Why Prices Aren't Going Back Down
Summary
TLDRIn this episode of the Gram Stefan Show, the host shares a personal tip for mixing protein powder with coffee as a substitute for coffee creamer, resulting in a chocolate milk-like drink with 25 grams of protein and low calories. The main discussion shifts to the economic topic of inflation, explaining the reasons behind rising prices and the concept that a moderate level of inflation can stimulate spending and economic growth. The host also touches on deflation, its potential dangers, and the government's tools to combat inflation, such as raising interest rates. The video concludes with a sponsored mention of acorns.com, an investing app that helps users grow their money to keep pace with inflation.
Takeaways
- 😋 The host discovered mixing protein powder with coffee as a substitute for coffee creamer and found it tastes like chocolate milk with a coffee flavor.
- 📈 The video discusses the high inflation experienced globally in 2022, with the US, UK, and Eurozone peaking at around 10%, meaning prices were significantly higher than the previous year.
- 💡 Economists were initially skeptical that printing trillions of dollars would cause inflation, but as economies reopened and demand surged, inflation became a reality.
- 🚢 Disrupted supply chains contributed to inflation by not being able to meet the increased demand, leading to higher prices.
- 💰 The script mentions that a little inflation is considered good for the economy, as it encourages spending and investment to prevent hoarding of money, using Japan as an example of a deflationary economy.
- 🔄 The video explains that a moderate inflation rate, typically around 2%, is seen as a balance that encourages spending and economic growth without causing economic harm.
- 💼 The importance of wages keeping pace with inflation is highlighted, as it ensures people can still afford goods even as prices rise.
- 🏦 The government's role in combating inflation through tools like raising interest rates is briefly mentioned, making borrowing more expensive to control spending.
- 🌱 The host promotes an investing app, acorns.com, as a way to grow money and combat inflation by rounding up purchases and investing the difference.
- 📉 The script also addresses deflation, explaining that falling prices can lead to a deflationary spiral with negative impacts on employment, GDP, and investments.
- 🤔 The host speculates on future interest rates, predicting they may remain the same for the rest of the year and discusses the potential challenges if inflation continues to decline.
Q & A
What did the speaker mix with their coffee when they ran out of coffee creamer?
-The speaker mixed protein powder with their coffee when they ran out of coffee creamer.
What was the taste of mixing brownie protein powder with coffee according to the speaker?
-The taste was similar to chocolate milk mixed with coffee or espresso, with a tinge of coffee flavor.
How much protein does the protein powder mentioned in the script contain?
-The protein powder contains 25 grams of protein.
What is the approximate calorie content of the protein powder mentioned by the speaker?
-The protein powder has around 90 calories.
What is the main topic discussed in the Vox video that the speaker references?
-The main topic discussed in the Vox video is the reason why prices can't just stay the same and the concept of inflation.
What was the peak inflation rate in the US, UK, and Eurozone as mentioned in the script?
-The peak inflation rate in the US, UK, and Eurozone was around 10%.
Why did some economists believe that printing trillions of dollars into the economy wouldn't cause inflation?
-Some economists believed it wouldn't cause inflation because everything was shut down and it didn't make an immediate effect, so they thought the economic activity would not increase.
What are the two main factors that contributed to the high inflation experienced in 2022 according to the script?
-The two main factors were the monetary policy of printing money into the economy and the disruption of supply chains.
Why is a little inflation considered good for the economy according to the speaker?
-A little inflation is considered good because it encourages spending and investment, preventing people from hoarding money and promoting economic growth.
What is the example given in the script to illustrate an economy with a culture of saving rather than spending?
-Japan is given as an example of an economy with a culture focused on saving and hoarding cash, leading to deflation.
What is the recommended balance of inflation that has been generally accepted in recent decades according to the script?
-The recommended balance of inflation that has been generally accepted in recent decades is 2%.
What is the potential tool the government can use to combat rising inflation as mentioned in the script?
-The government can use the tool of raising interest rates to make borrowing more expensive, which can help combat rising inflation.
How does the speaker suggest one could grow their money and keep pace with inflation?
-The speaker suggests investing in certain assets, which long-term tend to keep pace with inflation plus some, as a way to grow money.
What is the sponsor's service mentioned in the script and how does it work?
-The sponsor's service mentioned is acorns.com, an investing app that rounds up your purchases to the nearest dollar and invests the difference on your behalf.
What is a deflationary spiral and why is it considered problematic for the economy?
-A deflationary spiral is a cycle where prices fall, which can sound good but can introduce issues affecting employment, GDP, investments, and hiring, potentially damaging the economy.
What action did the US take when inflation dipped below 2% as per the script?
