- Whoa.

What's that high in the sky?

It's a bird, it's a plane.

Nah, it's literally just gas prices.

What up, world?

Myles Bess here, journalist, host of "Above the Noise".

And in our last video, we talked about inflation and some of the reasons why everything is so dang expensive.

Oh hey look, it's me, it's a nice shirt you got there, Myles.

So today we're doing a follow up to that video and asking, what can we do about inflation?

So first, a quick recap on what inflation is.

It's basically just the increase in the cost of a bunch of different goods and services over time like gas, food, cars, clothes, rent, healthcare, you name it.

And The Federal Reserve, the granddaddy of all the other banks, tries to set policies that keep inflation at around 2% each year.

But as of April of 2022, inflation is running at about 8.3%.

That's a big difference.

This basically means that stuff on average costs 8.3% more than it did the same time last year.

And there's a lot of debate about all the different things that are causing this.

But in general, economists typically agree that these two things played a role.

Number one, the pandemic.

Long story short, places shut down, workers couldn't go to work, companies aren't able to make and ship enough stuff that people wanna buy.

So supply is low, and demand is up, and spoiler alert, this is all still happening.

And number two, fossil fuels.

We rely a ton on fossil fuels so we're at the mercy of the global oil market which goes up and down a lot, and it's something that we don't have a ton of control over.

And the war in the Ukraine is driving prices up even more at the moment.

And then there's even more debate on how much these two things contribute to inflation.

Number one, big evil corporations.

In markets where there's just a few mega corporations, those companies can raise prices without fear of competitors undermining them, and they're seeing record profits.

And number two, COVID stimulus.

The money that both Trump and Biden gave out could account for about 3% of the inflation we're seeing, but there's a lot of uncertainty around that number.

See that shaded area?

Yeah, that's the uncertainty.

But this video, the one you're watching right now is about what we can do about all this inflation.

First up, take a lesson from history.

So the last time inflation was really high was back in the late seventies, early eighties.

In fact, it was so bad that in 1974, President Ford declared it public enemy number one, worse than drugs.

Can you believe it?

Worse than drugs!

By 1980, inflation topped out at around 14.8%.

People were freaking out, like losing their minds.

So the granddaddy or grandmama of all banks, The Federal Reserve, AKA The Fed, stepped in and decided to do something drastic.

So here's the deal.

The Fed is the central banking system of the US.

It basically sets the rules and controls how money flows through the banks.

You wanna go to college, buy a house or expand a business?

You'll probably need a loan to do that.

And The Federal Reserve sets the interest rates.

So you're probably thinking, what exactly is an interest rate?

Well, I asked our friends over at "Two Cents" to help me out with this.

- Hey, Myles.

So when it comes to borrowing money, an interest rate is basically what a bank charges you to take out a loan.

So let's say you need a $50,000 loan to pay for college and the bank charges you a 6% interest rate.

- If you agree to pay the money back in 10 years, you'll end up paying about $16,000 in interest, and that's on top of the 50K you originally borrowed.

The higher the interest rate, the more money you'll end up paying the banks.

- Okay, so back to The Fed.

This dude, Paul Volcker, became the head of The Federal Reserve in 1979.

And he was basically like, "look, inflation is so high because there's too much money floating around.

So I'm going to make it a lot harder for people to access all this money."

And he did that by increasing interest rates.

By a lot, we're talking like 20%.

And this had a huge ripple effect, infamously known as the Volcker Shock.

It ended up sending the economy into a recession, and unemployment soared.

It was real bad, but it did end inflation.

To help paint a picture of just how bad the recession was, historian Tim Barker writes, "90% of job losses occurred in mining, construction and manufacturing."

In places like Flint, Michigan, and Youngstown, Ohio, more than one in five workers were unemployed.

In the areas around Pittsburgh, suicide rates and alcoholism soared, while residents competed for spots in homeless shelters.

And the recession also hit black Americans particularly hard, resulting in unemployment rates close to 20%, when overall unemployment hovered at around 8% to 10% during the early eighties.

