing...
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...inflation!
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Is a permanent underclass a necessity
for American capitalism?
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Where the stork drops you
in the United States matters.
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By the way,
that's not actually how babies--
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Oh, forget it. We're not--
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Why can't the Fed intervene
on behalf of the worker
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to cool the profit market?
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I guess that means just giving people
lots of money.
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- Handing people money--
- Don't slippery slope my--
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- I want to understand--
- They've done it for corporations.
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It's gonna be a burner, baby!
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Hey!
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Welcome. Hello, hello.
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My name is Jon Stewart.
Happy St. Patrick's Day.
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Because that's what day it is.
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It is March 17th.
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Personally, I don't like holidays
that focus on race and divide us.
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But let the Irish have their day.
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You couldn't have picked
a better night to be joining us
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because tonight we are gonna
be discussing...
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...inflation!
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And Romanian sex trafficking.
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Inflation.
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Rising prices and its effect
on the overall economy, huh?
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You might wanna wake the kids.
It's gonna be a burner, baby.
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Prices are up about 6% from last year.
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And as usual,
one group is bearing the brunt.
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{\an8}Working families clobbered by inflation.
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Millions of people can't afford groceries,
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toiletries, other goods
necessary to provide for their families.
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{\an8}They're not even going
for medical treatments that they need
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{\an8}because they need the money
to pay the gas bill.
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{\an8}It falls most heavily on working folks,
middle-income, blue-collar,
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{\an8}hard hats, lower-middle-income.
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Grease goblins.
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Mid-lower income, unwashed masses,
lower-lower-middle-income, the Irish.
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That's who it falls on...
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It sucks that inflation makes it harder
for the working class
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because pre-inflation,
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66% of Americans were already
just living paycheck to paycheck.
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With no cushion for a health crisis,
or a job loss,
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or a charcuterie board
for your MILF Manor watch parties.
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But fear not, working class,
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America's most treasured
and politically convenient demographic.
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Chairman of the Federal Reserve
Jerome Powell has heard the call.
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{\an8}It's clearly time to raise interest rates.
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Yes!
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Inflation is bringing pain
to ordinary households.
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So this is an action we must take.
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{\an8}Higher interest rates
will bring down inflation.
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{\an8}They will also bring
some pain to households.
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Hey, you know what might help
your kick in the nuts?
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A nut kick.
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{\an8}Housing prices go higher.
Credit card debt go higher.
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{\an8}We need wages
to come down pretty significantly.
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{\an8}We need fewer jobs.
We need a higher unemployment rate.
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{\an8}We actually want to see and hear
about more layoffs
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{\an8}and lower wages, more firings.
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{\an8}There's gonna need to be increases
in unemployment to contain inflation.
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I gotta say, it takes major balls
to promote unemployment while in...
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Bermuda, Bahama
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Poughkeepsie, Sc...
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So to help people
living paycheck to paycheck,
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the plan is to reduce or take away
said paycheck.
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Which sounds bad
but only because you're dumb.
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{\an8}You would think, as an individual worker,
I wanna be paid more,
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{\an8}but from a macroeconomic sense...
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{\an8}- That a good point, yeah.
- ...a lot of these trends are tough.
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{\an8}It will hold the whole economy back.
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Yeah!
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What are you thinking, you greedy,
1997-Honda-Civic-driving,
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T.J.-Maxx-wearing motherfuckers?
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Remember when the world shut down
and they sent you a check
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so as not to have you die?
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This is your fault.
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{\an8}The root cause of spiking inflation
is the COVID-19 relief package.
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{\an8}We're all paying the price
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{\an8}for having overstimulated this economy
during the pandemic
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{\an8}and putting too much money
into people's pockets.
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{\an8}They're in some of the best
financial shape they've ever been,
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{\an8}and the result is that demand
is outstripping supply a little bit.
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We have to act!
Americans are starting to have enough.
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But not to worry, if inflicting pain
on already suffering workers
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is a little microeconomic for you,
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there's a macroeconomic way to explain it.
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{\an8}He's going to ask everyone
to just take a little bit of medicine now...
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{\an8}- Yeah.
- ...for the good of the country.
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{\an8}It tastes terrible and hurts too.
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{\an8}Very, very bitter indeed.
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{\an8}Is it necessary? Yes.
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{\an8}We have to accept our medicine.
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{\an8}Say, "Listen, we're not gonna dribble out
the medicine. Let's take it now!"
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Yes!
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And we're gonna deliver the medicine
directly into your dick hole.
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Which is, as you know, the only avenue
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to deliver medicine
that eases pain and suffering.
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Open up your dick hole and say...
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I don't actually even think
that would work, would it?
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Mine just wheezes now.
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What's the opposite of a mushroom cloud?
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So, the working class
needs to take its medicine
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for the overall good of the country.
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It's gonna be painful, but it's necessary.
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Hey. What about since CEO pay
has far outpaced worker wage increases,
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should we come up
with a medicine that deals with that?
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{\an8}Some of these people are worth
a lot more than they make.
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{\an8}They're the ones, Judge, to your point,
that are producing the wealth.
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{\an8}These are small countries
these people are managing.
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{\an8}Oh, my God. We should be
praising these people to heaven.
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{\an8}The way I see it,
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{\an8}you need to look at CEOs
like they're great athletes.
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Yeah, I don't think I see it.
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And thus...
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"The Problem with Inflation."
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Our leading economic minds have one,
and only one fix,
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for easing the pain of inflation
for the working people.
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And that fix is
the Fed raises interest rates
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to crush demand and lower wages.
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Because wages rising
must be the principal cause of inflation.
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Is there anything else, though,
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that the chairman of the Fed
wanted to add to that?
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{\an8}I don't think wages
are the principal story
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{\an8}of why prices are going up.
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{\an8}I don't think that.
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Then what the fu--
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So it turns out, the only tool we have
to bring down inflation
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doesn't actually address
the principal reasons inflation went up?
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Just the part that helped you.
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{\an8}The factors impacting inflation globally
are complicated.
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{\an8}Inflation,
we have to remember, was caused by COVID.
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{\an8}We've got supply chain issues.
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{\an8}It's got everything to do with
Russia invading Ukraine...
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{\an8}- ...labor shortage...
- ...drought in California...
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{\an8}- ...tax hikes...
- ...avian flu...
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{\an8}...corporate greed.