-When inflation dipped below 2%, the US brought interest rates down to 0.5% in an attempt to stimulate the economy.
What is a negative interest rate and why might it be considered?
-A negative interest rate is a scenario where the central bank could lower interest rates so low that they pay you to borrow money. It might be considered to incentivize spending and borrowing in economies that are very slow.
What is the speaker's prediction for the Federal Reserve's interest rates for the rest of the year?
-The speaker predicts that the Federal Reserve will likely keep interest rates the same for the rest of the year, currently sitting at about 5.25%, with a possible 125 basis point rate cut.
What is the current state of inflation and the speaker's opinion on its future trend?
-The current state of inflation is hovering around 3.5%, and the speaker believes it will take longer than people expect to come down, with the Federal Reserve likely doing nothing unless inflation starts going up again.
Outlines
😋 Innovative Coffee Substitution with Protein Powder
The speaker introduces a novel way of mixing protein powder with coffee as a substitute for coffee creamer. They discovered that using brownie-flavored protein powder created a delightful chocolate milk-like taste when combined with coffee or espresso. The protein powder mentioned contains 25 grams of protein and only around 90 calories, which the speaker highly recommends. The video then transitions into a discussion about rising costs and inflation, referencing a Vox video titled 'why can't prices just stay the same'. The speaker invites viewers to like and subscribe to continue watching and promises to delve into the topic of inflation affecting the global economy.
📈 Understanding Inflation and Its Economic Impacts
This paragraph delves into the economic phenomenon of inflation, particularly noting the high inflation rates experienced by the US, UK, and Eurozone in 2022, which peaked at around 10%. The speaker discusses the unexpected nature of this inflation, as many economists believed that printing trillions of dollars into the economy wouldn't cause inflation due to everything being shut down. However, once economies reopened and people started spending their savings, demand surged, leading to supply chain disruptions and increased prices. The speaker also touches on the idea that a little inflation can be beneficial, using Japan as an example of a deflationary economy where saving is culturally ingrained, leading to decreased spending and a deflationary spiral. The balance between encouraging spending and preventing excessive spending is highlighted, with the speaker noting that a moderate inflation rate has been the goal for decades.
🏦 Combating Inflation Through Savings and Investing
The speaker discusses the government's tools to combat rising inflation, such as raising interest rates to make borrowing more expensive. They then introduce a sponsor, acorns.com, an investing app that helps users invest by rounding up their purchases to the nearest dollar. The potential long-term benefits of investing are highlighted, with an example given of how a small daily investment can grow significantly over 50 years with an average 8% return. The speaker encourages viewers to check out the sponsor's offer for a $20 bonus upon signing up. The paragraph concludes with a return to the topic of inflation, discussing the potential for deflation and the economic risks it poses, such as a deflationary spiral. The speaker also speculates on future interest rate adjustments by the Federal Reserve, suggesting that rates may remain the same for the rest of the year.
Mindmap
Keywords
💡Protein Powder
💡Inflation
💡Supply Chains
💡Deflation
💡Monetary Policy
💡Interest Rates
💡Investing
💡Acorns.com
💡Federal Reserve
💡Deflationary Spiral
Highlights
Mixing protein powder with coffee creates a chocolate milk-like taste with an espresso flavor.
The protein powder used contains 25 grams of protein and has around 90 calories.
In 2022, the US, UK, and Eurozone experienced high inflation, with prices on average 10% higher than the previous year.
Economists initially believed that printing trillions of dollars wouldn't cause inflation due to the economy being shut down.
Demand surged once economies reopened, leading to inflation as supply chains were disrupted and couldn't meet demand.
A little inflation is considered good as it encourages spending and investment to avoid losing purchasing power.
Japan's culture of saving money leads to deflation, where consumers delay purchases expecting prices to fall.
A balance of 2% inflation has been the target for decades to encourage spending without overheating the economy.
Governments combat inflation by raising interest rates, making borrowing more expensive.
Investing in assets that keep pace with inflation can help grow wealth and combat the effects of inflation.
Acorns.com is an investing app that rounds up purchases and invests the difference, helping users grow their money.
Investing $5 a day over 50 years with an 8% return could amount to $1.2 million, demonstrating the power of long-term investing.
Deflation, or falling prices, can introduce a deflationary spiral with negative impacts on employment, GDP, and investments.
Negative interest rates, where banks pay borrowers, have been implemented in some economies to incentivize spending.
A little inflation is preferred to prevent the economy from dropping into a deflation zone and triggering a bad cycle.
The Federal Reserve may keep interest rates the same for the rest of the year, with a potential slight cut if inflation rises.
Companies are still having strong earnings, suggesting a stabilizing market with high but steady prices.
