Why Prices Aren't Going Back Down

Summary

In 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

00:00

😋 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.

05:02

📈 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.

10:04

🏦 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.

Keywords

💡Protein Powder

Protein powder is a dietary supplement used to increase protein intake. In the video, the host mentions mixing protein powder with coffee as a substitute for coffee creamer, which resulted in a flavor reminiscent of chocolate milk with a coffee twist. This example illustrates a practical and creative use of protein powder, highlighting its versatility and potential health benefits.

💡Inflation

Inflation refers to the rate at which the general level of prices for goods and services is rising, and subsequently, the purchasing power of currency is falling. The video discusses the high inflation experienced globally in 2022, with the US, UK, and Eurozone peaking at around 10%. This concept is central to the video's theme, as it explores the impact of inflation on everyday life and the economy.

💡Supply Chains

Supply chains are the networks of organizations, people, activities, information, and resources involved in producing and delivering a product or service. The script mentions supply chain disruptions as a contributing factor to inflation, as these disruptions can limit the availability of goods and thus drive up prices due to increased demand and limited supply.

💡Deflation

Deflation is an economic phenomenon where prices fall consistently over time, which can lead to a decrease in the quantity of money in circulation. The video contrasts deflation with inflation, using Japan as an example of a country experiencing deflation due to a cultural preference for saving over spending, which can lead to a decrease in consumer spending and economic growth.

💡Monetary Policy

Monetary policy refers to the actions of a central bank or monetary authority that determine the size and composition of the money supply, which in turn affects interest rates and inflation. The script discusses how the printing of money into the economy can lead to inflation, which is a key aspect of monetary policy.

💡Interest Rates

Interest rates are the cost of borrowing money and are used by central banks to control inflation. The video explains that governments can combat rising inflation by raising interest rates, which makes borrowing more expensive and can help to reduce spending and slow down inflation.

💡Investing

Investing involves allocating resources, such as money, with the expectation of generating an income or profit. The host of the video suggests investing as a way to combat inflation, as certain assets can keep pace with inflation and potentially grow one's money over time.

💡Acorns.com

Acorns.com is mentioned as a sponsor of the channel and is described as an investing app that helps users invest by rounding up their purchases to the nearest dollar and investing the difference. This service is presented as a way to encourage regular investing, which can be beneficial in the long term, especially in the context of inflation.

💡Federal Reserve

The Federal Reserve, often referred to as the Fed, is the central banking system of the United States. It plays a crucial role in setting monetary policy, including interest rates. The video discusses the Fed's potential actions in response to inflation, such as raising or lowering interest rates, to stabilize the economy.

💡Deflationary Spiral

A deflationary spiral is a cycle where falling prices lead to reduced economic activity, which in turn causes prices to fall further. The video warns about the potential dangers of deflation, explaining how it can create a negative feedback loop that is harmful to the economy.

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