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Corporate avian greed.
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Yes, it turns out one of the things
rising much faster than wages is profit.
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US corporate profit margins
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are the biggest they've been
since the 1950s.
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Oil companies,
the highest profits in 115 years.
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Meat packing profits, 300% up.
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Egg profits, 65% up in one year.
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I mean, for God's sake, if it helps,
I'll just start laying eggs.
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Can't be that hard.
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I stand corrected.
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That is not an egg.
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Well, it turns out, demand factors, like
the COVID stimulus and higher savings,
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only account for about 30% of inflation,
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while rising corporate profit margins
are to blame for 40%.
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Look, the pandemic was a crisis.
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So, our government
created stimulus packages
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to do what a government is supposed to do.
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Keep people fed and housed
and stave off a depression.
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And, by the way, it worked.
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How is that bad?
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{\an8}This is called
the Great American Comeback,
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{\an8}the economy roaring back
in the first quarter.
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{\an8}It's almost back to where it was
before the pandemic.
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{\an8}That unemployment rate, 3.4%.
Fifty-three-year low!
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{\an8}Unemployment's low, the job market's hot
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{\an8}and that's gonna be bad
for working people.
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We live in the Upside Down.
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Were any of you alive
in the last crisis in 2008?
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{\an8}The banks got $1.5 trillion...
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{\an8}- Right.
- ...in secret loans.
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The government handed over
$3.3 trillion to the banks.
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The government has already
spent $4.7 trillion
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to survive the financial crisis.
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The Fed loaned or guaranteed
the banks some $7.7 trillion.
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The banks got so much fucking money,
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they were laughing all the way
to themselves.
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We gave trillions of dollars of stimulus
to banks and Wall Street,
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and Wall Street recovered quickly.
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But no one else did in 2008,
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and unemployment stayed high
for nearly a decade, peaking at 10%.
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But since macroeconomists
only learn visually,
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perhaps this will help.
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{\an8}This is the graph of the recovery
from the pandemic.
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{\an8}Look at the V.
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{\an8}We plunged, we got stimulus,
and then the graph shot back up
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{\an8}and the economy recovered.
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{\an8}Here's the graph from 2008.
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{\an8}It sucked when the banks were giving
big fat stimulus checks, and yet,
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only one is being called "America's
worst economic policy in 40 years."
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For the last half-century,
our economic policy
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has just been a flow chart
where, no matter what the input is,
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the answer is
the worker must pay the price.
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Mortgage derivatives tanked our economy?
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Fuck you. Pay me.
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00:11:26,144 --> 00:11:27,563
COVID pandemic?
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Fuck you. Pay me.
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Continuing a long tradition in America
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of politically fetishizing
the working class
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while the subtitles are always the same.
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Fuck you. Pay me.
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Take a look at this.
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{\an8}Prices continue to go up and up and up.
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{\an8}Higher oil prices...
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{\an8}...higher egg prices...
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00:11:50,419 --> 00:11:51,753
{\an8}...higher real estate prices.
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00:11:51,753 --> 00:11:54,840
{\an8}It cost me about $28
at Taco Bell for lunch...
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00:11:54,840 --> 00:11:56,341
{\an8}...and it's just out of control...
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{\an8}...and it's hurting...
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{\an8}...good, hardworking Americans.
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00:11:59,344 --> 00:12:01,305
{\an8}The only way, the only way...
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00:12:01,305 --> 00:12:02,556
{\an8}...to help them is to...
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00:12:02,556 --> 00:12:04,558
{\an8}- ...raise interest rates...
- ...raise unemployment...
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00:12:04,558 --> 00:12:06,810
{\an8}...lower wages and lower retirement savings.
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00:12:06,810 --> 00:12:07,895
{\an8}That's the ticket!
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00:12:07,895 --> 00:12:09,396
{\an8}But we can't touch...
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00:12:09,396 --> 00:12:11,690
{\an8}- ...Wall Street...
- ...corporate profits or...
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00:12:11,690 --> 00:12:12,941
{\an8}...CEO pay.
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00:12:12,941 --> 00:12:15,485
{\an8}It's just too important.
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{\an8}- Punishing...
- ...good, hardworking Americans...
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{\an8}...is the only way.
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{\an8}- You may be...
- ...an essential worker...
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00:12:20,449 --> 00:12:22,034
{\an8}...but in the grand scheme of things...
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{\an8}...you don't matter,
your family doesn't matter,
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00:12:24,119 --> 00:12:25,454
{\an8}your children don't matter.
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00:12:25,454 --> 00:12:28,373
{\an8}But the big banks
and the fat cats on Wall Street...
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{\an8}...they are the only ones who matter,
not you.
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{\an8}- Thank you...
- ...good, hardworking Americans...
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{\an8}- ...for your sacrifice...
- ...for the greater good.
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00:12:35,380 --> 00:12:38,258
{\an8}- It's just economics.
- Do you understand that?
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Of course we understand it.
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All right, look.
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Inflation is obviously a painful
and serious problem for the working class.
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00:12:47,434 --> 00:12:50,854
But it's frustrating that the first
and maybe only solution
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seems to be hurting those
who are already hurting the most.
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{\an8}To help understand why,
we've got Lindsay Owens,
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00:12:55,692 --> 00:12:59,363
{\an8}an economist and executive director
of Groundwork Collaborative,
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00:12:59,363 --> 00:13:02,366
{\an8}a group that advocates
for progressive economic reform.
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00:13:02,366 --> 00:13:06,161
{\an8}John Rizzo, former Senior Spokesperson
for the Department of Treasury
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00:13:06,161 --> 00:13:09,248
{\an8}and currently a senior vice president
at the Clyde Group.
237
00:13:09,248 --> 00:13:12,251
{\an8}And Kenneth Rogoff,
a Professor of Economics at Harvard
238
00:13:12,251 --> 00:13:16,296
{\an8}and former chief economist
at the International Monetary Fund.
239
00:13:16,296 --> 00:13:17,714
Thank you all for joining us.
240
00:13:18,966 --> 00:13:19,967
It's exciting!
241
00:13:21,552 --> 00:13:24,096
We had a pandemic.
242
00:13:24,096 --> 00:13:26,139
It's an unprecedented crisis.
243
00:13:26,139 --> 00:13:29,852
The government stepped in
and provided relief for regular people,
244
00:13:29,852 --> 00:13:31,562
and the country didn't collapse.