Transcripts
welcome back to the gram Stefan show and
we got to talk about something that's
extremely important today and that's the
fact that I've been mixing protein
powder with my coffee for the last few
weeks I ran out of coffee creamer funny
story but yeah coffee creamer was no
good I think it either expired I I
didn't have it available and I thought
to myself how odd would it be to mix
protein powder and the coffee it's kind
of taste good right so I got this like
brownie protein powder and I mixed it in
with this and oh my gosh it tastes like
chocolate milk
just mixed with coffee or like espresso
so it's got like a tinge of like coffee
flavor to it but it's protein powder
this thing has 25 gram of protein in it
and like 90 something calories it's
absolutely amazing so I'd highly
recommend it but beyond that though we
also got to talk about something else
and that's the cost of things going up
in price for the last four years
everything seems to be costing double
triple quadruple what it was back in
like 2019 that brings me to the this
video here it's by Vox they titled this
why can't prices just stay the same so
with that said I want to comment on this
as soon as you hit the like button and
subscribe as soon as you do that we'll
begin the
video still haven't done it yet the
video is not thank you so much now let's
begin in 2022 much of the world
experienced a period of uncommonly high
inflation with the US UK and Eurozone
all peaking at around 10% meaning that
prices on average were a full 10% %
higher than one year before yeah it was
absolutely awful and uh there were a lot
of economists out there who thought that
that would not be possible who thought
that you could print trillions of
dollars into the economy and it wasn't
going to cause inflation because
everything was shut down and it really
didn't make an immediate effect so uh
you know people kept thinking well you
know there's this inflation and
everyone's wor why aren't prices going
on well because everything was shut down
but as soon as things began opening up
as soon as people started spending the
money that they were saving in Bank
accounts that's when demand went through
the roof but the other issue with that
isn't just so much monetary policy' been
printing money into the economy it was
also the fact that Supply chains were
disrupted and when things are backed up
they can't make enough to satisfy the
amount of demand that there used to be
prices are going to go up as a result so
you had a whole bunch of backlog
shipping you had a lot of demand you had
a lot of extra money in the economy and
that just caused inflation to go through
the roof and for some of the prices that
we're seeing today but at the same time
if you were to I don't know find
yourself reading and watching a ton of
inflation related content you'll also
keep hearing this a little inflation is
a good thing a little inflation is a
good thing a little inflation now would
be a good thing everybody wants a little
inflation why if Rising prices hurt
seemingly everyone why can't they just
stay the same why can't inflation be
zero because otherwise people are going
to hoard their money look at Japan Japan
is a fantastic example of an economy
where it's been so ingrained in their
entire culture to save money don't spend
it hoard cash for a rainy day and don't
spend it like that's their number one
thing so as a result you have deflation
and when prices begin to come down
consumer psychology says that the
customer would then be less likely to
spend it because their money is going to
go further the next day so just imagine
your money is gaining 10% in value every
year so so in essence everything is
getting 10% cheaper the longer you wait
to buy it so unless you need to go and
spend money now it makes sense just to
say oh you know what instead of buying
the flat screen TV today I'm going to
wait a month it'll be a little cheaper
instead of that car I want to buy I'll
wait a month it'll be a little cheaper
everything's going down in price we need
some form of spending in the economy to
push us forward because we want more
people spending but we don't want people
spending too much that it destroys
everything so there's got to be a fine
balance and really for the last few
decades that balance has been 2%
inflation for the most part in times
when prices are generally Rising people
tend to expect them to rise further and
that actually encourages people to money
now on big durable purchases like cars
or appliances in order to avoid having
to pay more for the same thing later
either way companies make more money
which means more people have jobs and
that means more demand and therefore
higher prices it's okay if prices rise
so long as wages rise too you'll still
be able to afford the same Goods if your
wages keep Pace with inflation emphasis
on the if yeah but even if wages don't
rise at the same Pace as inflation it
just is there to help stimulate the
economy to a certain degree to force
people to spend some money or invest it
because otherwise their money's losing a
little bit of purchasing power every
year so it's just enough to give you a
kick in the pants to say hey you know
what go and spend that money in the
protein powder mix it in coffee because
it tastes really good and do that as
soon as possible because if you wait uh
your money is going to buy you slightly
less that's all it is it also helps that
it's somewhat predictable that people
know hey if I have a 100 bucks next year
it's going to have the purchasing power
of 98 the year after that 90 you know 6
and so on so at least it's something you
could take into consideration versus 10%
where people just can't adjust to that
they can't keep up and that's bad the
government does have tools to combat
Rising inflation they usually shift
things here by raising interest rates
which makes all borrowing including
credit cards and bank loans more
expensive see one of the ways to combat
this though is honestly just by Saving
