The Young Turks - Permanent Distortion

Episode Date: October 19, 2022

The reason your rent is spiking? It could be this company’s algorithm. The Young Turks interview Nomi Prins. Katie Porter just skillfully broke down how the greedy corporate world has contributed to inflation. The grocery chains Kroger and Albertson's potential merger would create a grocery giant. Host: Ana Kasparian Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

You're listening to The Young Turks, the online news show. Make sure to follow and rate our show with not one, not two, not three, not four, but five stars. You're awesome. Thank you. What's up, Friends, you're watching TiT, and you're watching TYT, I'm your host, Anna Casparian, and today's show contains a huge treat. We're going to have an interview with Nomi Prince, one of my favorite people on the planet, period. She's an economist, an author, someone I've interviewed on the show before in regard to other

books that she's published. And she has a new book out that talks about the distortion we're seeing in the economy between, you know, the asset economy versus the real economy. It's a really, really important topic to discuss. It's something I'm really interested in, and I hope that, you know, you guys will inform yourselves about why it is that there's this huge disconnect between what we're seeing in the stock market oftentimes and what Americans are experiencing with their personal finances and just the inequality that continues to explode here in the United States on all

across the globe. So that is something that we'll be doing in the second segment of the show today. We're also going to be talking about Katie Porter drawing attention to one of the major factors that's leading to inflation. And corporate greed, of course, has a lot to do with that. In the second hour, John Ida Rola will be joining me, which I'm looking forward to as well. Donald Trump has said some other pretty terrible anti-Semitic stuff on tape. And that's just been released. It's making its rounds online.

And we'll talk about it with John later in the second hour. But as always, just want to encourage you guys to like and share the stream. If you're watching us live, it's a great way to get the message out about TYT, but more importantly about the topics that we discuss and it helps to promote the progressive message. I also want to just quickly say thank you to one of our viewers who happened to be watching when I made a casual comment about a bumper sticker that I came across and I thought was incredibly hilarious. It's obviously poking fun at the don't tread on me, you know, a sign or sticker and it just says no step on snake. I don't know why I find it hilarious, but it just is. So thank you to Denny for sending that in. I really appreciate it. It was just an offhand casual comment I made on the show one day, and he took the time to order this and send it to me.

So I'm really appreciative of that. All right, we're going to have a big economy hour in the first hour today. And I want to start off with a little-known story that was just reported on by ProPublica. So without further ado, let's get right to it. Evan Ross faced a brutal wake-up call when his Miami Beach landlord told him rent was nearly doubling. I could either pay $6,500 a month and pay it every month, or if I paid the entire year up front, I could write one check for $72,000, which would be equivalent to $6,000 a month. And they would accept that. Now, unfortunately, Evan Ross's experience is not an anomaly. Many Americans all in. across this country are struggling to afford the rent spikes that they're being confronted

with by their landlords, oftentimes corporate landlords. And while we've talked about all of these different factors that are playing a role in the spike in rental costs, whether it's private equity firms monopolizing the rental market, whether it's just greedy corporate landlords, you know, increasing rent to make up for some of the lost rent they may have experienced during the COVID pandemic. There are other issues that are not really known about. In fact, I didn't even know about it until ProPublica did this explosive report about how the tech industry is now getting involved, using algorithms to jack up prices while simultaneously colluding with all these corporate landlords to, well, it looks like they're fixing the prices in some cases. So I'm going to

give you the details on what's going on. It's really important to know about this. It's also important to understand that the impact of this on the overall cost of rent across the country isn't fully known yet. But this is something that I personally think is going to become a bigger problem as the years go on. So for years, this company known as Real Page has sold an algorithmic software system that specifically helps corporate landlords jack up rent prices and basically do so in a way where they're able to make enough money from some of the people who are willing to pay the increased costs, while a huge portion of their units remain empty, vacant.

It's pretty incredible stuff. So they use an algorithm that decides what the cost of the rent should be for these corporate landlords. And then the corporate landlords with absolutely no empathy, no consideration, no negotiation with the tenants, we'll just jack up the prices. And whoever stays, stays and pays that exorbitant amount for rent. And a lot of people can't afford it so they leave. But the point here is they jack up the rent so much that those who are willing to pay the higher rent, make up for the vacant units and then some.

And it maximizes profits like you wouldn't believe while leaving many Americans without a home. So here's how it works. To arrive at a recommended rent, Yield Star, which is the name of the software that we're talking about here, deploys an algorithm, a set of mathematical rules to analyze a trove of data that Real Page gathers from clients. So understand what they're doing. They're gathering all this information from all these landlords. And they're ensuring that the landlords basically all charge similar amounts for the rent.