245
00:13:32,563 --> 00:13:33,897
Which was the point.
246
00:13:34,565 --> 00:13:38,193
How do we now fix
that terrible mistake we made?
247
00:13:38,193 --> 00:13:40,487
I think we can take a beat
and celebrate the fact
248
00:13:40,487 --> 00:13:43,073
that we didn't repeat
the mistakes of the Great Recession,
249
00:13:43,073 --> 00:13:46,243
where we presided over a jobless recovery.
250
00:13:46,243 --> 00:13:48,787
Americans were out on the street
for years and years.
251
00:13:48,787 --> 00:13:50,163
They lost their homes.
252
00:13:51,123 --> 00:13:52,749
We did things
a little differently this time...
253
00:13:52,749 --> 00:13:54,585
- Right.
- ...during the COVID pandemic.
254
00:13:54,585 --> 00:13:58,046
We put money in people's pockets,
and it worked. We got people back to work.
255
00:13:58,046 --> 00:13:59,548
Apparently too much money.
256
00:13:59,548 --> 00:14:01,592
Oh, right. The fundamental problem
with our economy right now
257
00:14:01,592 --> 00:14:03,177
- is that Americans have it too good.
- Thank you.
258
00:14:03,177 --> 00:14:04,678
Let's move on now.
259
00:14:05,429 --> 00:14:07,431
But, John,
you were at the Treasury Department.
260
00:14:07,431 --> 00:14:09,683
The Fed, don't they have a dual mandate?
261
00:14:09,683 --> 00:14:12,144
Aren't they supposed to
deal with price stabilization
262
00:14:12,144 --> 00:14:14,646
but also deal with full employment?
263
00:14:14,646 --> 00:14:19,067
Why does it seem like they only bring out
the guns for price stabilization?
264
00:14:19,067 --> 00:14:23,614
Well, you know, there was a period of time
when President Obama was president,
265
00:14:23,614 --> 00:14:25,407
- and we didn't--
- When was that?
266
00:14:25,407 --> 00:14:28,911
2009 to, what, 2016?
267
00:14:28,911 --> 00:14:33,832
And there was a period of time where
we didn't have full employment, right?
268
00:14:33,832 --> 00:14:36,293
It wasn't viewed as an emergency
269
00:14:36,293 --> 00:14:40,589
in the same way as we view
increases in inflation as an emergency.
270
00:14:41,089 --> 00:14:42,341
Now, that doesn't mean
271
00:14:42,341 --> 00:14:46,512
that inflation isn't painful
or challenging for working people,
272
00:14:46,512 --> 00:14:50,390
but we do have to be honest that we treat
those two realities differently.
273
00:14:50,390 --> 00:14:53,769
If we don't have full employment,
we don't treat it as an emergency.
274
00:14:53,769 --> 00:14:55,854
When we have inflation, we do.
275
00:14:55,854 --> 00:14:58,440
And we can have an honest discussion
about why that is,
276
00:14:58,440 --> 00:15:01,193
but we should be honest about the fact
that we do treat it differently.
277
00:15:01,193 --> 00:15:06,156
It does seem as though they want us
to forget that 2008 and 2009,
278
00:15:06,156 --> 00:15:07,950
that crisis ever happened.
279
00:15:07,950 --> 00:15:13,163
When the Fed and the federal government
pumped trillions of dollars
280
00:15:13,163 --> 00:15:16,834
into the system on the supply side,
into the banking system.
281
00:15:16,834 --> 00:15:18,335
And now they're telling us
282
00:15:18,335 --> 00:15:23,423
that these stimulus packages that came
to the people were just too irresponsible.
283
00:15:23,423 --> 00:15:25,092
How do you square those?
284
00:15:25,676 --> 00:15:29,805
Well, I think they do
need to worry eventually
285
00:15:29,805 --> 00:15:32,641
to have inflation come down.
286
00:15:32,641 --> 00:15:36,228
They're not, I think,
aiming to have a lot of unemployment.
287
00:15:36,228 --> 00:15:38,313
It's a debate about if you need it or not.
288
00:15:38,313 --> 00:15:42,568
They'd like to have inflation come down
without having that.
289
00:15:42,568 --> 00:15:46,280
And the only tool the Federal Reserve has,
and it's the most powerful tool,
290
00:15:46,280 --> 00:15:47,906
is to raise interest rates.
291
00:15:47,906 --> 00:15:51,869
But, Lindsay, that gets to the point
of who's in the room with the Fed?
292
00:15:51,869 --> 00:15:56,123
Because it doesn't sound like
labor has a voice in any of this.
293
00:15:56,123 --> 00:15:57,916
Yeah,
it's technocrats and multimillionaires.
294
00:15:57,916 --> 00:15:59,877
The people don't have a voice at a Fed.
295
00:15:59,877 --> 00:16:03,297
You can call your congressman if
you're upset about a piece of legislation.
296
00:16:03,297 --> 00:16:07,259
You can say, "Hey, vote no on that,
'cause it's gonna throw me out of work."
297
00:16:07,259 --> 00:16:08,802
You have no recourse at the Fed.
298
00:16:08,802 --> 00:16:11,763
You can't call the Fed up and say,
"Hey, enough with the interest rate hikes.
299
00:16:11,763 --> 00:16:14,224
I'm gonna be out on the street,
if you keep this up."
300
00:16:14,224 --> 00:16:16,476
There's really very little
accountability at the Fed right now.
301
00:16:16,476 --> 00:16:18,270
It's not really a democratic institution.
302
00:16:18,270 --> 00:16:19,563
The last 40 or 50 years,
303
00:16:19,563 --> 00:16:22,774
you can make the case that
we've only done supply-side stimulus,
304
00:16:22,774 --> 00:16:26,195
whether it be big tax cuts
that mostly went to wealthy
305
00:16:26,195 --> 00:16:28,447
or cutting the corporate rate to 20%.
306
00:16:28,447 --> 00:16:32,117
When you stimulate it at the demand level,
giving people checks,
307
00:16:32,618 --> 00:16:36,038
it was really clear
the effect was immediate,
308
00:16:36,038 --> 00:16:38,874
robust and really efficient.
309
00:16:39,458 --> 00:16:43,170
Doesn't that tell us we've been
doing it backwards for 40 years?
