What is inflation and when you should really start worrying about it

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Some investors worry that fiscal and monetary stimulus will drive up inflation.

  • Economists are bracing for the strongest US inflation in decades as the country reopens.
  • Where some expect inflation to be temporary, others fear a dangerous spiral, or “runaway” inflation.
  • Here’s what you need to know about inflation, where it stands today, and when you should really start to worry.
  • See more stories on Insider’s business page.

After decades of weaker-than-expected price growth, America has inflation on the brain.

Inflation – or the general rate at which prices climb – has taken center stage as the US economy climbs out of its year-long slump. Economists expect the combination of a swift reopening and trillions of dollars in stimulus will lift prices at their fastest rate in recent history.

For some, forecasts of stronger inflation bring up memories of the 1970s and 1980s, an era sometimes called the Great Inflation, when prices grew at such a furious pace that the Federal Reserve had to lift interest rates to historic highs.

For younger observers, healthy inflation is a long pursued but seldom seen goal. Price growth has trended below the Fed’s 2% target for most of the past quarter-century. People under 40 simply don’t know a world with runaway inflation – or what the beginning of such a world might look like.

But recent economic headlines – gas shortages, troubles in the labor market, and big-government programs – have a distinctly ’70s flair. Just when should Americans know when to be really worried that inflation could be back in a big and problematic way?

Here’s a look at what inflation actually is, why it’s a tricky concept that is a bit of a self-fulfilling prophecy, and how it’s actually unfolding in 2021.

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Why are people worried about inflation?

The basic notion of soaring prices is concerning. Roughly 10 million Americans are still out of work, and millions more were unemployed for at least some of the past year. At a time when many Americans are looking for stable financial footing, people are more worried about inflation than they have been in years.

The way in which prices have been climbing has already made some worried. While the Fed and President Joe Biden’s Council of Economic Advisors have repeatedly said they expect stronger inflation to be only temporary, others are less optimistic.

Former Treasury Secretary Larry Summers, one of the loudest voices raising concerns of rampant price growth, castigated Democrats’ $1.9 trillion stimulus in March as the “least responsible” fiscal policy in 40 years and kindling for an inflation crisis.

“I think there’s about a one-third chance that the Fed and the Treasury will get what they’re hoping for and we’ll get rapid growth that will moderate in a non-inflationary way,” he added.

A return to the inflation seen in the 1970s would be disastrous for the already ailing economy. In that decade, swaths of easy money were initially viewed as a way to combat unemployment, but inflation quickly broke out of its trend and spiraled out of control. The Fed was forced to step in with interest rates as high as 20% to choke off the price growth, and that had its own detrimental effects on the economy, including a deep recession in the early 1980s.

Conservative economists have warned Biden’s $1.9 trillion stimulus package was unnecessary and could spark a similar disaster. Whether price growth stays elevated or trends back to about 2% will tell the tale of whether Biden’s plan was safe or fuel for a 1970s-like crash.

What would healthy inflation look like this year?

The Fed, America’s central bank, has an “inflation target,” which it uses to guide price growth. In a major shift, the central bank replaced its 2% target in August with a goal for inflation that averages 2% over time. This update allows the Fed to pursue inflation above 2% immediately after the crisis as it tries to run the economy hot and drive a stronger recovery.

The Fed’s own projections point to the stronger-but-transitory inflation it expects to see over the next few months. Policymakers expect year-over-year personal consumption expenditures – the Fed’s preferred inflation measure – to reach 2.4% this year before cooling to 2% in 2022, according to a March release.

The Fed’s new inflation target opens the door for a period of economic overheating as the country reopens. It’s this gamble that concerns conservative economists, or “hawks.” After decades of not letting inflation trend above 2%, it’s embarking on an experiment to let the country run hot in hopes of a faster recovery.

Fed Chair Jerome Powell has been less exact with his forecast, but expects inflation to trend above 2% for “some time” before falling in line with the central bank’s long-term goal.

How does inflation look now?

Signs of an inflation pick-up have emerged, which the Fed says it expected and critics say merits caution.

The PCE price index jumped 0.6% in April, marking the strongest one-month jump since 2008. The measure also notched a 3.6% year-over-year gain, though the data is somewhat skewed by last year’s readings. Inflation “doves” say such a big jump is only natural after the pandemic and widespread lockdowns brought price growth to a near crawl.

The core PCE price index, which excludes volatile food and energy prices, rose 0.7% in April and 3.1% on a year-over-year basis. The core measure is the Fed’s preferred gauge of nationwide price growth.

