John Oliver returned to Last Week Tonight after a month-long hiatus with an economics lesson on inflation, which has walloped the US over the past two years. Food prices in the US, for example, are up 10.4% over last year, electricity up 13.7%, and gasoline up 59.9% – “so to be honest, it’s probably a good idea to start making your gasoline at home in the morning instead of getting an expensive cup of it on your way to work,” Oliver joked.
The soaring inflation and its strain on many people’s budget have prompted a “a flurry of finger-pointing”, Oliver explained, “with many tending to place the blame on whatever they were already mad at”. Democrats have blamed corporate greed, Republicans blamed Joe Biden, Biden blamed Putin, “and your dog presumably blam[ed] the vacuum cleaner”.
Confusingly, “aside from the dog, they’re probably all at least at a little bit right”, Oliver said, as this inflation crisis is the result of a multitude of factors combining in an “unprecedented perfect storm”.
Oliver broke down the components into an Economics 101 on supply and demand, conducted through the example of three giant spreadeagled frog statues marketed for $1,425 apiece (Oliver purchased all three, which decorated his studio). On the excess demand side, particularly Republican efforts to blame Biden’s stimulus packages during the pandemic: “There is a kernel of truth to it,” said Oliver, as people did have more cash on hand, but “that is not the only reason” for inflation. Many people actually saved money during the pandemic, “and the extent that people were spending money, it mostly wasn’t on services like flights or hotels or restaurants. Instead, it went to goods like furniture, appliances or, I don’t know, some steamy watercolor rat erotica.”
And “the notion that our economy would be fine if not for Biden’s stimulus completely ignores what it would’ve looked like without it,” such as a likely double-digit recession in spring 2021. “So two things are likely true here: the government stimulus did contribute to inflation, but it was also a necessary intervention,” said Oliver.
He then turned to supply, which has been disrupted since Covid by factory shutdowns and supply chain delays. As for Biden blaming Vladimir Putin’s invasion of Ukraine for the supply chain crisis – “that’s just not true”, Oliver said. “Inflation was happening even before Putin invaded Ukraine, so that’s just not how time works. What is true, though, is that Putin definitely exacerbated the problem.”
It is also true that corporate greed has made it worse. “Some companies are taking advantage of this environment to drive up prices, and they’re getting record profits in return,” Oliver explained. “And that is infuriating, but most economists will tell you that’s not what caused inflation in the first place. After all, it’s not like corporations only just got greedy in the last two years. Companies will shamelessly profiteer, the exact same way that a dog will make an absolute meal out of its own ballsack. If left to its own devices, that’s unfortunately just what it’s going to do.”
The thesis of Oliver’s inflation crash-course was basically that there is no one cause of the problem, and “anyone loudly saying that one thing is the cause of inflation is either lying or has absolutely no idea what they’re talking about”, he said.
Regardless of the exact formula of the cause, the entity many are looking to for relief is the US Federal Reserve, which has the power to raise interest rates and thus indirectly curb spending. In June, the Fed announced it would raise interest rates by 0.75 percentage points, its largest hike since 1994 – a move some, including chairman Jerome Powell, dubbed as too late.
Biden has pledged to make tackling inflation his number one domestic priority, attempting to empathize with struggling Americans by saying, in a press conference, “I know you’ve got to be frustrated. I know. I can taste it.”
“No, no, no! Never say that again!” Oliver exclaimed at the comment. “That may be the grossest thing I’ve ever heard come out of Joe Biden’s mouth, and that is saying a lot, because I’ve heard the stuff that he used to say in the 1970s.”
There have been some small, encouraging developments: gas prices have dropped slightly, and long-term inflation expectations recently ticked down after the Fed’s intervention. Most economists now expect this wave of inflation to pass in a year to 18 months. But that’s an “incredibly long time for those suffering the most,” Oliver noted. For all the talk about supply and demand curves, “it’s important to remember that inflation’s effects are anything but abstract for those that it’s hitting the hardest”.
“The next year is likely to be very hard for a lot of people,” he added, “which is why what we should definitely be doing right now is helping them”. He suggested passing a refundable child tax credit for those that need it, and expanding rental assistance, which economists say would have a minor impact on inflation.
Regardless, he concluded, “there are two things that we do know for sure: one, it’s going to take a difficult combination of monetary policy, supply chain recovery and time to bring supply and demand back into alignment. And two, that if everyone does win the lottery in the future, and does suddenly want some frog statues, I just made the smartest investment of all time.”