310
00:16:43,170 --> 00:16:45,881
{\an8}Well, I'd certainly say it's a good idea
311
00:16:45,881 --> 00:16:48,884
{\an8}to give money to lower-income people
312
00:16:48,884 --> 00:16:51,512
{\an8}and to tax higher-income people more.
313
00:16:51,512 --> 00:16:53,555
That's absolutely a good idea.
314
00:16:53,555 --> 00:16:58,060
If you do it all the time,
you do end up with a lot of inflation.
315
00:16:58,060 --> 00:16:59,686
So there are a lot of countries
in the world
316
00:16:59,686 --> 00:17:02,147
where it just runs out of control
all the time.
317
00:17:02,147 --> 00:17:03,857
We have seen this movie before.
318
00:17:03,857 --> 00:17:08,529
Why do they call it wage inflation,
but they never call it profit inflation?
319
00:17:08,529 --> 00:17:12,406
I mean, the stock market has, what,
doubled or tripled in that time?
320
00:17:12,406 --> 00:17:14,785
That money hasn't come down
to normal people.
321
00:17:14,785 --> 00:17:18,664
Is it just that we're just very
comfortable with that as the status quo?
322
00:17:18,664 --> 00:17:21,750
Yeah.
I think we have to think about the idea
323
00:17:21,750 --> 00:17:24,627
that there's not a perfect economy,
but there is an econ--
324
00:17:24,627 --> 00:17:26,505
- What? Sir?
- Right. Right.
325
00:17:26,505 --> 00:17:31,385
{\an8}But there are a series of choices
that we make, and they have results.
326
00:17:31,385 --> 00:17:34,680
{\an8}And there's a real trade-off
between what's good for capital
327
00:17:34,680 --> 00:17:35,931
{\an8}and what's good for labor.
328
00:17:36,515 --> 00:17:38,517
{\an8}You could argue, over the course of--
329
00:17:38,517 --> 00:17:41,520
And when does
the "what's good for labor" part kick in?
330
00:17:41,520 --> 00:17:44,314
Yeah. I think that's the real difficulty
331
00:17:44,314 --> 00:17:47,734
is that decisions we do make
over and over again
332
00:17:47,734 --> 00:17:50,988
tend to be better for capital
than they are for working people.
333
00:17:50,988 --> 00:17:54,741
When we talk about raising interest rates,
whether that's needed or not,
334
00:17:54,741 --> 00:17:57,202
we know that there are downside impacts.
335
00:17:57,202 --> 00:18:00,247
The downside impacts is that
economic growth is reduced.
336
00:18:00,247 --> 00:18:01,874
People lose their jobs.
337
00:18:01,874 --> 00:18:05,961
Those people who lose their jobs are at
the lower end of the economic spectrum.
338
00:18:05,961 --> 00:18:09,756
So there are a lot of challenges and risks
involved with the decisions we've made.
339
00:18:09,756 --> 00:18:14,219
The catch here is if you don't raise
interest rates when you need to,
340
00:18:14,219 --> 00:18:15,679
then inflation goes up.
341
00:18:15,679 --> 00:18:20,100
And everybody wants higher interest rates
for mortgages and everything,
342
00:18:20,100 --> 00:18:21,935
'cause they want to be compensated
for inflation.
343
00:18:21,935 --> 00:18:23,770
Here's what the workers have suffered:
344
00:18:23,770 --> 00:18:27,608
automation has taken their jobs,
globalization has taken their jobs,
345
00:18:27,608 --> 00:18:29,526
regulations have been removed.
346
00:18:29,526 --> 00:18:32,696
Union power has dissolved.
347
00:18:32,696 --> 00:18:37,326
So, it's been one erosion after another
of their power.
348
00:18:37,910 --> 00:18:40,454
They finally get a little bit of
a foothold,
349
00:18:40,454 --> 00:18:44,499
and immediately the Fed says,
"We gotta put a stop to this."
350
00:18:44,499 --> 00:18:47,044
Yeah. I mean, the inflation hawks--
351
00:18:47,044 --> 00:18:48,545
We may not be giving them enough credit.
352
00:18:48,545 --> 00:18:50,547
{\an8}I think the viewpoint
is much more dangerous
353
00:18:50,547 --> 00:18:53,175
{\an8}than just their cures for inflation, right?
354
00:18:53,175 --> 00:18:55,594
{\an8}Their diagnosis is also a problem.
355
00:18:55,594 --> 00:18:58,597
The prescription is obliterate
the labor market. We don't want that.
356
00:18:58,597 --> 00:19:02,017
But the diagnosis is
Americans have it too well off,
357
00:19:02,017 --> 00:19:04,102
- and that means nothing else.
- Right.
358
00:19:04,102 --> 00:19:06,230
And that's driving--
And then they're gonna want more,
359
00:19:06,230 --> 00:19:07,397
- and we can't have that.
- Right.
360
00:19:07,397 --> 00:19:08,941
And these are the same folks
361
00:19:08,941 --> 00:19:12,069
who are gonna oppose
you know, student debt cancellation,
362
00:19:12,069 --> 00:19:14,780
because we can't put another dollar
in Americans' pockets
363
00:19:14,780 --> 00:19:16,698
because "Oh, no,
that will increase inflation."
364
00:19:16,698 --> 00:19:20,786
Is a permanent underclass
a necessity for American capitalism?
365
00:19:20,786 --> 00:19:22,871
We-- It didn't used to be.
366
00:19:22,871 --> 00:19:25,624
I mean,
there used to be a lot of rotation.
367
00:19:25,624 --> 00:19:27,876
Well, we were able to change that,
weren't we?
368
00:19:28,460 --> 00:19:29,336
No, I mean, that's--
369
00:19:29,336 --> 00:19:33,215
That is the single biggest problem
with our system at the moment.
370
00:19:33,215 --> 00:19:34,758
There's not the mobility,
371
00:19:34,758 --> 00:19:38,720
the Horatio Alger story,
if that means anything to this generation.
372
00:19:38,720 --> 00:19:39,805
You know, it used to be--
373
00:19:39,805 --> 00:19:41,807
Doesn't even mean anything
to my generation.
374
00:19:41,807 --> 00:19:43,350
No, it used to be,
375
00:19:43,350 --> 00:19:45,394
you know, you were born in poverty,
376
00:19:45,394 --> 00:19:47,312
and you'd work hard,
and you're enterprising,
377
00:19:47,312 --> 00:19:48,522
and you pull yourself up,
378
00:19:48,522 --> 00:19:51,900
and that's possible,
but it gets harder and harder.
