As oil prices drop, consider this!

Make Me Smart July 27, 2022 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.

Kai Ryssdal: Alright, let’s go. Let’s go, why we’re sitting around. Hey everybody I’m Kai Ryssdal. Welcome back to Make Me Smart where we make today – which is Wednesday – make sense.

Samantha Fields: I’m Samantha Fields, in for Kimberly Adams, thank you for joining us for Whaddya Wanna Know Wednesday, where we answer the questions that you, the listeners of this podcast, send to us.

Kai Ryssdal: So your questions about the economy, business, technology, take your pick. Email us makemesmart@marketplace.org or leave us a voicemail, our number for that is 508-U-B-SMART.

Samantha Fields: And first up today we have a caller who wants some clarification.

Jay: Hey, this is Jay calling from Minneapolis, Minnesota. And my question is when we talk about negative economic growth, negative GDP growth, are we talking about a graph that has turned and is downward, or are we talking about a growth rate that is declining, i.e., the slope is still up, but the slope has gotten less steep? Thanks.

Kai Ryssdal: Well, I mean, so, yes is the answer to that one. And I know that’s not a satisfying answer. But what we’re measuring here is – so let’s back up from it, right. We’re gonna get GDP tomorrow morning, if you’re listening to this on a Wednesday, it’s going to come out Thursday morning at 5:30am my time, 8:30 in the morning Washington DC time. And it’s going to be our first look at second quarter GDP, that is to say April, May and June. And it’s a big deal this time, because people are looking to see if it will be a second consecutive quarter of negative economic growth. Not that that means we’re in a recession technically. Do not think that, do not tell your friends that you learned it on marketplace that’s what it is. Because that’s not what it is. But it’s a big deal, right? Because the shrinking economy is a big deal. So, it is measuring on an annualized basis, right? If you take that number that we’re gonna get tomorrow, and extended over the year, what the economy is doing. So generally speaking, GDP growth has been positive over the many decades that we’ve been tracking this. So the slope of that graph goes up and to the right. Economies, generally speaking, get bigger and they grow. Sometimes, though, like the financial crisis, sometimes though, like in the 2001 dot-com crash in that recession, and sometimes, as in February and March of 2020, they shrink, they get smaller. And that’s what happens. And so the graph will have a little burble in it. So if you want to take a point graph, sure it’ll go down, but the trend line will be, broadly speaking, up and to the right. And I hope that answered the question.

Samantha Fields: Answered it for me.

Kai Ryssdal: All right. Well, good. Good, good, good. Okay. Jim, in Wisconsin, here’s an email. And here’s what he wants to know. It’s about helium. We just did a story about this, I think. Anyway. With research labs and hospitals concerned about the cost and supply of helium. Did you do that story? Were you … the helium?

Samantha Fields: No, Savannah did and we’ll link it. It’s a good one.

Kai Ryssdal: Right. Yeah. Yeah, no, it was a good piece. So research labs and hospitals concerned about the cost and supply of helium, which is exactly what Savannah did. Why haven’t all those party balloons been priced out of existence? Great question. Does supply and demand not work for that market? Really good question.

Samantha Fields: It is a good question. I love it. And I would say supply and demand does still apply here. Everything I’m reading says most places that use helium right now are only getting maybe 45% to 65%, depending who they are of their normal supply. And it is more expensive for them too. That’s true for party balloons, like you’re asking about, Jim. And also for a lot of the other more critical things. Helium is used in like scientific research labs and hospitals. Also weather balloons that help with forecasting use helium, and some of those have been grounded because there isn’t enough of it. And now I think we should back up for just a sec and talk about why that is for people who maybe haven’t been super in the helium world. And as with so many things these days, it’s a combination of a whole lot of factors, right? There is pandemic related supply chain issues. There’s Russia’s invasion of Ukraine. Russia is one of the major producers of helium along with the US. And there’s also been some shutdowns of helium plants recently here and in Russia, both planned and unplanned. So you kind of put that all together and there’s just not enough helium to go around right now. And companies that supply helium say they’re prioritizing research labs and hospitals and other places that use it for critical things. But stores that sell balloons like Dollar Tree and Party City do say that they’re also having trouble getting it. And it’s kind of unpredictable whether they’ll have it on any given day. So if you’re looking for balloons for a party, they say we can’t promise anything. But honestly, this question now has me wondering why any of the helium that is around right now is going to party balloons. So thanks, Jim.

