What's REALLY Causing Prices to Rise?

If it seems like things are more expensive these days, it’s cause they are! Myles digs into the current causes of inflation.

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** What is inflation?
It’s the increase in the cost of goods & services over time. It’s measured by the Bureau of Labor Statistics using the Consumer Price Index (CPI)-- which looks at the cost of a bunch of different items called a “basket of goods” They release monthly reports, so when people say inflation is at 8% this month, what they usually mean is that stuff on average costs about 8% more than it did the same time the previous year. The Federal Reserve sets policies to try to keep it around 2%.

* Is inflation bad?
As of April 2022, inflation was around 8% and it becomes a problem when wages don’t keep up with the rising cost of things. According to a UPenn analysis, in 2021 wages for the lowest-paid workers did go up by about 6.5%. But the increase in those earnings didn’t keep up with inflation in 2021. Even middle-income earners' wages had a hard time keeping up with rising costs.

*What’s causing inflation?
There’s lots of debate about what's causing the current inflation. But in general, economists tend to point to agree on a couple of things. The first is supply chain issues from shutdowns during the pandemic. World wide a lot of factories shut down, materials stopped being mined, and shipping companies reduced their schedules. This created bottlenecks making it harder for us to get stuff we wanted to buy. Meanwhile, a lot of us were stuck at home and started ordering stuff online so demand for things rose. Supply was low and demand was high so you get inflation. Our dependence on fossil fuels is another big driver of the inflation we are seeing. The US is still very dependent on fossil fuels which are at the mercy of the volatile global oil market and influenced by things like geopolitics, financial downturns, and war. Currently, oil prices are super high, partly because of the war in Ukraine.

** Did covid stimulus cause inflation?
There’s lots of debate among economists about this. But the Federal Reserve Bank of San Francisco did an analysis showing that both Trump and Biden’s stimulus plan could account for about 3 percentage points of the inflation we are seeing– but there’s a large margin of uncertainty around that number.

**Is corporate greed responsible for inflation?
In certain markets– there are just a few companies that control a large portion of the market– which makes it easier for them to raise their prices because they have less competition. And now, they can use the excuse that inflation is making it more expensive for them to run their business, so they have to increase their prices. But there are some reports of some big companies raising their prices and reporting record profits– suggesting that they are raising their prices more than they really need to, and that contributes to inflation as well. Moral of the story: lots of different things are impacting inflation.

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00:00 Intro
00:45 What is inflation?
02:12 History of inflation
03:10 Are wages keeping up with inflation?
04:04: Causes of inflation supply chain
05:40: Covid Stimulus and inflation
06:14 Inflation and gas
06:34 Inflation and corporate greed

[AboveTheNoise]

Are you feeling inflation? How is it impacting you these days? Let us know in the comments - and don't forget to subscribe so you get notified when our Part 2 episode on inflation drops on June 29. That one is all about potential solutions...before we slide fully into another recession, y'all!

[vermiliontyrant]

Inflation affected my wife and I in the aspect of housing, we have been saving for a house and we met our goal but we can't afford a house anymore also we had to leave Phoenix and move back home to Yuma and live with family because we can't afford the $400 rent increase that hit our area.

[quryshna]

Medication shortages are the scariest. There were more than a few times in the last two years that the pharmacy wasn't sure if they were going to be able to get me the medication I need. It was scary.

[I.____.....__...__]

- 1:12 Except that's not realistic. If you look at any graphs of cost increases vs income increases over time, the prices of stuff goes up _much_ faster than incomes go up. Honestly, I don't understand how anyone who isn't rich manages to make ends meet at all, let alone having luxuries like eating out, concerts, streaming services, yearly phone upgrades, etc. 🤨
- 1:25 What? _How_ is a little inflation a "sign of a healthy economy"? 🤔 Constant inflation, even a "little" means eventually all prices will be huge numbers and everything will have to be normalized back down to normal amounts so that people aren't making 100-trillion dollars per month and a bread costing 100-billion.
- 2:45 People are struggling to pay even the basic bills like rent or food, while at the same time, corporations like Amazon, oil companies, banks, etc. are posting _record profits._ 😠 … 6:38 Exactly. And it's not surprising. When the lockdowns started in 2020 and people couldn't go to work and make money, they were still expected to pay bills somehow. They were expected to take a hit and not make money, but landlords and banks and ISPs and power companies and such still expected to get paid, they demanded to be exempt from the global issue and not take a hit. 😠

[Duraputer]

Great video, I like how you avoid blaming one particular side. One thing to mention is that while the us has been getting better from covid, china has been having a lot more issues with covid, and have had much stricter shut downs than the us ever had. All countries are heavily dependent on goods manufactured in china. Even goods that are made in other counties may still use a lot of parts from china.