379
00:19:51,900 --> 00:19:54,278
And that's part of the reason
that Americans were tolerating
380
00:19:54,278 --> 00:19:56,780
such high levels of inequality
381
00:19:56,780 --> 00:19:59,032
and such high levels of
persistent inequality--
382
00:19:59,032 --> 00:20:01,743
was the idea, "Okay, fine,
we're okay with a few rich people,
383
00:20:01,743 --> 00:20:05,414
as long as everybody
has their shot at making it."
384
00:20:05,414 --> 00:20:08,125
But over the last few decades
it's become really clear
385
00:20:08,125 --> 00:20:12,254
that economic opportunity in this country
is highly concentrated.
386
00:20:12,254 --> 00:20:15,090
I mean, where the stork drops you
in the United States matters,
387
00:20:15,090 --> 00:20:18,719
what race, you know, you are,
where you're born.
388
00:20:18,719 --> 00:20:20,554
By the way, a brilliant economist,
389
00:20:20,554 --> 00:20:23,182
but that's not actually how babies--
Oh, forget it.
390
00:20:23,182 --> 00:20:24,266
We're not--
391
00:20:25,601 --> 00:20:28,979
Do we have a free market economy?
Is it a free market economy?
392
00:20:28,979 --> 00:20:31,857
Well, I think,
from a political perspective,
393
00:20:31,857 --> 00:20:33,567
it's free in a sense.
394
00:20:33,567 --> 00:20:36,153
But, no question, over the dozen years
395
00:20:36,153 --> 00:20:38,697
that I spent serving
as a staff member of Congress,
396
00:20:38,697 --> 00:20:42,826
when interests need something,
they tend to get it. And--
397
00:20:42,826 --> 00:20:44,536
- Moneyed interests.
- Sure.
398
00:20:44,536 --> 00:20:46,997
And those needs that they have
399
00:20:46,997 --> 00:20:50,334
sometimes pervert
what you might call a free market.
400
00:20:50,334 --> 00:20:52,294
This actually brings up
a really interesting point,
401
00:20:52,294 --> 00:20:53,879
and, Lindsay,
I'll let you end on this.
402
00:20:53,879 --> 00:20:55,964
The thought I was having
as you were talking was,
403
00:20:55,964 --> 00:20:59,134
well, those are political solutions,
and our political system is broken.
404
00:20:59,134 --> 00:21:03,639
And, so, I think it's why I find
the Fed's actions so frustrating.
405
00:21:03,639 --> 00:21:06,058
It's the one government institution
406
00:21:06,058 --> 00:21:11,522
unencumbered by that analog system
of a broken democracy,
407
00:21:11,522 --> 00:21:16,068
and to see them always act
with that agility and that decisiveness
408
00:21:16,068 --> 00:21:20,030
on the side of a more corporate interest
is maybe the most frustrating part.
409
00:21:20,030 --> 00:21:21,865
Yeah. I mean, look,
they can act with agility,
410
00:21:21,865 --> 00:21:24,159
but they can't actually
solve the problem at hand, right?
411
00:21:24,159 --> 00:21:26,620
And so the question is,
what can we do instead?
412
00:21:26,620 --> 00:21:30,165
And there's an answer to that.
We can build a different kind of economy.
413
00:21:30,165 --> 00:21:31,250
What?
414
00:21:32,501 --> 00:21:34,628
There's no such thing as a free market.
We make markets.
415
00:21:34,628 --> 00:21:37,673
Humans, nation states, governments.
416
00:21:37,673 --> 00:21:41,301
We make decisions, the rules
that the markets play by, that's us.
417
00:21:41,301 --> 00:21:44,847
That's our responsibility.
And we can create a different market.
418
00:21:44,847 --> 00:21:47,099
We can create a resilient economy.
419
00:21:47,099 --> 00:21:49,977
I'm sorry, rainbows are shooting out
of your mouth right now.
420
00:21:50,644 --> 00:21:51,895
And I am lovin' it!
421
00:21:53,230 --> 00:21:55,232
First of all, thank you all
very much for joining us.
422
00:21:55,232 --> 00:21:57,234
Second of all, I don't know what it is,
423
00:21:57,234 --> 00:21:59,820
but economists have
the most soothing way of talking
424
00:21:59,820 --> 00:22:01,154
I've ever heard in my life.
425
00:22:01,864 --> 00:22:03,073
But thank you all for joining us.
426
00:22:03,073 --> 00:22:05,242
Lindsay Owens, John Rizzo, Kenneth Rogoff.
427
00:22:05,242 --> 00:22:06,410
Thanks for joining us.
428
00:22:09,663 --> 00:22:10,706
So...
429
00:22:11,290 --> 00:22:16,587
Why? Why are we so focused
on raising interest rates,
430
00:22:16,587 --> 00:22:20,757
basically employing the tool
of unemployment, to address inflation?
431
00:22:20,757 --> 00:22:22,968
For more perspective on the fight
against inflation,
432
00:22:22,968 --> 00:22:29,016
I sat down with former Treasury Secretary,
and interest rate hype man, Larry Summers.
433
00:22:29,766 --> 00:22:32,227
- Larry Summers, thank you for joining us.
- Good to be with you, Jon.
434
00:22:32,227 --> 00:22:33,937
Inflation.
435
00:22:33,937 --> 00:22:37,858
There are so many different elements
that contribute to inflation.
436
00:22:37,858 --> 00:22:39,526
{\an8}It's very complicated.
437
00:22:39,526 --> 00:22:42,821
{\an8}Well, ultimately,
inflation actually isn't that complicated.
438
00:22:43,363 --> 00:22:47,242
When you have rising demand
and only so much supply,
439
00:22:47,826 --> 00:22:49,036
prices keep going up.
440
00:22:49,661 --> 00:22:54,833
And that's what basically happened to us,
as we had massive stimulus
441
00:22:54,833 --> 00:22:58,212
and an economy
that could only produce so much.
442
00:22:58,212 --> 00:23:00,380
We had huge levels of demand,
443
00:23:00,380 --> 00:23:05,552
and those huge levels of demand kept
pushing up prices and pushing up wages.