So it kind of leaves Americans without many options. So there are some potential antitrust issues here, which we'll get to in just a moment. But get a load of this ad for the software that Real Page had put out back in 2014. Think of these golf balls as your residents. Once the jar starts filling up and hits that magical market occupancy rate, a lot of companies start to relax, thinking this performance is good enough, especially during the good times. What they lose sight of are the opportunities to continue to drive rent growth

on the remainder of their community and significantly outperform the market. The vase may look full, but is it? Or is there room for more opportunities? By maximizing internal asset opportunities and capitalizing on turns in the market, Yield Star has helped thousands of communities and hundreds of our partners continuously outperform over the last 10 years. Imagine the opportunities Yield Star can provide for you. Our innovative approach and data availability deliver optimized pricing and asset performance based on calculation, not speculation. You've got no vacancy, everyone's paying their rent on time.

You're satisfied. you're content. I mean, the market is working the way it's supposed to work, right? You're basing the cost of rent on market forces. What this software essentially pushes landlords to do, or encourages landlords to do, I think that's a better way of putting it, is to start charging rent that is over market value. Okay, so let me give you more details on how this works. As ProPublica writes, For tenants, the system upends the practice of negotiating with apartment building staff. Real page discourages bargaining with renters and has even recommended that landlords in some cases accept a lower occupancy rate in order to raise rents and make more money.

And this, in my mind, answers a huge question I've had for such a long time as we see these ivory towers built all around Los Angeles and other big cities. These major apartment complexes with luxury units that sit empty. And I always wonder, the developer, how is the developer or the landlord making money off of this? And there's a pretty good chance that they're relying on this algorithm, this software to jack up the rents to a point where even with all those vacancies, those who remain, those who are who agree to pay the rent, oftentimes because they have no choice and they just have to pour all their money into that rent, are again. making up for the vacancies and still providing even more of a profit, it's insane. So apartment managers can reject the software suggestions, but as many as 90% are adopted, right? So more often than not, the corporate landlords are like, no, I'll implement this.

Let me try my luck. Let's see how it plays out for me. There are certain parts of the country where the software is widely used already. And I think it's important to look at the numbers to see the impact that it has. had. So for instance, in one neighborhood in Seattle, ProPublica found 70% of apartments were overseen by just 10 property managers, and every single one of them used pricing software sold by real page. And the consequences to that are pretty dire. So let's talk a little bit about what you're likely to see if you have the misfortune of living in one of these

buildings. So corporate landlords who use the software have seen their profits rise even during economic downturns. So think about it. There's an economic downturn, like in the beginning of the coronavirus pandemic, where landlords, small landlords in particular, were trying to make the units that they were trying to rent out a little more desirable, a little more affordable, a little more affordable to maintain occupancy. Now, the nation's largest property management firm, Graystar, found that even in one downturn, it's buildings using Yield Star, which again, that's the software we're talking about here, outperform their markets by 4.8%. A significant premium above competitors, Real Page said in materials on its website. By the way, since this

was reported, they've taken down a lot of content from their website. Graystar uses Real Page's software to price tens of thousands of apartments. It's also worth looking. at some specific other specific cases to kind of get a sense of how much of an impact this has had. So it it really turns this whole notion of the free market on its head, right? The supply and demand idea is kind of thrown out the window when they game the system this way by having all these corporate landlords collude with one another on what they're charging for rent because that's the other part of the software. It's baked into the software. A proof of concept version of the software had performed well in tests at townhouses,

Camden Property Trust offered for rent in its home city of Houston. At the time, the street behind Camden's townhouses was shut down while a grocery store was being built. Leasing staff wanted to discount rent for the townhouses because of the obvious nuisance, said Kip Zacharias, who worked at Camden as a consultant. So that's usually what landlords will do, right? Who wants to rent or continue paying higher rent in a building where the street next to it is shut down and there's all this construction going on with the grocery store. Oftentimes landlords would decide against raising rent and they would actually give some sort of discount

to keep units in that building desirable to renters. But that is not what happened. Instead, Yield Star suggested boosting rents. We were like, guys, just try it, Zacharias said. The units ended up renting for significantly more than staff had expected. That was kind of the eureka moment, Zacharias said. If you'd listen to your gut, you would have lowered your price. But again, that is not what they did. The practice of lowering rent to fill a vacancy was a reflex for many in the apartment industry. Letting units sit empty could be costly and obviously nerve-racking for landlords, but not when they used this software. Such agents sometimes hesitated to push rents higher. Jeffrey Roper, principal scientist at Real Page, said that they were, said they were

often peers of the people they were renting to. We said there's way too much, get a load of this, there's way too much empathy going on here. This is one of the reasons we wanted to get pricing off site. So think about, it's like the drone strike version of the housing market. Okay, the whole thing with drone strikes is you press a button and you cause damage. You kill people. And that, you know, face to face combat where you're watching someone die before your very eyes, like that, that element is taken out of it completely. So it feels like a video game. When it comes to housing and the use of this software, it's kind of a similar idea. Because if you're negotiating with a tenant who just can't afford higher rent, well, it humanizes the person, right?