Kai Ryssdal: I would bet that party balloon purchasers are paying more per unit than like hospitals and stuff, just because…

Samantha Fields: Yeah, but they are too.

Kai Ryssdal: …that’s the way market dynamics works. Apologies for the sirens in the background. I have no idea what’s going on. But, but look, Savannah did a really good piece actually. She did a couple, she did one on Morning or maybe on Tech. We’ll put it on the show page. Because it was a really good piece. It was totally interesting. And a market about which I knew bubkis. Yeah.

Samantha Fields: Hey, me too. So helping make us smarter. Next up, we have an inflation history question, possibly inspired by yesterday’s Deep Dive.

Gail: Hi, this is Gail from Apalachin New York, a place best known for the American Mafia Summit held in November of 1957. I was wondering if there were any actions taken during the Great inflation of the 1970s that were helpful. The Ford administration’s “whip inflation now” program comes to mind. Thanks for making us smart.

Kai Ryssdal: That is such an interesting question. Such an interesting question. I actually have in my office somewhere a “whip inflation now” button. Those of you of a certain age will remember that what Jerry Ford did in 1974, 1975 was – so he started this campaign called “whip inflation now” and they handed out these red buttons with white letters that said WIN, whip inflation now. And it was a complete and abysmal failure. But let me back up for a second and try to set the stage. So Richard Nixon, facing rising prices in the early 1970s, puts in wage and price controls. And they are, as wage and price controls tend to be, they were a complete failure. They did nothing. They created shortages. And that of course, when wage and price controls were lifted, prices went bananas. So Ford had to deal with that. He did it – and this to me is still the most amazing public policy move of his very brief presidency, he basically asked people to voluntarily control inflation. If you remember a couple of weeks on this podcast, we had a listener ask what can I do to control inflation? And I said, Well, fundamentally, you can stop spending. That is what Jerry Ford asked the country to do. He actually gave his speech. He said, Listen, everybody out there, send me some good ideas about how to stop inflation. Swear to God. He also put out these buttons that said whip inflation now. Alan Greenspan, who was the head of the Council of Economic Advisers at the time, later the very famous and long-serving Federal Reserve Chairman, Greenspan, in his memoirs said, and this is a quote, “I thought this was unbelievably stupid”. Truly. So “whip inflation now” did nothing. There were no actual policies coming out of it. It was left to Jimmy Carter when he appointed Paul Volcker to chair the Fed in 1979. And then in 1980 and 1981, when Volcker really cranked up interest rates to break the back of inflation, he drove the country into a recession on purpose to control inflation. But Ford was sort of stuck in the fallow middle of the Nixonian price controls and the aftermath of that, and having the chutzpah and the opportunity to appoint a new Fed chair, like Jimmy Carter did. And “whip inflation now” and Ford was a big nothing burger in the inflation fight. So there you go. Also history…

Samantha Fields: So it sounds like 70s is not so much. Nothing that was that helpful.

Kai Ryssdal: The 70s were terrible, full stop. And I’ll say that on culture, music, Fed policy, take your pick. Food was bad, you know, whatever.

Samantha Fields: Just inflation.

Kai Ryssdal: Oh my god. Yeah, no, no. All right. Here’s… Don’t at me on the 1970s, by the way, those of you who are of age, they were terrible. I was there. Ah never mind. Anyway. Let’s keep going, here’s Laura.

Laura: My name is Laura and I live outside of Madison, Wisconsin. I have a question for you. As I was standing in the midway of our local carnival right around the Fourth of July holiday, I got to thinking about the economics of traveling carnivals and whether ride operators are only responsible for their rides, whether people share the profits of tickets and concessions sales and how that works generally. Can you make me smart on this? Thanks.