444
00:23:05,552 --> 00:23:07,179
But ultimately it was
445
00:23:07,179 --> 00:23:11,183
you put too much water in the bathtub,
the bathtub overflows.
446
00:23:11,183 --> 00:23:15,354
You put too much demand into the economy
447
00:23:15,354 --> 00:23:18,565
and you get high and rising prices.
448
00:23:18,565 --> 00:23:21,777
But the San Francisco Fed says that is--
449
00:23:21,777 --> 00:23:25,906
demand is maybe 30% to 35%
of the inflation.
450
00:23:25,906 --> 00:23:28,825
Wages are really around 20%
of the inflation.
451
00:23:28,825 --> 00:23:31,954
There's a huge
corporate profit aspect to it.
452
00:23:31,954 --> 00:23:34,164
There's a huge supply chain aspect to it.
453
00:23:34,164 --> 00:23:36,291
But our method for controlling it
454
00:23:36,291 --> 00:23:41,088
seems really much more focused
on wages and employment.
455
00:23:41,088 --> 00:23:43,549
There's certain sicknesses you can have
456
00:23:44,091 --> 00:23:47,094
where there's a drug,
and it has side effects.
457
00:23:47,094 --> 00:23:49,805
And everybody hates the side effects,
458
00:23:49,805 --> 00:23:53,684
and no doctor wants their patient
to suffer the side effects.
459
00:23:53,684 --> 00:23:56,186
But if you don't address the sickness,
460
00:23:56,186 --> 00:23:59,189
you're gonna have a bigger problem
down the road.
461
00:23:59,189 --> 00:24:02,943
But the stock market assets
have gone up 150%.
462
00:24:03,443 --> 00:24:06,363
CEO pay has gone up 1,500%.
463
00:24:06,363 --> 00:24:08,740
Workers' wages haven't gone up at all.
464
00:24:08,740 --> 00:24:10,701
I think you're misdiagnosing the sickness.
465
00:24:10,701 --> 00:24:14,413
First, Jon, inequality's a terrible thing.
466
00:24:14,413 --> 00:24:17,249
The most serious problem
the American economy has
467
00:24:17,833 --> 00:24:22,462
has been the cleavages
between those like you and me,
468
00:24:22,462 --> 00:24:24,131
who are very fortunate--
469
00:24:24,131 --> 00:24:29,219
That's why we need a strategy
of strengthening labor power
470
00:24:29,219 --> 00:24:31,096
in the economy.
471
00:24:31,096 --> 00:24:33,515
The question, though, is
472
00:24:33,515 --> 00:24:37,769
is it an issue that somebody whose control
473
00:24:37,769 --> 00:24:42,566
is over setting interest rates
and printing money can do much about?
474
00:24:43,108 --> 00:24:44,526
- Now you could say...
- Boom!
475
00:24:44,526 --> 00:24:50,157
...that they shouldn't have responded
to the 2009 recession...
476
00:24:50,157 --> 00:24:52,409
- Boom again.
- ...by cutting money.
477
00:24:52,409 --> 00:24:53,702
- Yes.
- By cutting interest rates.
478
00:24:53,702 --> 00:24:56,163
- You could say that.
- Yes, you could.
479
00:24:56,163 --> 00:24:57,581
But do you really think--
480
00:24:57,581 --> 00:25:00,792
And certainly that wasn't what
progressives were saying at that time--
481
00:25:00,792 --> 00:25:02,878
- It doesn't matter.
- At that time,
482
00:25:02,878 --> 00:25:06,882
progressives were saying,
"We need lower interest rates
483
00:25:06,882 --> 00:25:10,135
so people can borrow money
to buy houses and put people to work."
484
00:25:10,135 --> 00:25:12,179
- But they were stimulating it...
- "We need lower interest rates
485
00:25:12,179 --> 00:25:13,805
- for car loans."
- ...at the corporate level,
486
00:25:13,805 --> 00:25:16,391
where they just put the money
in the hands of the bankers
487
00:25:16,391 --> 00:25:18,143
and say, "You decide."
488
00:25:18,143 --> 00:25:21,980
This pandemic was the first time
the government, in my opinion,
489
00:25:21,980 --> 00:25:24,691
did the thing
that they're supposed to do in a crisis.
490
00:25:24,691 --> 00:25:27,027
When you look at the stimulus payments
that went out,
491
00:25:27,528 --> 00:25:31,865
you know, 70% of it
was being used for rent and food.
492
00:25:31,865 --> 00:25:35,369
And if you look at the recovery
in the pandemic
493
00:25:35,369 --> 00:25:37,496
versus the recovery from 2008,
494
00:25:37,496 --> 00:25:41,500
when you stimulated the economy
at the demand level,
495
00:25:41,500 --> 00:25:45,212
jobs had plunged in the pandemic
and then they shot back up.
496
00:25:45,712 --> 00:25:51,218
The recovery in 2009 was painstaking,
but the stock market did great.
497
00:25:51,218 --> 00:25:54,972
So, our fiscal policy
and our monetary policy
498
00:25:54,972 --> 00:25:57,891
has always been on the side
of corporate easing.
499
00:25:57,891 --> 00:26:00,352
- Just so we're clear, if--
- Yes.
500
00:26:00,352 --> 00:26:03,021
If you talk to African American voters,
501
00:26:03,021 --> 00:26:05,190
if you talk to Hispanic voters,
502
00:26:05,190 --> 00:26:07,651
talk to voters who don't have
college degrees,
503
00:26:07,651 --> 00:26:10,779
they regard the country's biggest problem
504
00:26:10,779 --> 00:26:14,616
as having to do with inflation.
505
00:26:14,616 --> 00:26:16,910
So while you may see this
506
00:26:16,910 --> 00:26:20,873
as having been tremendously successful,
507
00:26:21,415 --> 00:26:25,794
our fellow Americans who don't live
as comfortably as you and I do
508
00:26:25,794 --> 00:26:29,423
have a lot of questions, Jon,
about what's happened.
509
00:26:29,423 --> 00:26:32,426
And it's not hard to understand
why they have a lot of questions...
510
00:26:32,426 --> 00:26:34,761
- Well, then--
- ...in light of what's happened...
511
00:26:34,761 --> 00:26:36,930
- Right.
- ...to their purchasing power.
512
00:26:36,930 --> 00:26:38,682
But you're suggesting
their purchasing power--
513
00:26:38,682 --> 00:26:41,018
- We took a good idea and overdid it...
