Plus, the Fed fidgets with the interest rate.
Some publicly traded corporations reported strong earnings today, despite inflation and supply chain shortages. This left consumers to foot the bill for rising prices. Meanwhile, the Federal Reserve is walking a fine line during a critical time. We talk about a key indicator we’ll be watching to gauge the economy’s health. We’ll leave you with some wicked humor from Capitalism herself and fictional pairings we’d like to see (Hamlet, meet the Ghost Busters).
“Fed’s Powell, half-point hike in view, completes hawkish pivot” from Reuters
“Fed’s Powell Puts Half-Point Rate Hike on the Table for May” from Barron’s
“Nestle CEO says growth target conservative, margin more challenging” from Reuters
“Big companies manage to pass on soaring costs to cash-strapped consumers” from Reuters
(Note: Contains some vulgar slang) @tessplease on capitalism
Join us Friday for Economics on Tap. We’ll be livestreaming on YouTube starting at 3:30 p.m. Pacific time, 6:30 p.m. Eastern.
April 21, 2022 Make Me Smart transcript
Note: Marketplace podcasts are meant to be heard, with emphasis, tone and audio elements a transcript can’t capture. Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the corresponding audio before quoting it.
Sabri Ben-Achour: I only know like there’s a techno remix of it. Hi, everybody I’m Sabri Ben-Achour, in for Kai Ryssdal and welcome back to Make Me Smart where we make today make sense.
Marielle Segarra: And I am Marielle Segarra in for Kimberly Adams, thanks for joining us this Thursday, Sabri and I are gonna go over a few news items that we’ve got for you. And then we will wrap things up with some Make Me Smiles. So, let’s start yeah?
Sabri Ben-Achour: Yeah, why don’t you go first?
Marielle Segarra: Okay, so a couple of big consumer facing companies reported earnings today. And they are all doing just fine. Thank you very much, despite inflation and their costs going up, they are passing the cost on to all of us. So Nestle is one example and Danone, which owns a bunch of yogurt brands. And also Evian water. Both of them saw their sales go up significantly. And I know Nestle also saw its profits rise. And they just raised prices in the past year in the past, I think in the past three months in particular. What it made me think about was two things, I guess, companies, the limit to price increases and the limit to inflation, I think comes down to what we are willing to pay, right? There’s going to be a ceiling at some point. But if you’re willing to pay an extra, let’s say 25 cents for that chocolate bar, they’re going to charge it. And so I wonder when we’re going to hit that limit. But then I also wonder, as inflation starts to weigh on all of us, and we look and say, Hmm, like I do not have as much disposable income left this month. What am I going to cut back on? Where do we start to see those cuts? And I think one of them is –
Sabri Ben-Achour: Netflix.
Marielle Segarra: Netflix! Yeah, exactly. They reported earnings, I think it was today as well. And they saw a loss of 200,000 subscribers in the past quarters the first time that they lost subscribers in last decade or more. And they their estimate was that they were going to lose another 2 million next quarter.
Sabri Ben-Achour: Oh my god.
Marielle Segarra: So isn’t that wild? I thought I was looking at the numbers wrong when I saw that. But I mean, it made me think of this woman who I interviewed I think it was last year I did a profile on her she lost her job. During the pandemic. She was a big marketing executive. She was making $180,000 a year, sole breadwinner for her family, three kids. She lost her job, and then was able to cobble together some freelance income and her husband got a job as a janitor. They went from making 180k to 60k. And so that meant some pretty big – Yeah, yeah, I mean, and some families survive on 60k. But if you go from if you’re making a third of what you used to, you have to make a lot of cuts. And one of the first things they did, she made a spreadsheet, and she said subscriptions. She looked up every subscription that they had that she didn’t even realize they had like they had an Audible subscription. She didn’t even know what that was, I think one of her kids signed up for it. And they just went one by one and deleted them because this is really concrete thing, right? You’re like, okay, that’s whatever, $13 a month, that’s $10 a month you can see it and it feels easy to cut. Whereas 25 cents extra for a chocolate bar at the grocery store you might not notice or you might think just a one off thing.