You're talking to an actual individual who's struggling, and you might have empathy baked into that whole situation because, again, it is a person-to-person negotiation process. And humans, I mean, it doesn't seem like it these days, but fact of the matter is, they do have some degree of empathy that might impact their decision on how much they should increase the rent price. The whole idea with the software is, no, no, you're just going to have an algorithm, decide for you, and it takes the empathy out of it. Because the real problem, according to Real Page, was that the previous method

and the method that a lot of small landlords still use today, just had a little too much empathy in it. Now remember, we're talking about people who need a roof over their heads, a roof over their family members' heads to survive, just a basic, fundamental thing that people need to live and survive in the world. Again, a roof over their heads. But hey, according to Real Page, you got to take the empathy out of it. You got to maximize your profits. You really got to get a great return on your investment. It's insane. Now, such agents sometimes, as I said, had hesitated to do this. Now, some of the tenants did move out when Camden's properties

increase their rents. But this is the most important part. Camden Property Trust's turnover rate increased about 15 percentage points in 2006 after it implemented Yield Star. Rick Campo, the company CEO, told a trade publication a few years later. But that wasn't a problem for the firm. Despite having to replace more renters, its revenue grew by 7.4%. So again, what Campo learned from this experiment would actually,

actually end up being pretty devastating for Americans looking for affordable housing, looking for affordable rent. The net effect, he said, of driving revenue and pushing people out was $10 million in income. I think that shows keeping the heads in the beds above all else is not always the best strategy. They say it out loud, guys, they say it out loud. And you have to rely on independent media sources, real journalists like those who work over at ProPublica to shine a light on what's really going on. This story isn't going to be on CNN, it's just not.

It's not going to be on MSNBC, certainly not going to be on Fox News. It's not going to be on network news. This is the stuff that matters. It has an impact on your day-to-day life. And it's just there in plain sight. You have these corporate CEOs straight out saying, you know, keeping people housed, Not profitable. Sometimes we don't want to do that. Sometimes we want to watch people suffer if that means we're going to see a massive return on investment. If we're going to see a huge increase in our profits, that is what he's saying there.

Now, Real Page might be breaking the law. And this is where the antitrust issues come into play, because antitrust enforcers might find that the use of private data on what competitors charge in rent is illegal. and could even amount to illegal collusion between landlords, right? Because you're not supposed to collude as a landlord and be like, yo, what are you charging for rent? Okay, then if you're charging that, then I won't charge anything less, right? It creates a rental market that is not competitive, which is why this could potentially be an antitrust issue. This also stifles competition, clearly, and artificially inflates rent prices, even if there's an economic downturn where conventional, wisdom would have you believe that landlord should be decreasing the cost of rent. The story also gets even more gross once you learn who's behind the software, one of the chief

architects behind this software. It's actually a business executive by the name of Jeffrey Roper. We mentioned him a little earlier in this story. And Jeffrey Roper had gotten into some trouble back in the day when it came to the airline industry. So let's go to that graphic. Jeffrey Roper was Alaska Airlines' director of revenue management when it and other major airlines began developing price-setting software in the 1980s. Competing airlines began using common software to share planned routes and prices with each other before they became public. The technology helped head off price wars that would have lowered ticket prices. But back in the day, I mean, this is in the 1980s and early 1980s.

The Justice Department was a little better, and so they got involved, they investigated this. The Department of Justice said the arrangement may have artificially inflated airfares, estimating the cost to consumers at more than a billion dollars between 1988 and 1992. Now, the government, because of their investigation and because they were somewhat effective back in the day, decided to get involved, and luckily there were settlements and also consent decrees. for price fixing, and eight airlines were involved with this price fixing scam. And guess what? Alaska Airlines happened to be one of them. Now, that same guy, Jeffrey Roper, who was Alaska Airlines' director of revenue management, is the chief architect of this software

that's being used by corporate landlords to artificially inflate and jack up rent prices across the country, in places like Seattle, for instance. And as we know, rent is insanely high in Seattle. Now, again, I want to repeat that despite the pernicious nature of this software, it's really difficult at this stage to understand how much of an impact it's had on the overall rental market. There is a housing crisis. There is an issue with the lack of construction.