and investing your money because when
you invest it in certain assets for the
most part those assets longterm tend to
keep Pace with inflation plus some so
you can actually grow your money and one
of the ways that you could do that by
the way is with a sponsor of the channel
acorns.com for those UNF familiar
they're an investing app that you could
link your debit or credit cards to and
then what they'll do which is really
cool is they'll round up your purchases
to the nearest dollar and then invest
the difference on your behalf so you
don't even have to think about it like
uh just as an example if you were to
invest $5 a day just $5 a day and and
you could basically just automate this
entire process over 50 years if you
average an 8% return that is going to
amount to $1.2 million in this
hypothetical situation just $5 a day it
really goes to show you just how much a
small amount goes in the long term and
acorns also has ways that you could just
set up an automatic recurring deposit
you can automate the entire process you
don't even have to think about it and
again longterm investing tends to be the
best way to combat inflation so if
you're interested check out acorns.com
down below in the description and even
better if you sign up for this month
they'll give you a $20 bonus when you
sign up which takes like five to maybe 8
minutes to do so if you want to make $20
in 5 to 8 minutes the link is down below
in the description enjoy that thank you
so much and now let's get back to the
video but we also have to talk about
what happens when prices fall instead of
Rise that's called deflation and falling
prices honestly sounds pretty good but
they can also introduce another kind of
cycle a deflationary spiral the
deflationary spiral oo so spooky
Honestly though for economists like this
is the worst case scenarios prices tend
to go down we do think that as consumers
that would be a great thing things get
less expensive our money is now more
valuable than it was you know a month
ago the issue though is that if money is
now more valuable prices drop how does
that affect employment how does that
affect GDP how does that affect
Investments how does that affect hiring
there's so many nuances that come with
falling prices like this where even
though it sounds great on the surface
prices fall at what expense at what cost
at what damage to the economy and that's
something that you don't really know
until it happens the last time inflation
dipped below 2% the US brought interest
rates all the way down to
05% and after bottoming out for a bit
that seemed to work inflation ined back
up but if inflation hadn't come back up
the government would have had limited
options their rates were already getting
almost out zero and then things could
get dicey yeah so there was actually a
brief moment there where the market was
pricing in what's called negative
interest rates so basically the Federal
Reserve could lower interest rates so
low to the point where they pay you to
borrow money I know it sounds like a
really really really crazy concept but
just imagine that you could borrow 100
Grand and then pay back
$98,000 instead of the 100 and Profit
the difference over you know certain
length of time there are some economies
out there that have negative interest
rates their economies are so slow that
they have to really incentivize people
to spend and borrow money for the sake
of growing the economy and at that point
there was even concerns that if you had
a certain amount of money in the bank
account you would actually end up paying
the banks instead of them paying you and
interest because interest rates are just
so low they're negative it's a wild
concept some countries have done it some
countries have it I can't imagine the
United States going through that it's
possible and really anything is possible
at this point it's possible to even put
protein powder and coffee that I just
discovered recently so that's possible
too but negative interest rates is there
I don't think things are ever going to
get that bad to force that to happen but
hey you know what crazier things have
occurred if inflation sits here that
basic shakiness is constantly at risk of
dropping down into the deflation Zone
triggering the bad cycle and the way to
prevent that is to have it sit just a
little bit higher so a little inflation
is usually a good thing yeah that's
annoying yeah we'll see what happens
with interest rates though my bet if I'm
going to place money on something and
listen I could be wrong I think the
Federal Reserve is probably going to
keep interest rates the exact same for
the rest of the year so right now the
federal funds rates sitting about 5 and
a quarter
5.25% and I tend to think if we see
anything we might see 125 basis point
rate cut at some point this year that's
my guess realistically inflation is
having a tricky time coming down it's
hovering around 3 and a half% and
there's still a lot of demand out there
so I think it's probably going to take
way longer than people expect people are
going to have a lot more patience than
they wanted to have the Federal Reserve
is probably going to do absolutely
nothing if inflation starts going up
they're going to have no other choice
but to raise rates at this point it
seems like everything is trending either
sideways or like slightly down but more
so sideways so again I think probably
going to see more of the same over the
next year compan are still having strong
earnings Nvidia just crushed it recently
so overall there's a lot of good things
going on the market prices somewhat
stabilizing still high let me know what
you guys think though Down Below in the
comment section and don't forget if you
want that $20 as a bonus for like 5 to 8
minutes worth of work check out our
sponsor acorns.com or use the link Down
Below in the description it's pretty
good offer 20 bucks for like 5 to 8
minutes enjoy thank you so much and
until next time
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