Sabri Ben-Achour: Oh my god. Yeah, no, you’re so right. It’s way easier to Marie Kondo subscriptions, I guess then then maybe material things maybe I don’t know.
Marielle Segarra: It seems like it’s more obvious. Yeah.
Sabri Ben-Achour: I mean, I was surprised when I heard this. I was like, Where are all my fellow cheap as hell consumers because like when I saw the CVS where I get my protein powder, it went up by like 30% the price went up to 30% and I was like, so help me God. I will never pay this price for protein powder. And I went to coupon clipping you know, I like resorted to flavors that I found disgusting. I was like, hell will freeze over before I pay this price, and I’m just like, “Where? Where is everybody?” But I’m sure we’re gonna get there. You know, like, eventually. But it will be interesting to see when
Marielle Segarra: Yeah I think there’s a upper ceiling on what you’re willing to pay, especially if you’ve bought something for a long time. Like, if you think a slice of pizza shouldn’t be more than 2.50 then that might be your your alright, this is it moment. I’m not paying 2.75 for this thing. Now I’m kind of curious what your what your disgusting protein powder flavor is, like, is it like watermelon? I don’t know. Watermelon, catfish or something. Like some weird combination.
Sabri Ben-Achour: No, it’s literally just chocolate tastes like cardboard. But it’s like super. It’s not like the nice chocolate. It’s like the gross chocolate. But you know, my dad told me a story one time about my granddad. This was in Tunisia, who they he decided to take the family out for pizza, which, you know, he was old. And so he had not actually taken anybody out anywhere for a very long time, he had not actually paid a bill for a very long time. And so, you know, a lot of inflation had happened, while you know, during that time. And so he took everyone out to pizza place. And he’s like, Oh, I’ll get this, I’ll get the I will get this. And the bill came and let’s say it was like $10 or something not expensive. And he was like, “What? What is this?” And then he and he pulled out his little change purse and went to the waiter and was like “25 cents, tomatoes, cheese, 50 cents, bread and wheat 10 cents. Here’s your pizza.” And, and my dad and his brother were so mortified. So mortified, but my granddad was so insistent and he liked – so my dad had like, secretly paid the waiter, like, behind the scenes or something and let my very old granddad have that. That win.
Marielle Segarra: I kind of want to try that though.
Sabri Ben-Achour: Personal fight against inflation.
Marielle Segarra: I’m gonna, I’m gonna show up to a restaurant and try that. We’ll see how that goes.
Sabri Ben-Achour: Yeah, yeah, I’ll bail you out. I mean like literal pay your bill. Yeah. Okay, so mine is it is like on the surface, super boring. But Jerome Powell, Fed of the chair, chair of the Fed, was speaking at an IMF meeting. And he said, a half point, interest rate rise is on the table. And my, I am pretty sure that when people hear Fed, chair, interest rate, their eyes glaze over, and they’re like, “please, please address this to someone who cares.” But there’s sort of, I actually think we are in a really critical, critical moment in time in terms of the course of our economy within which we all live. Because, you know, the Fed is trying to get hold of inflation, it’s, you know, raising the rates that banks pay. So the bank’s raise the rates that we pay, it’s doing this thing called, you know, it’s reducing its balance sheet, which is gibberish for basically selling a bunch of Treasuries and other securities on the open market, it’s just, you know, it’s going to start shooting them out there. And just like, you know, if you’re, you know, it’s the phrase a dime a dozen, you know, when there’s so many out there, no one wants them or not enough people want them the price falls. And that makes the, the yield. If people understand what that is the yield on these securities higher, it’s just means they’re just like fidgeting with all these different interest rates in the economy and making it harder to borrow and driving up, you know, all kinds of other interest rates, credit cards, bank loans, auto loans, that will go up too. So now, the reason why this is such a critical moment in our economy is because if they do that, they need to do that enough to get inflation down. But if they do it too much, our economy is going to go into recession. And there are a lot of prominent economists who are saying the odds of that happening of recession happening are not zero. They’re not even close to zero. Matthew Luzzetti at Deutsche Bank is basically saying it’s gonna happen. Goldman Sachs says there’s like 35% chance. Mark Zandi says, you know, one in three chance, so there’s like a real, a real possibility out there, that that is going to be in our future. And I think one of the things that people are gonna be looking at here is the unemployment rate. If it goes up a half a percent for three months, more than it’s been at more than its lowest point in past year. There’s a strong, it’s not a rule, but it’s a phenomenon it usually means we’re recession. So the moment we see the unemployment rate, start to tick up, that is gonna set off all kinds of alarm bells. And people are gonna be watching that very closely. So I don’t know, I just feel like, we got to know the moment that we’re in here, because we are in a moment, for sure.