Separately, the Consumer Price Index showed prices climbing 0.8% in April. The gauge rose 4.2% year-over-year, also indicating the strongest inflation since 2008.

Inflation expectations are also a gauge worth watching. Median US inflation expectations for the next 12 months gained to 3.4% in April from 3.2%, according to the Federal Reserve Bank of New York. Expectations can serve as a kind of self-fulfilling prophecy. When Americans anticipate faster price growth, businesses tend to lift prices and workers in turn demand higher wages. While inflation expectations typically surpass real inflation, they can hint at the direction inflation will trend, and even affect prices and wages in that direction.

Taken together, the gauges show inflation firming, but still far from the peak economists are bracing for. The median estimate for April year-over-year CPI sits at 3.6%, a rate that would be the fastest since 2011.

What can the Fed and the government do about inflation?

Inflation has been half of the Fed’s dual mandate since its inception in 1913. The central bank was tasked by Congress to ensure stable price growth for the US economy. Its main lever for doing so is its benchmark interest rate, which dictates borrowing costs across the country.

When rates are high, Americans are more incentivized to save money. When rates are low, or near zero as they are today, Americans are pushed to borrow and spend. The Fed’s ability to change rates allows it to stimulate economic activity in times of recession or cool spending when the economy is running hot.

The latter is primarily how the Fed dampens strong inflation. By raising interest rates, the central bank weakens the incentive to borrow and spend. That then drags on demand and weakens the rate at which businesses lift prices.

Powell said in March that lifting its threshold for future rate hikes can allow it to more aggressively pursue its maximum-employment target.

“There was a time when there was a tight connection between unemployment and inflation. That time is long gone,” he said. “We had low unemployment in 2018 and 2019 and the beginning of ’20 without having troubling inflation at all.”

During those years, unemployment and wage growth among low-income households and racial minorities started to fall in line with broader measures. By letting inflation run above its historical average for some time, the Fed aims to foster not just a tighter labor market, but one that’s more inclusive and beneficial for all Americans.

The risk is that higher inflation in pursuit of a more inclusive economy can spark a new crisis as price growth runs out of control.

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Loud commercials are infuriating Americans, and streaming TV is making them even worse

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Loud commercials blowing out your eardrums lately? You’re not alone.

  • The CALM Act banned excessively loud television commercials, but it doesn’t apply to streaming TV.
  • Consumers lodge thousands of complaints annually about loud commercials, and they’re on the rise.
  • The FCC almost enforced the act twice in the past decade. Audio engineer experts are trying to fix it.
  • See more stories on Insider’s business page.

On July 1, 1941, New York’s NBC station made history by airing the world’s first television commercial.

With about 4,000 televisions in the region at the time, audience-wise it was not all that different from paying a guy to yell about a product in Times Square. The ad for Bulova watches cost $9 and ran for 10 seconds. But the world changed forever.

A decade year later, in 1954, a similar moment occurred in the annals of television history. The Federal Communications Commission got its first consumer complaints about loud commercials on television.

Needless to say, it’s pretty much all gone downhill since.

The pandemic has forced people to spend more time in front of the television than they have in ages. Simple questions like “Is it just me or are the ads way louder than ‘Jeopardy!’ every night?” provoke evocative answers. Casually asking people if they’ve experienced loud commercials yields one of two general responses: “It’s so annoying!” and “It’s way worse on my streaming TV service.”

If you’re hearing things, you’re not alone: the four-month period from November 2020 to February 2021 saw FCC complaints of loud commercials up 140% compared to the same period a year ago, more than double the volume of complaints.

There is a law on the books – the CALM Act, passed in 2011 – that is supposed to rein in loud commercials. But the FCC hasn’t done any enforcement on it in the better part of a decade.

Most significantly of all, for the people angry about explosively loud ads on streaming, there’s absolutely nothing the FCC can do about that even if they were enforcing it. What’s more, it’s not entirely clear there’s any way to do anything about that even through Congress.

The CALM Act is supposed to regulate loud commercials but the FCC hasn’t enforced it

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Rep. Anna Eshoo and Sen. Sheldon Whitehouse mark the implementation of the CALM Act, the federal law that requires TV ads be no louder than the programs that accompany them, on Dec. 13, 2012.

The story goes that Rep. Anna Eshoo wrote the CALM Act after a loud television commercial interrupted dinner, which may be the single best argument for being an elected member of Congress I have ever heard.

