History's playbook for taming the beast of inflation
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What is the main topic discussed in this episode?
Hey, it's Latif from Radiolab. Our goal with each episode is to make you think, how did I live this long and not know that? Radiolab, adventures on the edge of what we think we know. Listen wherever you get podcasts.
Inflation is back, rearing its ugly head.
Inflation's heating up again.
To its highest level in almost three years.
And we've got to get it back down.
Since President Trump ordered strikes on Iran, and Iran retaliated by shuttering tanker traffic through the Strait of Hormuz, prices all over the country are up. Many families are struggling with costs. I just drove by a gas station today and it said $7.25 a gallon. Yesterday you could afford to fill the car with gas. Today you can't. And that means transportation by truck, train or plane has become more expensive, too.
Grocery prices, for example, jumped about seven-tenths of a percent last month alone. I'm not buying this.
What is the current state of inflation in the U.S.?
I can't afford it.
People are tired of getting ripped off on food prices.
Oh, I'd love to have some beef. It isn't just food. It's housing, health insurance, mortgage rates. The cost of living rises with inflation. And that means our money goes less far. No one is happy about that.
Consumers are just to the point where, give us a break.
You're stuck and your dollars are buying less and less. And it's happening at a time when the nation's main inflation-fighting institution, the Federal Reserve, is getting a shakeup in leadership.
A new chair has been sworn in. It's now Kevin Warsh's Federal Reserve. So as the U.S. wades back into a period of rising inflation, as the Fed and the government grapple with how to fix it, and while we all wait to see what Warsh will do now that he's in charge, we thought it might be useful to offer up this episode that first aired in 2022. Countdown is on to the Fed decision. The Fed is raising interest rates, and this affects all of us. It's a proven solution. Higher interest rates make it more expensive to borrow money. Is that by raising interest rates, they'll slow the economy? Don't fight the Fed. Back then, a historic inflation took hold, one that could have crashed the economy. And the Fed needed to decide what to do.
Historically, there have been two approaches. On the one hand, a hardcore government intervention. The other one supports loosening regulations. But here's the challenge. Inflation is complicated. Even the people in charge don't fully understand what causes it.
One way to say it would be, I think we now understand better how little we understand about inflation.
That's not very reassuring.
No, honestly, this was unpredicted.
That's former Federal Reserve Chair Jerome Powell four years ago, at the moment when inflation hit its peak. It was a very candid moment for Powell. Remember, he's a person who was not only paid to think about inflation, but he was seen as America's chief inflation fighter. And here he was, acknowledging a fundamental truth. Inflation is mysterious. Different people have different meanings. John Cochran is a senior fellow at Stanford University's Hoover Institution. He's also known as the Grumpy Economist. The Grumpy Economist is the name of my blog. I'm not really a grumpy person. There are varying views and understandings of inflation at any moment. Meg Jacobs is a historian at Princeton University.
I've written about the energy crisis of the 1970s, and I'm working on a book now about the Great Depression and World War II. What you believe to be the cause of inflation probably depends on how you view the world, what you think the causes of economic success and failure are for the country. And Meg and John didn't agree what caused the inflation, let alone what to do about it. There's, of course, lots of political spin on this question. Back then, John blamed inflation on big government spending, especially during the pandemic. The wildly overdone stimulus, printing and borrowing money and sending people checks. Meanwhile, Meg focused on Russia's invasion of Ukraine. ongoing pandemic supply chain issues, and corporations raising prices in an opportunistic way to bring in record-breaking profits.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:00–0:58
2
What is the current state of inflation in the U.S.?
0:58–7:04
3
How has the government historically responded to inflation?
7:04–8:01
4
What role did the Federal Reserve play in past inflation crises?
8:01–27:37
5
What historical events shaped America's approach to inflation?
27:37–33:49
6
How did World War II impact inflation and price control policies?
33:49–49:11