- I disagree.
514
00:26:41,018 --> 00:26:45,147
...by providing for too much inflation.
515
00:26:45,147 --> 00:26:50,694
But what you're not addressing is
not all of inflation was stimulus.
516
00:26:50,694 --> 00:26:54,281
The tools that we have, though,
are basically saying to somebody,
517
00:26:54,823 --> 00:26:58,911
"Everyone's paying more for gas
and groceries, and that's really hard,
518
00:26:58,911 --> 00:27:00,370
so here's what we're gonna do.
519
00:27:00,370 --> 00:27:03,540
We're gonna throw ten million of them
out of work,
520
00:27:03,540 --> 00:27:06,126
so that we all don't have to
share that burden."
521
00:27:06,126 --> 00:27:09,796
Why aren't we attacking
corporate profit in any way?
522
00:27:09,796 --> 00:27:14,343
Because that's been estimated to be
30% of inflation, 40% of inflation.
523
00:27:14,343 --> 00:27:17,888
I don't think it's a tenable view
524
00:27:17,888 --> 00:27:21,642
that all of a sudden
corporations became greedy.
525
00:27:21,642 --> 00:27:24,102
Of course there's monopolies
in the economy, Jon,
526
00:27:24,102 --> 00:27:26,104
and we should be for
much more aggressive--
527
00:27:26,104 --> 00:27:29,525
They've been bragging about it
on their earnings calls.
528
00:27:29,525 --> 00:27:31,318
They're-- On their earnings calls,
529
00:27:31,318 --> 00:27:34,196
they're saying,
"Our profits have never been higher.
530
00:27:34,196 --> 00:27:35,405
We're killing it."
531
00:27:35,405 --> 00:27:37,741
The markups during the pandemic are--
532
00:27:37,741 --> 00:27:40,494
sometimes they're saying 70%
of what they were.
533
00:27:40,494 --> 00:27:45,624
If there was a huge increase in the demand
for shrewd television commentary,
534
00:27:46,250 --> 00:27:50,170
I imagine the demand for what you do
would go way up,
535
00:27:50,671 --> 00:27:54,216
and I imagine you'd convert that
into higher wages
536
00:27:54,216 --> 00:27:56,760
and getting more-- getting paid better.
537
00:27:56,760 --> 00:27:58,679
- You're saying it's the market at work.
- I don't think you'd call yours--
538
00:27:58,679 --> 00:28:02,224
I don't think you'd call yourself
a gouger...
539
00:28:02,224 --> 00:28:05,352
- I would absolutely call myself a gouger.
- ...when you did that.
540
00:28:05,352 --> 00:28:09,106
And by the way,
the effect of the talk show business
541
00:28:09,106 --> 00:28:12,526
is very different
than the effect of ExxonMobil, right?
542
00:28:12,526 --> 00:28:14,111
I mean, let's be fair, that--
543
00:28:14,111 --> 00:28:16,530
I think-- Isn't this show
gonna be on Apple TV?
544
00:28:16,530 --> 00:28:18,615
- Correct.
- And I think Apple TV
545
00:28:18,615 --> 00:28:22,536
is worth about
five times as much as Exxon.
546
00:28:22,536 --> 00:28:27,165
I think Apple's price--
Since the stimulus began,
547
00:28:27,165 --> 00:28:29,960
Apple's value has gone up
548
00:28:29,960 --> 00:28:35,090
- by about 1.2 trillion dollars.
- Right.
549
00:28:35,090 --> 00:28:38,468
That's $4,000 for every American,
550
00:28:38,969 --> 00:28:43,599
just in increase in the value of Apple.
551
00:28:43,599 --> 00:28:45,392
You just made my point for me.
552
00:28:45,392 --> 00:28:48,395
Do you feel that Apple is somehow
gouging or doing something wrong?
553
00:28:48,395 --> 00:28:50,397
Yes. Of course.
554
00:28:50,397 --> 00:28:52,691
- So--
- And Exxon is, and Mobil is--
555
00:28:52,691 --> 00:28:54,985
So let's talk about Apple.
Let's talk about Apple.
556
00:28:54,985 --> 00:28:57,070
- Do you think Apple...
- Okay.
557
00:28:57,070 --> 00:29:02,034
...should just sell phones for less
and not have enough phones?
558
00:29:02,034 --> 00:29:04,953
What would you have Apple do?
559
00:29:04,953 --> 00:29:08,999
You're saying to me, "Jon,
market forces are market forces.
560
00:29:08,999 --> 00:29:13,295
And if demand goes up,
are you suggesting, young man,
561
00:29:13,295 --> 00:29:16,548
that Apple should charge less
than they could charge?"
562
00:29:16,548 --> 00:29:18,425
Let me flip that on you.
563
00:29:19,092 --> 00:29:21,220
When there's a tightness
in the labor market,
564
00:29:21,220 --> 00:29:25,349
what you're saying is
the workers shouldn't do the same.
565
00:29:25,349 --> 00:29:29,645
That the workers, just following
the same capitalistic principles
566
00:29:29,645 --> 00:29:32,606
that allow Apple to charge more
for their phones,
567
00:29:32,606 --> 00:29:36,777
shouldn't charge more because
wage inflation is driving inflation.
568
00:29:36,777 --> 00:29:38,612
Every-- That's not at all
what I'm saying, Jon.
569
00:29:38,612 --> 00:29:41,031
- That's exactly what you're saying.
- No, no. Actually it isn't.
570
00:29:41,031 --> 00:29:46,537
Every worker should get
as high a wage as they can.
571
00:29:47,246 --> 00:29:48,705
It would be a terrible idea...
572
00:29:48,705 --> 00:29:51,750
- But the Fed is going to intervene--
- ...to try to restrict the wages.
573
00:29:52,251 --> 00:29:56,046
The Fed is going to intervene
to make that not possible.
574
00:29:56,046 --> 00:29:58,507
No. The Fed is intervening
575
00:29:58,507 --> 00:30:02,803
to control the overall level
of demand growth.
576
00:30:02,803 --> 00:30:05,597
And what will that do to the labor market?
577
00:30:05,597 --> 00:30:08,350
Because if it goes
much faster than supply--
578
00:30:08,350 --> 00:30:10,894
What will it do to the labor market?