Marielle Segarra: All right, you go. So, two things that come up for me here. One is this word recession, I think a lot of us, especially who are still scarred by the Great Recession, or I mean, the pandemic recession, have a certain feeling around that word. But recessions can also be pretty small. Right? Like, they don’t all have to be kind of world ending. The way that the last two were,
Sabri Ben-Achour: You are so right. You are 100%, right. And that is that is like a really good point. I mean, we are, as you know, at our age, I’m twent – how, do I find if I lie about my age on the air.
Marielle Segarra: You’re 25 right?
Sabri Ben-Achour: Yeah. 25. Um, but like, if we, yeah, you’re right. Like the only recessions we know, have been, like, catastrophic, basically. But you’re right, we could have a recession. That’s there’s not that huge of a, as much of a deal. But it just sucks when the unemployment rate, you know, goes up and get a bunch of people, you know, out of work.
Marielle Segarra: Yeah. Does – if this happens, if the Fed raises interest rates, and then we see the economy respond in this way where we dip into even if it’s a baby recession, does that validate some economic theory? Is that some like, is that evidence for I feel like there are so many economic theories that we’re like, not really sure if they’re true or not, or they haven’t been true? For the past 20 years that used to be true? Is there anything like that?
Sabri Ben-Achour: Well, I’m sure. I don’t know of any. I do know that the – I’m pretty sure for going back a very long time, the Fed has not been able to get a hold of inflation without raising interest rates above, above the real the inflation, real interest rates above inflation. So that is going to be interesting, I think, to see if that’s the case, basically, how high do they need to raise rates for this to work?
Marielle Segarra: Yeah, because inflation is really high right now.
Sabri Ben-Achour Yeah, it won’t be like what it is right now. Because the average over the year will be lower than this insane 8.5%. In March, we will aren’t we’re not gonna get that high. But you know.
Marielle Segarra: Wild. All right. Well, I think we need to smile now.
Sabri Ben-Achour: Yeah. Totally.
Marielle Segarra: Yes. I want you to go first.
Sabri Ben-Achour: Okay.
Marielle Segarra: Make me smile Sabri!
Sabri Ben-Achour: This is okay. All right. There’s this Instagram person called @tessplease. And she has periodically these videos, which often have an economic bent to them. She basically makes a lot of fun of capitalism. And she’ll like impersonate capitalism, like, hi, it’s me capitalism. And I’m not endorsing a particular critique of it. You know, I’m not endorsing any particular critique of capitalism, this or that, but she’s just funny. Okay. But anyway, we can play like a second of that.
@tessplease on Instagram: Hi it’s Capitalism. I’m thriving. How are you? JK I do not care. My precious CEOs are making record profits during historical inflation. So what if there’s little price gouging here and there? I’ll allow it.
Sabri Ben-Achour I don’t know. She’s really funny. She’s really funny.
Marielle Segarra: And I’m pretty sure you sent this to me on Instagram too.
