DeepSummary
The episode discusses the difference between how economists and the general public view the causes of inflation and ways to fight it. A survey by the National Bureau of Economic Research found that the public believes government spending, particularly foreign aid, is a major driver of inflation, while economists disagree. The public also thinks raising interest rates will increase inflation, contrary to economic orthodoxy.
The episode also covers the World Bank's updated global economic outlook, which improved due to the resilient US economy. However, the bank expects interest rates and inflation to remain elevated over the next few years. The transcript then provides historical context on the Federal Reserve's aggressive interest rate hikes in the 1970s and 80s to combat double-digit inflation.
The episode includes promotional messages for Marketplace's summer book club and an upcoming podcast series by host Lee Hawkins called 'What Happened in Alabama?' which will explore his family history and the trauma experienced by many Black Americans.
Key Episodes Takeaways
- There is a significant disconnect between how economists and the general public view the causes of inflation and effective ways to combat it.
- The public tends to incorrectly believe government spending, especially foreign aid, is a major inflation driver and that raising interest rates increases rather than lowers inflation.
- Economists dismiss these public views as unfounded, arguing they don't align with data, economic principles and policy objectives.
- Official inflation metrics like the CPI may not fully capture the lived experiences of different demographic groups, contributing to the expert-public divide.
- The World Bank has improved its 2023 global economic growth outlook due to US resilience, but still anticipates elevated inflation and interest rates.
- The Fed's current measured approach to raising rates contrasts with the more aggressive recession-inducing tactics it employed to quell double-digit inflation in the 1970s-80s.
- Clearer public communication from policymakers explaining the logic behind their actions could help bridge the expert-public gap on inflation perceptions.
- The transcript includes promotional segments for unrelated Marketplace content.
Top Episodes Quotes
- “When we live in environments of high inflation, we tend to see interest rates go up. And so the causality might not be clear, right? We see a correlation that's there, and it might be difficult to trace the causality.“ by Lee Hawkins
- “Most people surveyed said government spending causes inflation. That can be a factor depending on the program. But when asked what kind of government spending they're concerned about, people think that foreign aid from the United States is the number one source of inflation. It's a joke.“ by Yuri Garudnichenko
- “One solution, says Francesco da Kunto, a finance professor at Georgetown who studies how people understand inflation, fine tune the communication of policymakers in a way that actually makes very clear what the objective of the policy is.“ by Lee Hawkins
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Episode Information
Marketplace Morning Report
Marketplace
6/12/24
The general public doesn’t always see eye-to-eye with economists on why inflation happens or on how to fight it, a new survey finds. We’ll unpack. Plus, a resilient U.S. economy lifts global economic outlook. And later: The Federal Reserve is expected to leave interest rates unchanged today. But let’s revisit the ’70s and ’80s, when the Fed was battling double-digit inflation and didn’t have the luxury of patiently holding interest rates steady.