But the Volcker Shock got inflation under control, and eventually, the economy recovered.

- What happened during that period that caused inflation to stabilize?

There's two theories.

One is that we had a lot of unemployment that caused a recession, people stop spending as much money, and that allowed inflation to come down.

- That's Damon Jones, an economist and professor at the University of Chicago.

- The other thing that people say is to send a strong signal.

To show to everyone that if inflation gets outta control, we will raise interest rates, even though it's gonna be painful.

After that, inflation came down, and inflation was steady at around 2%.

- So back to today, The Federal Reserve has already started raising interest rates a little, I'm talking in March of 2022, it raised it a quarter of a percentage point.

In May, it raised it another half of a percentage point.

There's predictions that The Fed will likely increase to 2.9% by early 2023.

That's a lot lower than the 20% Volcker raised it to.

But these increases are designed to control inflation by basically doing two things.

One, cooling the economy, and two, easing people's fears about out of control inflation.

You see, fear of inflation can actually drive inflation.

- If you're a business and you're thinking inflation's gonna go up, the materials I buy are gonna be higher, I need to raise my price to cover that.

- But it's a delicate balancing act of not cooling the economy off too much that it'll lead to job loss or recession.

But not everyone agrees that raising interest rates is the way to go.

And some experts argue that doing so might actually make things worse.

For example, if businesses are already having a hard time producing stuff, raising interest rates can make it just that much harder for them to invest in the things that they need in order to make more stuff.

Now, one strategy that's pretty controversial among mainstream economists is to institute price controls.

Some are arguing that strategic and targeted price controls could help fight inflation, by limiting just how much a company can raise their prices.

Just look at AriZona Iced Tea.

That stuff's been 99 cents for 30 years, that's kind of like a self-imposed price control.

How do they do it?

The company makes less money.

In the words of the founder and chairman of the company, "I'm committed to a 99 cent price.

When things go against you, you tighten your belt.

Consumers don't need another price increase from a guy like me."

And that guy is worth $4.3 billion.

I've definitely contributed to that money with my AriZona purchases.

And then there are also some longer term solutions experts argue could help inflation.

One is ending our dependence on fossil fuels.

- It's good I think, to shift to more green sources or renewable sources of energy anyway, but another benefit could be that we won't have to be as affected by oil pricing.

- Green and renewable energy on the other hand is way more stable.

Another thing that could help with inflation is to address bottlenecks in the supply chain.

This could mean investing in more manufacturing here in the good old USA.

There's also a shortage of housing that's driving rental prices up, and those increases contribute to inflation too.

Experts at the Roosevelt Institute argue, "if you really wanna help families out, address their biggest line item in their budget, rent.

So adopt policies that'll increase affordable housing."

- We have a lot of places with exclusionary zoning.

They don't let certain types of housing be built and that causes prices to go up for housing and rent.

- And I'll leave you with one final long-term solution, and that's enforcing antitrust laws and breaking up monopolies.

- Making sure that we don't have markets dominated by just one big player, can help to keep prices low as well by making sure that they aren't raising prices unnecessarily or lowering the wage that they pay to their workers.

- In our last video, we talked about how four big companies control 82% of the beef packing industry.

You want another example?

Grain production.

Four companies control 90% of the market there.

And according to an investigation by The Guardian, one of those companies saw profits increase by 55%, and another company saw profits go by $280 million.

That's a lot of bread.

So in conclusion, increasing interest rates can provide more immediate control to rising inflation, but there is a trade off.

It's designed to cool the economy which can hurt people in the short term.

And those other solutions I talked about take a long time to implement and see the effects from.

So is there anything us ordinary folks can do about this?

- I think it's important for young people to know that they do have a voice that needs to be heard, even if you're too young or not allowed to vote, there are other ways to stay engaged.

And if you didn't catch part one about all the causes of the current inflation, be sure to jump on that.

As always, I'm your host, Myles Bess.

Peace out.

Oh yeah, and shout out to our friends over at "Two Cents" for helping us out.

Check out their channel, they're dope.

Till next time, bye.