Sabri Ben-Achour: Oh, I think did actually, I’m pretty sure I did.
Marielle Segarra: It’s like one of the many memes that we exchange daily. I think she she is funny and no capitalism. I am not thriving. Thank you very much. Appreciate it, but no. So mine is also from it’s from social media. From an account I follow on Twitter called the moons wife. I do not know this person, but she is just delightful. The things she tweets out, fill me with joy and wonderment and today, she tweeted this question. “Do you ever wish fictional characters from different universes could hang out together? I think Peter Rabbit would have gotten into such vegetable stealing mischief with Merry and Pippin from Lord of the Rings.” The two hobbits if I’m if – O’m getting that, right, so I kind of went down the rabbit hole with this one. And I came up with some suggested pairings from literature and film. So right here goes. We have Hamlet, who is the original emo kid and you know, haunted by his his dad’s ghost with the original Ghostbusters.
Sabri Ben-Achour: Ohh. That’s, that’s that’s good.
Marielle Segarra: Pretty good. I feel like they could help him with his problem. We have Fran Drescher from “The Nanny” and Logan Roy from “Succession”. She would be his publicist, and she would get on him about his style like, “Logan. You gotta you gotta spice it up a little bit like put on some leopard print.” You know? He would be super annoyed. We have Lady Macbeth and Jessica Rabbit, hear me out here. The reason Lady Macbeth is so mad is because she does not actually want to date men. Like she’s into women. She meets Jessica Rabbit. Her head turns the two of them make a saucy couple and she kind of evens out a little bit.
Sabri Ben-Achour: Jessica Rabbit is a rabbit though, right?
Marielle Segarra: She’s a rabbit. But shes’s like a sexy rabbit. She’s like a you know, she’s got that red dress.
Sabri Ben-Achour: Jessica Rabbit, wait. Jessica Rabbit from, from, from what?
Marielle Segarra: “Who Framed Roger Rabbit.” She’s not a rabbit after all.
Sabri Ben-Achour: I was thinking Peter Rabbit. You know the one that the vegetable rabbit? I didn’t get it.
Marielle Segarra: For some reason I pictured her with a rabbit ears. But yeah, she’s got the red hair, both she and Lady Macbeth have red hair. She’s got the red dress and the gloves.
Sabri Ben-Achour: You’re very creative.
Marielle Segarra: I’m gonna throw one more at you. Okay, Ron Swanson from “Parks and Rec.” Notable curmudgeon and the mouse from “If you give a mouse a cookie.”
Sabri Ben-Achour: Oh, what did the little mouse cookie the cookie mouse like melt his heart or something?
Marielle Segarra: “If you give a mouse a cookie, he’s gonna want some milk to go with it and then he’s gonna want a straw for the milk and then he’s gonna want a napkin because his face gets to – “he would just annoy the crap out of Ron Swanson.
Sabri Ben-Achour: Oh, I get it. I think you have a future with, well I was gonna say Netflix but let’s go with maybe not. I guess that’s it. Yeah, I did. I love him. I guess that’s it for today. I’ll be back with Amy Scott tomorrow for Economics on Tap. We will have a drink, play a game, talk about the news I guess. That show will stream live on YouTube at 3:30pm Pacific 6:30pm. Eastern. If you want to join us for a visual.
Marielle Segarra: And in the meantime, send us your thoughts or questions please our email is makemesmart@marketplace.org or leave us a message at 508-U-B-SMART. Make me smart is produced by Marissa Cabrera and Marque Greene with help from our intern Tiffany Bui. Today’s episode was engineered by Charlton Thorp.
Sabri Ben-Achour: Bridget Bodnar is the senior producer, the director of On Demand is Donna Tam.
Marielle Segarra: You know I’m a little embarrassed like how much time I spent coming up with these pairings. I have a Google doc.
Sabri Ben-Achour: Of course you do.
Marielle Segarra: I’m going to send it to you.
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