579
00:30:11,812 --> 00:30:16,191
- It will loosen it.
- Look, it is likely to lead to...
580
00:30:16,191 --> 00:30:20,529
- To looser labor markets.
- ...a somewhat looser labor market.
581
00:30:20,529 --> 00:30:24,491
- Exactly. Now--
- We hope to minimize that consequence.
582
00:30:24,491 --> 00:30:27,953
If the labor market
had not gotten to the point
583
00:30:28,495 --> 00:30:31,248
where there were two vacancies
for every job,
584
00:30:32,165 --> 00:30:35,544
then it wouldn't have been necessary to--
585
00:30:35,544 --> 00:30:38,088
But why is it, though,
that when we get to a point
586
00:30:38,088 --> 00:30:40,716
where corporate profits
are at record highs,
587
00:30:40,716 --> 00:30:45,095
why can't the Fed intervene
on behalf of the worker
588
00:30:45,095 --> 00:30:47,055
to cool the profit market?
589
00:30:47,055 --> 00:30:50,809
'Cause-- What the Fed does
is the Fed has control
590
00:30:51,602 --> 00:30:55,731
only of the overall level of demand.
591
00:30:55,731 --> 00:30:57,441
- Now you could be saying--
- That's--
592
00:30:57,441 --> 00:30:59,276
- You could be saying...
- That's not true.
593
00:30:59,276 --> 00:31:00,736
- ...what Richard Nixon said.
- That's not their mandate.
594
00:31:00,736 --> 00:31:06,450
And if inequality is, as you say,
the biggest problem facing our economy,
595
00:31:06,450 --> 00:31:12,706
then always penalizing workers in a crisis
is not the answer to the biggest problem.
596
00:31:12,706 --> 00:31:15,751
So what I would suggest is
that somehow the Fed
597
00:31:15,751 --> 00:31:17,628
honor its dual mandate.
598
00:31:17,628 --> 00:31:20,214
Not just the mandate
for price stabilization,
599
00:31:20,214 --> 00:31:24,134
but the mandate for full employment,
and not put those two things at odds.
600
00:31:24,134 --> 00:31:28,013
And that, if we were okay
with 10% unemployment
601
00:31:28,013 --> 00:31:32,059
after 2008, when inflation was below 2%,
602
00:31:32,059 --> 00:31:35,938
why can't we be okay riding 4% and 5%
603
00:31:35,938 --> 00:31:40,609
while still trying to maintain
as many jobs as we can possibly maintain?
604
00:31:40,609 --> 00:31:42,819
I guess that means just giving people
lots of money
605
00:31:42,819 --> 00:31:45,155
- and just have the Fed handing people--
- Don't--
606
00:31:45,155 --> 00:31:47,115
- Handing people money--
- Don't slippery slope my--
607
00:31:47,115 --> 00:31:48,951
I'm not talking about irresponsibility.
608
00:31:48,951 --> 00:31:51,286
- I want to understand--
- They've done it for corporations.
609
00:31:51,286 --> 00:31:54,081
Your point is there's only one way
to control it,
610
00:31:54,081 --> 00:31:57,000
and my point is
that's a failure of imagination
611
00:31:57,000 --> 00:31:59,586
and one that has caused
the workers to suffer.
612
00:31:59,586 --> 00:32:03,215
If I thought that allowing inflation
to continue
613
00:32:03,966 --> 00:32:08,554
would add to the purchasing power
of American workers,
614
00:32:09,221 --> 00:32:10,514
I would be for it.
615
00:32:11,139 --> 00:32:16,603
But the approach of taking inflation
at high rates
616
00:32:16,603 --> 00:32:19,439
and just allowing it to continue,
617
00:32:20,190 --> 00:32:24,820
I don't know of any instance in history
where that's ended
618
00:32:25,362 --> 00:32:29,533
other than with some kind of
really hard crash
619
00:32:30,117 --> 00:32:32,411
of which the workers
were really the victims.
620
00:32:32,411 --> 00:32:36,373
Well, I'm saying let's not be hasty
621
00:32:36,373 --> 00:32:38,792
with saying inflation's too high,
622
00:32:38,792 --> 00:32:41,837
so let's create a recession
for ten million people,
623
00:32:41,837 --> 00:32:44,173
or a depression for five million people,
624
00:32:44,173 --> 00:32:49,928
by raising unemployment
from 3.6% to 8% or 10%.
625
00:32:49,928 --> 00:32:51,555
So that's what I think.
626
00:32:51,555 --> 00:32:53,098
And I don't think it's crazy.
627
00:32:53,098 --> 00:32:56,185
But I do appreciate you sitting down.
And thank you very much for joining us.
628
00:32:58,645 --> 00:32:59,730
You know...
629
00:33:02,024 --> 00:33:04,735
I think from now on,
630
00:33:04,735 --> 00:33:09,198
I'm gonna end every conversation
with "And I don't think it's crazy.
631
00:33:11,283 --> 00:33:13,785
But I appreciate you coming by."
632
00:33:14,369 --> 00:33:17,289
{\an8}That's our show. For more resources,
head to our website.
633
00:33:17,289 --> 00:33:21,585
{\an8}Don't accept the cookies if you won't
commit to raising said cookies.
634
00:33:22,336 --> 00:33:23,670
{\an8}We also have a weekly podcast.
635
00:33:23,670 --> 00:33:25,422
{\an8}It's woke. You don't worry about it.
636
00:33:26,381 --> 00:33:29,176
{\an8}And I leave you
with one final "for fuck's sake."
637
00:33:29,176 --> 00:33:32,721
Costs are spinning out of control.
638
00:33:32,721 --> 00:33:36,266
I've brought the wheel of inflation.
639
00:33:36,266 --> 00:33:39,394
Let's go ahead and give it a spin.
640
00:33:39,394 --> 00:33:42,439
As a percentage,
how much is milk up in 12 months?
641
00:33:43,023 --> 00:33:45,859
- 50%.
- 50%. Anybody else?
642
00:33:46,944 --> 00:33:48,070
- Okay.
- 30%.
643
00:33:48,070 --> 00:33:49,154
30%.
644
00:33:49,154 --> 00:33:51,615
So milk is up 5.5%.
645
00:33:53,659 --> 00:33:54,910
Let's give her a good spin.
646
00:33:56,995 --> 00:34:02,209
All of these prices need to come on down.