There's a tight market for homebuyers that's been exacerbated by the housing shortage. And so you have to take those factors into account. I think those are incredibly important factors. But with that said, the idea of allowing algorithms to game the system so corporate landlords can price gouge renters and artificially increase rent prices is not only gross. It should be considered criminal. The Justice Department should be investigating this. And it is absolutely sick to see how something as important as housing can continue to be this profitable market, an asset, you know, something that investors use for personal gain, knowing full well how incredibly important housing is for everyone to survive. Anyway, it's a great story. Please read the entire piece at ProPublica. I promise you you won't be, you won't regret it. It's one of the hardest parts of getting older is feeling like something's off in your body, but not knowing exactly what. It's not just aging. It's often your hormones, too. When they fall out of balance, everything feels off. But here's the good news. This doesn't have to be the story of your next chapter. Hormone Harmony by Happy Mammoth is an herbal formula made with science,

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Excellent reporting and I'm really glad they did it. For now, though, we got to take a break. When we come back, Nomi Prins, economist and author will join us to talk about the permanent distortion in our economy. Come right back. Welcome back to the show. And this is a segment I've really been looking forward to, a topic that's super important and should be top of mind for every American. Joining us now is Nomi Prince, author of many incredible books, an economist as well.

She has published all the president's bankers. It takes a pillage behind the bonuses, bailouts, and backroom deals from Washington to Wall Street. And her latest book, Permanent Distortion, How the Financial Markets Abandoned the Real Economy Forever. No Me, it's always a pleasure to talk to you. Thank you so much, Anna. I'm very excited about this segment too. Yes. You know, you had previously written a book titled Collusion, not about Russia or any of that.

It was about central banks and how they collude with one another. and essentially game the economy on behalf of corporate interests. And I think it's really, really important to keep talking about that. And this book is kind of a continuation of that trend. And, you know, when you talk about permanent distortion, you're talking about the distortion between, you know, the asset economy and the real economy. So tell me what you mean by that permanent distortion. Why is there a disconnect?

Right. So first of all, yes, in my last book, I talked about the period really up through 2019, sort of pre-pandemic and what central banks were doing to effectively create money, not effectively, actually to create money, lower rates, have an average interest rate of zero for the banks and Wall Street and companies that could access it at that cheap level. Of course, real normal, regular people in the real economy don't have that luxury, they still don't. But why that became permanent is when we got to the pandemic period and everything was shut down,

and all of us were anxious and we didn't know what was going to happen, all of that on certain news going on, that the Federal Reserve decided to double the size of its asset book. It effectively went from around $4 trillion. It had been $4.5 trillion of money. It just kind of created to buy bonds through Wall Street to stick on its balance sheet, to hang out there doing nothing productive for anything. And then it doubled that amount to $9 trillion. And by doing that in the pretext of helping the real economy, it permanently distorted

the relationship between where money comes from and where it goes into the financial markets versus where it comes from and where it doesn't go into the real economy. And the reality since that time is everyone has accepted the fact that for some reason, you know, the Federal Reserve actually helped the real economy, which it did not. I mean, I think one thing that Americans are a little more privy to right now is how the Federal Reserve, which just to be clear is an unelected body that has a huge impact on our economy. They're currently through the increase of interest rates having a very negative impact on the personal finances and economic situation for ordinary Americans. I want to go back to that in just a moment.

But just to kind of further understand how this process works, it's different from just lowering interest rates, right? That's a separate thing. What you're referring to is quantitative easing. That's right. And it still sounds wonky when we continue to see it today. It was it was wonky back when they talked about it in the wake of the financial crisis of 2008, when there was a bailout and there was $4.5 trillion of quantitative easing created by the Fed for the financial system. And it wasn't just the Fed. All the central banks, as I talked about collusion, were at least the major ones were. The ones in sort of developing countries don't have the luxury of just being able to, you know, create money and have it go into their market system.

This is a big country kind of thing. And in the wake of that quantitative easing and this particular period where the Fed double that, it's a way of effectively giving a credit line with no accountability, no responsibility, and effectively no interest or very low interest to Wall Street and however that flows out into the financial markets. That's what it is. It's like we'll have rates here for ordinary people and a little bit for companies in Wall Street that has to deal with higher rates, but they pass it on, right? And then we have money, which is unattached to those rates, which just flows through. Just literally fabricated.

