Can Inflation Be Fixed?
7.2 هزار بار بازدید -
2 سال پیش
-
Things are expensive! How can
Things are expensive! How can we get prices under control? Myles digs into different ways to fight inflation. This is part two of a two-part video series on inflation. Check out part 1: What's REALLY Causing Prices to Rise?
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* What is inflation?
Inflation is the increase in the cost of goods and 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”. In general terms, inflation happens when “there’s too much money chasing not enough goods.” And the Fed tries to keep inflation at around 2% each year.
* How has the US dealt with high inflation in the past?
The last time inflation was really high was back in the late 70s and early 80s. At that time, Paul Volcker was the chairman of the Federal Reserve– which is like the bank of all banks – it sets monetary policies to help control the flow of money between banks. One of the ways it does that is by setting interest rates. When it comes to borrowing money an interest rate is what the bank charges you to take out a loan. The higher the interest rate, the more money you’ll pay the bank. So back in the late 70s when inflation was really high the Federal Reserve decided to raise interest rates a ton– up to 20%. The thinking was that inflation was really bad because there was too much money floating around, so raising interest rates makes it harder to access money. And this did bring inflation under control BUT it caused unemployment to surge and led to a big recession.
*Why does increasing the interest rate control inflation?
Generally speaking, when interest rates increase, it makes it more expensive for consumers to take out loans to buy things, and it makes it more expensive for businesses to invest in things necessary to run their business. So companies do less business, they lay off workers, people lose their jobs, spending goes down and unemployment increases. Since people are buying less– prices drop and inflation goes down. Economists also say that rising interest rates that much that quickly also sent a strong signal to businesses that the Fed wasn’t going to allow inflation to get out of control. If businesses think that inflation will keep going up, they’re likely to raise their prices in anticipation of keeping up with the higher cost of living.
* What are some long-term ways to control inflation?
There are a variety of long-term ways to control inflation in the future. One is ending our dependence on fossil fuels since they tend to contribute a lot to overall inflation. Green and renewable energy prices are more stable and aren’t dictated by the global oil market which can be very volatile. Other solutions include bringing back more manufacturing to the US to help alleviate some of the supply chain bottlenecks caused by covid shutdowns in factories abroad and reduced shipping schedules. Housing is also a contributor to inflation so adopting policies that allow for more affordable housing can help with inflation in the long run. Breaking up monopolies and mega-corporations could also help control inflation in the long run. When markets are dominated by a few players, it’s easier for businesses to get away with raising prices because they don’t have as many competitors keeping the prices in check.
SELECTED SOURCES
https://www.federalreservehistory.org...
https://www.nplusonemag.com/issue-34/...
https://www.cnbc.com/2022/05/17/powel...
https://www.cnn.com/2022/05/10/politi...
https://www.wsj.com/articles/price-co...
https://rooseveltinstitute.org/wp-con...
https://newrepublic.com/article/16452...
https://www.theguardian.com/business/...
https://thehill.com/blogs/congress-bl...
TEACHERS: Get your students in the discussion on KQED Learn, a safe place for middle and high school students to investigate controversial topics and share their voices. https://learn.kqed.org/discussions/
00:00 What’s inflation?
00:58 What’s causing inflation?
02:12 Historical Perspective: the Volcker Shock
05:15 Inflation and Interest Rates Today
06:18 Price Controls
07:00 Switch to Renewables
07:22 Address Supply Chain Bottlenecks
07:35 Affordable Housing Policy
07:55 Break up monopolies
SUBSCRIBE to Above the Noise so you never miss a video!
https://bit.ly/3tNKzhV
And follow us on Instagram and Twitter!
Instagram: abovethenoi..
Twitter: ATN_PBS
* What is inflation?
Inflation is the increase in the cost of goods and 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”. In general terms, inflation happens when “there’s too much money chasing not enough goods.” And the Fed tries to keep inflation at around 2% each year.
* How has the US dealt with high inflation in the past?
The last time inflation was really high was back in the late 70s and early 80s. At that time, Paul Volcker was the chairman of the Federal Reserve– which is like the bank of all banks – it sets monetary policies to help control the flow of money between banks. One of the ways it does that is by setting interest rates. When it comes to borrowing money an interest rate is what the bank charges you to take out a loan. The higher the interest rate, the more money you’ll pay the bank. So back in the late 70s when inflation was really high the Federal Reserve decided to raise interest rates a ton– up to 20%. The thinking was that inflation was really bad because there was too much money floating around, so raising interest rates makes it harder to access money. And this did bring inflation under control BUT it caused unemployment to surge and led to a big recession.
*Why does increasing the interest rate control inflation?
Generally speaking, when interest rates increase, it makes it more expensive for consumers to take out loans to buy things, and it makes it more expensive for businesses to invest in things necessary to run their business. So companies do less business, they lay off workers, people lose their jobs, spending goes down and unemployment increases. Since people are buying less– prices drop and inflation goes down. Economists also say that rising interest rates that much that quickly also sent a strong signal to businesses that the Fed wasn’t going to allow inflation to get out of control. If businesses think that inflation will keep going up, they’re likely to raise their prices in anticipation of keeping up with the higher cost of living.
* What are some long-term ways to control inflation?
There are a variety of long-term ways to control inflation in the future. One is ending our dependence on fossil fuels since they tend to contribute a lot to overall inflation. Green and renewable energy prices are more stable and aren’t dictated by the global oil market which can be very volatile. Other solutions include bringing back more manufacturing to the US to help alleviate some of the supply chain bottlenecks caused by covid shutdowns in factories abroad and reduced shipping schedules. Housing is also a contributor to inflation so adopting policies that allow for more affordable housing can help with inflation in the long run. Breaking up monopolies and mega-corporations could also help control inflation in the long run. When markets are dominated by a few players, it’s easier for businesses to get away with raising prices because they don’t have as many competitors keeping the prices in check.
SELECTED SOURCES
https://www.federalreservehistory.org...
https://www.nplusonemag.com/issue-34/...
https://www.cnbc.com/2022/05/17/powel...
https://www.cnn.com/2022/05/10/politi...
https://www.wsj.com/articles/price-co...
https://rooseveltinstitute.org/wp-con...
https://newrepublic.com/article/16452...
https://www.theguardian.com/business/...
https://thehill.com/blogs/congress-bl...
TEACHERS: Get your students in the discussion on KQED Learn, a safe place for middle and high school students to investigate controversial topics and share their voices. https://learn.kqed.org/discussions/
00:00 What’s inflation?
00:58 What’s causing inflation?
02:12 Historical Perspective: the Volcker Shock
05:15 Inflation and Interest Rates Today
06:18 Price Controls
07:00 Switch to Renewables
07:22 Address Supply Chain Bottlenecks
07:35 Affordable Housing Policy
07:55 Break up monopolies
2 سال پیش
در تاریخ 1401/04/08 منتشر شده
است.
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