It cascaded through the legislature, passing the Senate unanimously and the House in a voice vote before then-President Barack Obama signed it. Eshoo remarked at the time it was the most popular piece of legislation she had ever introduced in Congress.

The CALM act is actually fairly simple; it doesn’t say “commercials must be this loud” and it doesn’t get into the nitty gritty of how to measure that or enforce it or what consequences shall befall an operator who violates it. It’s fairly clever: all it actually says is that broadcasters and cable operators have to abide by the A/85 standard approved by the Advanced Television Systems Committee, and that the FCC has to enforce that.

A/85 is essentially an intricate, 72-page technical document that gets extremely specific about how things should sound. It’s not written for most of us to understand. But it does set acceptable bounds for the soundscape of television.

The experts wrote A/85, and Congress passed a law that said A/85 is mandatory, so Congress doesn’t have to learn about audio and the problem gets solved.

It’s a smart approach, because Congress is home to lawyers, doctors, activists, and people with all manner of expertise, but conspicuously no audio engineers, and the Advanced Television Systems Committee is understandably full of them. Congress took a standard that industry professionals had approved, and simply started requiring it.

A/85 required the average loudness of a commercial should be about as loud as the dialnorm, or the average dialogue level of a show. Because commercials can appear on your screen through a number of different ways from a number of different sources – such as being inserted by the local station or television provider, or embedded with the content itself – a standard for the whole system, top to bottom, at least formalizes the acceptable volume.

After an initial surge in complaints about loud commercials to the FCC following the Act’s passage and implementation, the bill largely had the desired impact, with complaints leveling off after a few years.

“FCC data I’ve seen shows consistent annual decreases in complaints since 2014,” Eshoo told Insider. “If that trend has changed, investigations are warranted.”

The past several months show complaints on the rise, according to an Insider analysis of the FCC database of complaints. Should the current rate hold, 2021 is poised to be the worst year since the initial rollout.

All that said, on a practical level, the CALM Act is not enforced.

There is no pipe exiting a cable company that says “out” and there is no meter on that imaginary pipe that says “too loud.” In reality, large stations and providers were supposed to spot-check once a year during the first two years of the rollout, doing 24 hours of monitoring over a seven-day period. If they found a problem, they were supposed to tell the FCC. You will be positively shocked to discover that only two small stations asked for a waiver while they fixed issues they found.

And since then? The FCC doesn’t audit stations. The agency will only investigate in the event that a pattern or trend emerges based on consumer-submitted complaints. From 2012 to 2019, consumers submitted 47,909 complaints to the FCC about loud commercials.

“In 2013, the Enforcement Bureau sent letters of inquiry to two separate companies addressing potential violations of the CALM Act and associated regulations,” an FCC spokesperson told Insider in an email, drawing from a 2020 letter from FCC Commissioner Ajit Pai responding to questions from Eshoo. “There were no violations found in either case and there are no public documents associated with these letters of inquiry. Since the 2013 letters of inquiry, the Enforcement Bureau analyses have not uncovered any pattern or trend of complaints supporting further inquiry.”

That is to say, the sum total of FCC enforcement on disproportionately loud commercials in the decade since the CALM Act has amounted to two letters – and no enforcement.

Federal Communications Commission (FCC) commissioner Ajit Pai arrives at a FCC Net Neutrality hearing in Washington February 26, 2015. REUTERS/Yuri Gripas
Then-Federal Communications Commission (FCC) commissioner Ajit Pai on February 26, 2015.

In 2014, the FCC did update their technical standards to address a clever workaround that some commercials had discovered. Basically, if the average volume of your commercial has to be on par with the average volume of the program, then you could hypothetically craft a 30-second advertisement that is 15 seconds of silence and 15 seconds at twice the volume of the program and technically not violate the standard, as you’ve technically maintained the average. The 2014 update discouraged this.

Despite thousands of complaints per year, the FCC has not discerned the kind of “pattern or trend of complaints” to support further inquiry.

The FCC declined to answer Insider’s questions regarding what precisely would qualify as a pattern or trend of complaints, whether the recent rise in complaints would qualify as a pattern or trend, or a question regarding the number of people working on CALM Act enforcement at a given time.

“If CALM Act-related complaints are increasing, the FCC should analyze the complaints to understand what is driving the shift,” Eshoo said. “If an analysis of the complaint data shows a pattern of legitimate complaints against specific companies, the FCC must investigate those companies. If the Commission finds violations through its investigations, it should bring enforcement actions.”