$41 trillion of money is currently on the books of central banks around the world. It was fabricated. That's crazy. Forty-one trillion dollars, guys, understand. There's $41 trillion of fabricated money floating around the global economy. That's been floating around. And so it's no surprise. And a lot of that was created in the wake of the pandemic, but it was also accumulated through, through the financial crisis period. And so it's no surprise that markets are so unmoored anyway from the real economy. When people need to understand fundamentally, is this method is done to ostensibly help the real economy.

That's the narrative. That's the cover story. That's the cover story. But that's not what happens. And we know this because of how much leverage the markets have had and how much they have outperform the real economy when they go up and when they go down. Okay, so let's talk about how that works because the cover story is that this fabricated money is meant to, in a sense, it's a little different from trickle down economics, right? But it's supposed to get to the real economy, in the form of loans, I guess, for small businesses and things like that.

I mean, I don't fully understand what the cover story is because what do they claim, how do they claim that money is supposed to get to ordinary people and benefit their lives economically? And the second part of the question is, what does, what does Wall Street do with the money? That's an important part of it as well. Right. And those are tied together because ostensibly, yes, the narrative says that if there's a problem in the system, the economy shuts down, there's a financial crisis caused by banks. So we need to sort of help them give money away that ostensibly they will do. But we won't make them accountable to doing that. We will have no rules.

We'll have no regulations to make them do that. And so they don't, because why would they? But what happens is this money goes into banks. The reason it does is because of how the financial system is structured. The financial system is structured in a triangle. The triangle is this. The government borrows money in the form of bonds, treasury bonds, and other forms of government bonds around the world.

Those bonds get sold to the rest of the world, other central banks, pension funds, people through banks. Banks are primary dealers. They get it first, right? Then what they've been doing because of quantitative easing is giving it back to the Fed who creates money out of nowhere to buy this debt back. So you have this triangle that just by definition doesn't go into the real economy, although yes, it is supposed to go out in the form of small business loans, better conditions and credit for real people and everything else. We know that hasn't happened. In fact, it has flown into the markets.

It has gone to the top of society and it hasn't filtered in, not in wages, not in loans, not. in small business growth and not in any sort of fundamental long-term strategy that could help the foundation of the economy. So there is that distortion between the, you know, between assets and what we're experiencing in the real economy. And, I mean, it's made me incredibly nervous because while the wealthiest people tend to be the ones who are heavily invested in the stock market, you still have, you know, retirement accounts associated with the stock market, ordinary people who've been saving, doing what they're

supposed to do. And it feels like the stock market is this house of cards, right? These assets are just so incredibly inflated. And I keep thinking, all right, that house of cards, it's going to topple over at some point. But it seems like any time we get close to that, the Fed comes in and does more quantitative easing. And that's exactly. And hence the term permanent. It's not just that distortion, which we're talking about, it's the fact that it's never going to change. Now, right now, yes, they are raising rights, and that is impacting everyone in society beneath the very top by more, because you have a one-to-one relationship with your money. Right now, the cost of getting a mortgage for an average home in this house has doubled in the last six months.

So if you've been sending aside money to even make a down payment, now you can't, you've got to double the down payment. And then you effectively have to go buy more than that in order to just weed out the relationship between what you're borrowing and what rates are. So that's a problem. But also, just in terms of the height of how this works. There's a stat that I have in the book, and it just, it always irritates me when I actually think about it, even though it's in my book. it's from Oxfam, 2020. It's a recent report, and it says that this in the last, in the two years since the pandemic, while all of this quantitative easing was wishing was wishing through the markets, wishing to the top. What happened was the top 10 billionaires in the world were making $15,000 a second. Oh my God. A second for two years. And the stack goes on, it says that if they were to lose, markets going down a little bit now, 99.99.59.5% of that increase, they would still be wealthier than 99.999% of the world. So when you just think of all those nines, and you just think of how that went out, that is one stat that fundamentally shows where this money went.

It didn't just inflate their coffers. Obviously, it inflated the entire market system. But it did not go into the real economy. Our wages did not keep up with that. No, our wages certainly have not kept up with that. And what's also fascinating is just like the juxtaposition between what Congress was up to at the height of the pandemic when it came to their. constant debates and nickel and dimming when it came to like stimulus packages and how the

Federal Reserve really was able to act unilaterally to immediately provide that fabricated money to the financial markets. It's pretty incredible. Yeah, and they're still, they're not elected, as you said, they're not accountable, they're not responsible. We cannot fire them for doing anything that impacts our economic lives. And again, this is sort of global, although the Federal Reserve is at the epicenter of central bank movement. Other central banks almost have to do or have to follow what they do. Otherwise, their currencies, which are happening right now anyway, get crushed relative to the dollar. And that creates all sorts of other economic problems in countries outside of the U.S. as well, like additional problems.