Samantha Fields: Okay, Laura. So to answer your question, we actually went to someone else to make us smart. We talked to Greg Chiecko. He is the CEO of the Outdoor Amusement Business Association. And he says it depends. It depends on the event and especially on the size of the event. There can be a lot of different dynamics at play at carnivals and other events. So for big events, like say a state fair, he says, generally, there’s probably some kind of revenue split. So the carnival itself would bring in the games, the rides, the food, the people to work everything, and they’d also sell the tickets. And then they’d probably split the proceeds from the ticket sales with whoever organized and hosted the carnival, so, say, the fair ground. And then for a smaller event, like maybe a church carnival, it’s probably the church that selling the tickets and renting a few rides, probably for a flat rate, and then keeping the money from the ticket sales. Greg also says that depending on the event, carnivals can gross anywhere from less than a million dollars to ten million dollars. It’s kind of a fun fact. And I have to say, I haven’t been to a carnival in a long time. And now I’m feeling like maybe I should seek one out this summer.

Kai Ryssdal: Yeah, but those rides, man, they just kind of… I don’t know, what could possibly go wrong?

Samantha Fields: What could possibly go wrong?

Kai Ryssdal: Yeah, that’s all I’m saying. Oh my goodness. All right. Let’s take a last one here, Juan Carlos. We’ll do this one, and then let’s hit it.

Bill: Hi, this is Bill from Harrisburg. And I have a question. The other day I was listening to Kai on Marketplace, and he right before the numbers said that oil prices were down. And he said with the tone that indicated one of those Kai sighs. And so I have a question: is oil being down a good thing because that means our prices are gonna go down? Is it a bad thing because people, investors are losing money? Is it a bad thing because high prices would mean that we’re gonna cut down on use of oil and thus climate change? Make me smart? Thanks.

Kai Ryssdal: Yeah, so look, Bill, you’re already smart. Because the answer to all of those questions is yes, right? This is a more philosophical question than an economic question. But all of those things come into play, which is why it’s really hard right now to figure out number one, what’s going on with this economy, but number two, what the best course of action might be. Because we need to get off fossil fuels, but if gas prices go down, it’s going to be easier for people to use gas. And that is a bad thing for the environment. Investors and fossil fuels and oil companies. I mean, they’ve been doing fine for a very long time. But let’s not worry about that, right? But the cost to consumers, of high gas prices and high energy prices in this economy, is substantial. First of all, just the straight up gas price, which by the way has been falling for 44 straight days now. But also because petroleum costs go through everything in this economy. And when petroleum costs are high, that means plastic costs are high and transportation costs are high and all that stuff. So that’s a challenge for an inflationary environment. But you kind of answered your own question. The answer is yes. To everything. There are no easy answers. But I think it’s a really good question. And it’s a good thing for us to kind of think about. So. That’s my two cents. It’s my two cents on that one. All right. We are done for this Wednesday. We do appreciate you all being here, as always. Make Me Smart is back tomorrow with news and make me smiles. It’s a Thursday show. Also, by the way, just remember, we’re on break next y– next year, well, that’s a whole different thing – we’re on break next week. Next week is when we’re on break. Bridget right now is having a heart attack. So no new episodes next week. We’ll figure it out this week. We’ll go through Friday and then we’ll take a week off.

Samantha Fields: And in the meantime, please do keep sending us your questions. Our email is makemesmart@marketplace.org. Or you can leave us a voicemail at 508-U-B-SMART.

Kai Ryssdal: Make Me Smart is produced by Marissa Cabrera, today with help from Marque Greene. Olivia Zhao is our intern. Ellen Rolfes writes our newsletters.

Samantha Fields: Today’s show was engineered by Juan Carlos Torrado. Ben Tolliday and Daniel Ramirez composed our theme music. And our Senior Producer is Bridget Bodnar.

Kai Ryssdal: Bridget Bridget.