Increased enforcement could stymie the surge in complaints. However, as streaming television rises and cords are cut, more and more Americans are getting their television from services that are not covered by the CALM act, which applies to MVPDs, or multichannel video programming distributors, which is the official legal name for cable providers.

So, why not just pass a CALM Act for streaming?

The government can’t actually regulate streaming services

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The loud commercials hurt his ears.

When Insider asked that question of experts in government, legislature, and the industry, the response was similar to asking “Why not legalize civil unions for leprechauns” or “When will the Federal Aviation Administration crack down on Pogo sticks,” in that it reveals a fundamental misunderstanding about what the FCC is.

“The FCC’s subject matter jurisdiction is communication by wire or radio,” said Gigi Sohn, a Distinguished Fellow at the Georgetown Law Institute for Technology Law & Policy. “The FCC doesn’t have jurisdiction over devices.”

The streaming landscape is vastly different from television. It may look like television, but it’s legally something else entirely, and while the offerings of a virtual over-the-top service may look nearly identical to the offerings of a traditional cable television service, legally it’s completely different, and not under the regulation of the FCC.

Streamers such as Netflix, Disney+, HBO Max, Youtube TV, FuboTV, Sling TV, and Hulu with Live TV may look aesthetically similar to a cable package, but from the perspective of the FCC, you may as well ask them to regulate your toaster. The FCC simply lacks jurisdiction over streaming services.

One side effect of this lack of jurisdiction is that for loud commercials, the FCC can’t do a thing. And the agency can’t address any of the other anxieties of modern streaming, including local blackouts, delivery issues, billing, usage caps, content exclusivity, bans, or any of the other policies enacted by fiat by the largest media companies on the planet.

Toward the end of the Obama administration, niche virtual streaming services sought classification as MVPDs. The companies – Pluto TV and Sky Angel – wanted the FCC to expand the definition of MVPD to include streamers like them, arguing that they should be under the FCC’s direction. In 2014, FCC chairman Tom Wheeler supported the move and the FCC began considering the shift.

“They determined the benefits that accrue to them justified the FCC oversight,” said Sohn, who was working for Wheeler at the time.

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Former FCC chairman Tom Wheeler.

But the move to expand the definition was opposed both by legacy MVPDs, as well as larger streaming companies, such as Amazon, which did not want the FCC encroaching on their business, with the main fear being that any regulation would open the door to further regulation.

Proponents of the change needed three of the five commissioners of the FCC to approve it.

“We didn’t have the votes,” Sohn said. The move never went through.

Commissioner Ajit Pai, who opposed the move, shortly after became the FCC chair, functionally killing the proposal. Last year there was some movement from network affiliates to reconsider it, but for the foreseeable future the virtual streaming services are unregulatable, and part of that means they can run commercials however loud they please.

While there is nothing to stop the FCC from adapting a definition of multi-channel video provider that would include the virtual providers, or even streaming services, the result would likely be a massive lawsuit that they would probably lose very badly.

In order for the FCC to have any authority over streamers, Sohn said, Congress would have to pass a law.

“I think this is a huge fight that might happen some day,” she said. “It’ll be a battle royale. Streaming services don’t want to be regulated.”

However, the difficulties that Congress faces in regulating streaming television doesn’t mean erratic commercial volumes on streaming is going to be a problem forever.

The small committee you’ve never heard of that might actually end loud annoying streaming ads

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She just learned about the Audio Engineering Society and she’s pumped.

When Congress passed the CALM Act, they passed a law that essentially took an existing audio industry standard and instructed the FCC to take the necessary steps to enforce that standard.

Right this moment, the Audio Engineering Society is designing a new audio standard for streaming television.

David Bialik is a systems engineer and the co-chair of the Audio Engineering Society’s Technical Committee on Broadcast & Online Delivery. If you’ve never heard of them, you’ve definitely heard them. This is the group of audio engineers who design the standards for much of how America’s media diet sounds.

The reason you change the channel and one isn’t materially louder than another, or if you’ve gone to a concert and not seen drastically different sounds between sets – all of that is genuine scientific work agreed upon by pros and at times set as standards.

And those standards may be the ticket to a better experience on web-based streaming.

The process by which an idea becomes a standard is not entirely like the serpentine process by which a bill becomes law. Think of it as a version of the Schoolhouse Rock song “I’m Just A Bill,” but instead of a bill it’s an intricate technical document, instead of congressional committees it’s a technical committee of audio experts, and in lieu of congressional votes it’s approval by the broader audio committee.