But yes, these people cannot be ejected from their roles. Even when they commit, like, crimes with trading, you know, they can resign. Yes. But, you know, they don't get fired. There was a huge insider trading scandal involving members of the Federal Reserve. Can you just briefly talk about that? Yeah, and I talk about it in the book, but effectively, one of the heads of, you know, the Dallas Fed basically resigned because it so happened, it looked like he was trading into the policies of the Fed. You know, you sort of trade in when you know, money's coming in.

You sort of take a profit once it's all, you know, seated there, whatever it was that was going on. But there was a number of these situations going on. And even some of Ben Bernan, not Ben, time warp, Jerome Powell's Fed members were also, and it's an ongoing investigation, trading at times that were very conveniently connected to when the Fed was fabricating money and causing markets to go up on the back of the sort of the balloon of money. And so a lot of that stuff is still going on. A lot of stuff is still being investigated.

But the reality is these people haven't been fired. Yeah, no. And they're not elected. They haven't been fired. And it just feels like there's, I mean, there might be, I never hold my breath when it comes to accountability at this point. But especially when it comes to insider trading that we've seen within Congress. I mean, there's been zero accountability on that. It's incredibly frustrating.

I wanted to also just kind of touch on the topic of the Federal Reserve, you know, rapidly increasing interest rates, which kind of shocked me because there's always been so much resistance to that. And Jerome Powell is very transparent about how, no, no, the target is to, you know, increase unemployment, pain and suffering, you know, among ordinary working Americans. And that will help lower inflation. And that's a cover story as well. And also, it's incredibly cruel because it shifts the onus or the blame onto ordinary Americans who haven't seen their wages increase since the 1970s, right? So, but while all of that is definitely negative, do you, what is your view of increasing

interest rates? Because I think it's actually a lot more nuanced than raising interest rates bad, right? Because there is a positive element to it as well, to some extent. I feel that the cheap money was definitely exploited, certainly by private equity firms who bought up literally entire neighborhoods of single family homes. That distorted the housing market and, you know, inflated the price of housing, you know, what are your thoughts on that? And is there a way to raise interest rates where there's less paid in suffering for ordinary people? Yeah, it is really nuanced, and that is one of the problems, because when all of the sort of

ballooning was happening, when rates were at zero, when all the money was being created on top of that, it was going into private equity firms, it was going to BlackRock, it was going to Wall Street, it was going to all of those consortiums, and they were doing things like buying up neighborhoods. Well, right now, for example, there's a situation where they have those neighborhoods, And now they can charge high rents on them. Because as I was saying before, people can't afford to even buy out some of the things that have been purchased by some of these firms and some of the sort of bigger corporate consortiums of landlords. So that's a problem.

So when rates get raised very quickly. Particularly, we are in such new territory here, particularly after a period where they have been at zero for so long, or almost at zero for so long. They're up a little bit between 2015 and 2019, but pretty much at zero for a really long time. And all this money is being created on top of that, which doesn't go into the real economy. The problem is that the brunt of all of that doubling of interest rate payments for the average person hits them one to one. For Wall Street, for example, Goldman Sachs just announced its last quarter earnings. It had a really awesome trading quarter. Like surprise, it just doesn't matter whether or not the market's going up and down rates are going up or down.

I mean, you know, they bobble a bit. They come back up. But that cushion, the 9 trillion from the Fed, the 41 trillion around, that's that. that's there for them, it's not there for real people. So there is a way to raise rates to help people, but it goes back to how does it funnel through the financial system? How does that triangle work? If, for example, savings rates were actually going up as quickly as interest rates were,

that could help. Now that said, it's hard to save if everything that you're paying for costs more. But it's just one mechanism where you could technically sort of rein in the banks. But the problem with this rate increase, this period, is just the veracity of it. And the fact that it's targeting wages. Now wages, wages are not the problem with inflation. As it turns out from 1979 to 2019, wage increases were 62% of price increases. But in the last two years, they're 8%.

They're nothing. They're not even keeping up with inflation. I mean, the stat is incredible, but really, if you think about it, it's common sense. I mean, if wages haven't kept up with inflation since the 1970s, if we haven't seen an increase in wages since the 1970s, the idea that higher wages has led to what we're experiencing with inflation is insane. It's just insane. It's completely, and it's a lie.