[TheDanEdwards]

You're right about inflation in the late 1970's not being "good". Among other things the political fallout had Carter losing to Reagan and that led the US down the path of undoing some of the important safeguards for the most vulnerable. But inflation is a phenomenon that transcends short term politics and that is a reality that is ignored in times of elections.

[essbee]

Rent is up more than 5%, in Florida at least. Tampa Bay is seeing 20-30% increases in the last year.

[OmarAbdulMalikDHEdMPASPACPAPro]

My kids are attending our local state college (UDC) because I don't want them taking out student loans. They received AA degrees first, from the community college. I graduated from UDC in 94' w/ BS in Biology. Tuition was $430.00 per semester for FULL time!😁 The SAME school is now about $12 K/yr for DC residents. I advised them to stay with me and my wife, instead of moving into over-priced apartments, in the name of "independence". In Islam, we're not supposed to deal with usury (riba), so I have no credit cards and bought old cars from auctions for saved up cash ($3K for each minivan). I wish I knew how to make more 🤑💰 by halal (permissable) means. Thank you for sharing this with us! 👋🏾👨🏾‍⚕️

[GameTesterBootCamp]

I know this isn't the point of the video but... Bro, where are you paying $40 for a dozen donuts?! 😂

[martin_bolha]

I am not feeling inflation so far, although I can't deny it is happening around here (Czech Republic). The more serious issue for me personally is lack of affordable living. Price for square meter goes up by 20% each year so far and currently, half of my salary is going bye bye just to pay the rent (living in a 40m2 studio). The saddest thing? My salary is slightly above average, so I really can't imagine how a single person like me manages with a lower salary. A room in a coliving flat is currently just about 20% cheaper than my rented studio.

So, inflation is manageable IMO, you "just" cut down on things you do not really need, such as expensive food deliveries. But the housing crisis is a completely different level because in the end of the day, how much you put into rent determines how much money you have left for other stuff.

Of course, put one the other together and we have it made for a really rough year.

[amandatucker]

Literally had to switch to fruits and vegetables due to how much meat cost and I don’t trust myself to cook chicken.

[jimlocke]

Inflation is the result of governments, in our case, the Federal Reserve, putting too much money in circulation. We had serious inflation in the 1970s. In the 1980s, inflation was brought under control under the Reagan Administration. As noted in the video, inflation has been under control at about 2% for some 40 years and now has gotten out of control. Typically, getting inflation back under control results in an increase in unemployment. We saw that during the Reagan Administration when official unemployment numbers exceeded 10%. Politicians don't like to see high unemployment, so they avoid putting pressure on the Federal Reserve to restrain the money supply.

Politicians love to take advantage of the population's general lack of knowledge of economics to put the blame on everyone else but themselves. The "Inflation Reduction Act of 2022" is "inflation reduction " in name only, in my opinion. It does not address the money supply but gives us the idea that they are doing something about inflation.

For an excellent explanation of inflation, what it is and what causes it, please read the chapter on inflation in economists Milton and Rose Friedman's book, "Free to Choose". Also, volume 9 of the 1980 "Free to Choose" video series, posted on youtube and elsewhere, addresses inflation.

[gigglysamentz]

Great video! Thanks for explaining that simply and remind us to check our confirmation bias ;P

[vullerseris]

It used to be that if something was not worth the money....you just didn't buy it....now we are being forced to buy merchandise that is not even worth the money.
Inflation is very hard on the generation of 2022... Yet what i really feel bad about is all of are new kids graduating that have to face this life on there own right now. How do they feel? Have we even interviewed are children to ask them what they think of all this.... Being the new people in this new modern world that have to face the tall high prices on everything now days.... I don't think we are thinking about how hard it is to follow this trail that we adults are leaving behind
This is going to be brutal on are next generation. This is no different then watching a bunch of baby sea turtles getting released into the ocean and watching them all get picked off one by one by seagulls and large sea bass fish.

[tblizzi]

Thanks for the explanation. Whenever people brought up inflation I wouldn't have anything to say because I didn't understand why it was happening or why it matters.

[cameronnorris]

Do you think that the high costs of gas will make the progress of biking transportation and public transportation increase? I've seen a lot more people riding bikes around my city since the price went up.

[Haseri]

I'm hearing that the workers need to seize the means of production

[jackbraddell]

Corporate greed, monopolies being allowed by politicians in exchange for donations.

[Ceelvain]

I often heared that a little inflation is good and deflation is really bad. But why is it so?
Good and bad are subjective terms.

[lighters]

Was looking forward to this new episode..Miles this episode was great especially during $5 a gal gasoline...I see a skateboard back there...Do you really board ? Btw I also believe many hedge fund and venture capitalist hedging shores on vital futures cause a monopolized effect on the economy, killing the security's against rationing and versatility