The equivalent of the presidential signature that makes it “law” is a vote that elevates the technical document to an official Standard, a move that in A/85’s case was carried out by the Advanced Television Systems Committee, but other standards go different routes.

Right now, the Audio Engineering Society’s technical committee is working on a new technical document that would address loudness on streaming services. And if it works, the issues of variable volumes on digital television could be solved without Congress at all.

“My hope is to see this released within the next 4 to 5 months,” Bialik told Insider. The gist is that programming material will come with loudness controls within metadata, indicating precisely how loud programming should be. They’re now getting comments from the 90 members of the committee. “It is our hope that our work gets elevated to a standard.”

“This isn’t something we’re taking lightly,” he added. The bigger players have good reason to play ball, namely because a unified consumer sound experience is good for the field as a whole.

“You want your content to be the same level as everyone else’s, on a level playing field,” Bialik said. A user touching the volume knob is bad. “When you invite the audience to touch the volume knob, you invite them to touch other knobs, too.”

Despite the many issues, Congress has been mulling an update to the 1992 Cable Act, which was the last major overhaul of the cable system. Needless to say, in the intervening years the landscape of television has changed somewhat, and to that end Republican Rep. Steve Scalise and Democratic Rep. Eshoo jointly introduced the Modern Television Act of 2019.

There’s little consumers can do outside of sending in official FCC complaints, or even just complaining about it on social media. In fact, those techniques are genuinely effective.

“I periodically hear from constituents about the annoyance of loud ads on streaming services and that worries me. I’ve also seen complaints on social media,” Eshoo said.

“Right now, I’m examining how large of a problem it is. If there is a real problem that we see beyond anecdotal reports, I will certainly consider legislation to address it.”

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Bitcoin whales: what are they – and how are they affecting the cryptocurrency’s price?

Visual representations of digital cryptocurrency Bitcoin (BTC) are arranged on a circuit board
Single trades can lead to huge changes to the price of bitcoin.

A bitcoin whale is a term that refers to individuals or entities that hold large amounts of bitcoin, according to Investopedia. There are around 1,000 individuals who own 40% of the market.

Whales have the potential to manipulate the currency valuations and, given bitcoin’s fluctuations in recent weeks, they are increasingly under the spotlight.

The Telegraph reported on Friday that, according to industry data, around 13% of all Bitcoin, or around $80 billion, sits in just over 100 individual accounts. It added that the top 40% of all bitcoin (approximately $240 billion) is held by just under 2,500 known accounts, out of roughly 100 million in total.

How do whales impact bitcoin’s price?

The number of addresses holding more than 1,000 bitcoin is at 2,334, a new all-time high, according to CoinDesk.

Single trades made by such whales can lead to huge changes to the price of bitcoin – swamping any movements by smaller investors, The Sun reported.

Bitcoin reached a record high of $41,973 on January 8. However, on Friday Insider reported that the cryptocurrency was on course for its biggest weekly price fall since September. It recovered to around $32,170 by Saturday morning, leaving it down about 10% since Monday. 

Back in November, CoinDesk studied data from crypto exchange OKEx to provide a possible explanation of how whales were able to influence prices as the cryptocurrency soared. “During that bitcoin run-up, institutions and whales were able to buy dips and oftentimes sell when prices went up. That left the majority of the retail investors scrambling to chase the rally,” the report said.

David Gerard, author of Attack of the 50 Foot Blockchain and a known crypto-skeptic, was quoted in The Telegraph report as saying: “The big players can easily move the price” because the bitcoin trading market is very thin…. Any one of them could crash it.”

There is not a lot of available volume to trade, he said, adding that there were all kind of “trading shenanigans,” which would not occur in regulated markets. 

What does the future hold for bitcoin?

On Tuesday, Biden’s pick for treasury secretary, Janet Yellen, suggested lawmakers curtail cryptocurrencies like bitcoin due to concerns they are mainly used for illegal activities.

However, a Biden administration could be friendly to crypto, according to Yahoo Finance, given its pick of crypto expert Gary Gensler as SEC chairman. 

Insider published an op-ed on Thursday stating that the federal government’s signals to cryptocurrency has been confusing.

The article was written by James Ledbetter, chief content officer at Clarim Media and editor and publisher of FIN. It stated: “If the US wants to keep up with the global development of digital currencies, Biden’s team must clearly answer some basic questions, like which ones will be regulated as securities, and will a Bitcoin-based ETF be approved?”

It remains to be seen whether these questions will be answered by the administration any time soon, however. 

 

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