And this is where the Fed is just, it's constantly dangerous. But at this particular period right now, it is super dangerous because it's lying to you. I mean, it's literally using the hot labor market, the increase in wages, to create a maneuver that is effectively, I think, political to make itself look better. Like, oh, we're fighting. We finally noticed things. We didn't notice when, you know, the top 10 billionaires went from $700 billion to $1.5 trillion collectively in two years, which we helped do. That wasn't inflation. We had nothing, whatever. This inflation is something we want to hit. And they're targeting wages, even though what's actually inflating, are costs in fuel, in food, in fertilizer, in transportation, in things that have nothing to do with anything the Fed can actually accomplish without really fundamentally tanking the economy, which I ultimately think it doesn't want to do, because that's really going to piss off Wall Street. So it's staying in this sort of gray area where it's looking like it's fighting inflation. That accelerated rate hike is hurting real people fundamentally every single day.

Yes, it's creating uncertainty in the markets, but the investors in the market will ultimately be able to be okay, and they have more cash set aside, as do the company's involved, to weather most of this little bit of an increase to them, but a very harsh increase as it's felt by real people. It's incredible. I love this topic. It's really important. Everyone, please check out Nomi Prince's book, Permanent Distortion, How the Financial Markets

Abandon the Real Economy Forever. It's just excellent. And Nomi, you're gonna say for one more segment, we've got a story involving inflation and Katie Porter calling it out coming up next, so stick around. and Nomi Prins with you. Well, Nomi was kind enough to stick around to talk about the next story with us. And it has to do with inflation.

So why don't we get right to it? According to this chart, what is the biggest driver of inflation during the pandemic? The blue is the dark blue is the recent period. It would be corporate profits. And what is that percentage? It is 54%.

And that number does stay that level of high if you update that number to more recent numbers. as well. Congresswoman, Katie Porter, brought her whiteboard out again to inform the American people about what's really driving inflation. Now, we've talked about inflation on the show. I think there are multiple factors, but corporate greed certainly happens to be one of them. And so why don't we take a look at how the rest of that conversation went, and then we'll break it down. So over half of the increased prices, people are paying, are coming from increases.

corporate profits? Yes, the unit price index is reflected in corporate profits as opposed to other costs. And how does that compare to historically to other periods of inflation or over other periods of economic time? As reflected there in another analysis, it is significantly higher in this recovery. 11.5%. And what is it today? 53%. So I want to make sure everyone in America understands this chart. What is a unit labor cost? The cost, wages and associated. So we can just wages. What is a non-labor input cost? A variety of things including maintenance and investments. Okay. So I have to buy the stuff to make the widget. I have to have a factory. I have to keep the lights on. I have to hire someone to make the widget. That's this stuff. And this is what I

add on on top. You know, I love when she brings the whiteboard out because, Our education system, I think intentionally, doesn't dive into this. And so a lot of Americans graduate high school not really understanding how our economy works, how corporations function, what the fiduciary responsibility is for these corporations and their executives. But Nomi, I want you to further break down what they're talking about here. Yeah, and first of all, shout out to the Economic Policy Institute for putting that data together and Rep Porter for just being awesome with it.

I really think she needs to take that whiteboard. the Federal Reserve and have a sit down with Jerome Powell who does not understand it or refuses to acknowledge it. What that's basically saying is the price increases that we've been experiencing that we are experiencing through companies are a result predominantly more than half of those companies expanding their profit margins, not paying their workers. And not only is that the result, this result has been particularly obvious and onerous. in the year since the pandemic when all this money was created as well, as we were talking about in the other segment. But these two years have created a situation where companies can use

the fact that there is inflated prices. There are higher food and fuel costs. There are things that cost more. There's supply chain disruptions. There's problems. There's geopolitics. But what they've done is they've sort of bootstrapped from that. They've expanded. They've increased prices by so much more than they have in the past because they have that cover. Yes, yeah, exactly. I mean, they're exploiting some of the supply chain issues as the reason for the price increases, as the reason why you're seeing that, you know, high cost of food and all of that in the market. And it's interesting because while it's true, it's just demonstrably true, the thing that I worry about is when you look at polls, and we've talked about several polls this week alone,

in regard to how voters are feeling as we get closer and closer to the midterms, who do voters, including Democrats, blame inflation on? And they blame it on Biden, right? It's very simple. It's a very simple way of thinking about what's happening in the country. And by the way, across the globe right now. And it's frustrating because I don't think that the Democratic Party has done a good job in communicating what's really transpiring here.

They're not really talking about the corporate greed in a repetitive. I think it needs to be repetitive and robust way. I'm glad that Katie Porter is doing it. Obviously, she's a Democrat. But the fact that the Biden administration is being blamed for it would make you think that they would have some sort of campaign in place to push back against that narrative. Yeah, it's really astonishing that they don't because there's two things going on with the Biden administration.

It could have been any administration in power right now. Okay, they are the ones in power when this inflation, when this greedflation from corporations has been running rampant together for multiple reasons. They've also been in charge of a bipartisan infrastructure act where they decided, okay, well, maybe we can actually grow the economy instead of just simply being sort of victims to this corporate inflation. But they're not even talking about the remedy to inflation. They're not breaking down inflation either.

They're literally like hiding from the situation. And by effectively, and what Biden did that was also not too bright is he is, he has let the Fed control the narrative on inflation. Yes, that's such a great point. And if you listen to Jerome Powell, you know, he does these press conferences and he addresses it, he blames it squarely on workers. Right. Yeah, who have, again, I've said this a billion times, but I'll say it again,

who haven't seen their wages increase since the 1970s. So they're actually the one suffering the most from inflation. That's right. and he doesn't really draw much attention or any attention to the corporate greed angle. I want to share a few other details with you to kind of help understand what these companies and these corporations are up to. So for instance, last summer, Kroger's CEO Rodney McMullen said that a little bit of inflation is always good in our business because customers don't overly react to increases in prices. Kruger's CFO, Gary Miller Chip, told shareholders

in October, quote, we've been very comfortable with our ability to pass on the increases we've seen at this point. And we would expect that to continue to be the case. The most enraging thing you can listen to is those investor calls. Oh, yeah. Right? Well, and let's break those things down, like add them together, right? On the one hand, wages haven't kept up with inflation. On the other hand, as Katie Porter was saying and citing that report in those stats. The last two years have been particularly bad for wages as a percentage of corporate profits anyway in that they are not part of that increase. And then you have the corporate CEO saying, oh, and by the way, it's okay to charge people more. So they're charging the people

that don't have the wages that have kept up with the prices more. So it's like they're, they're from two angles hurting most of the country. It's crazy. So let's talk about, in a perfect world where we actually had politicians who cared about us and our best interests and wanted to do something about this. What would be a possible solution, right? I mean, would it be regulation in regard to, you know, the price gouging that we're seeing? Is it something else? I mean, what would you propose be done by leaders in Congress and maybe even the executive branch in response to this? Well, it's something they're not going to talk about and don't like to do, but we do need some form of a price ratio cap to the level of inflated prices that's coming from

these corporations. The data is there. Even if that particular data isn't 100% perfect, the data is there to indicate where these price increases are coming from on top of where the supply chain and other geopolitical disruptions are causing prices to be. So that information is there. So if you had a sort of price cap ratio and you also have a situation where we need to actually have corporations pay taxes. We still exist in a world where most people pay most of the taxes that go into the Treasury Department of the United States and around the world, particularly though in the United States, then corporations do. And yet they're getting all this benefit. They're not paying people. They're increasing their prices.

They're hurting the rest of the economy. And they're not paying for it. So you can enforce the tax laws to begin with, even before you make them more fair. Yeah, definitely. And I would add to it, I mean, in terms of asset inflation, I would outlaw stock buybacks. I mean, what do these corporations use their profits for to generate more profits by buying shares of their own stocks? And then, you know, that's how executives are also paid. So all the incentives are there for the executives to take those profits, buy shares of their own stocks, and maximize the profits, you know, even further.

It's incredible, it really is. The system is set up in this way on purpose. And it's unfortunate that we don't have, there's maybe like a handful if that of politicians who actually care about this, try to draw attention to it. But when you have a two-party system that's kind of melded into one due to the way campaigns are financed due to the fact that members of Congress are allowed to invest in individual stocks themselves, they have a vested interest literally to keep this system. going to the detriment of everyone else.

Yeah, that's absolutely right. Well, Nomi, it was a pleasure having you on the show. Thank you for sticking around and talking about this with us. And everyone, I just want to say again, read all of her books. She's published many. But the latest is permanent distortion, how the financial markets abandon the real economy forever. Thank you so much, Nomi. Thank you.

All right, everyone. Stick around. We'll be back in just a few minutes. Thanks for listening to the full episode of the Young Turks. Support our work, listen to ad-free, access members-only bonus content, and more by subscribing to Apple Podcasts at apple.com slash t-y-t. I'm your host, Shank Huger, and I'll see you soon.