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Could the Fed Break the World Economy?

Kyla Scanlon joins the show to talk about whether the Federal Reserve is accidentally triggering a series of diabolical domino effects that could screw up the global economy

Traders Work On The Floor Of The Chicago Board Options Exchange, As Federal Reserve Prepares To Make Interest Rate Announcement Photo by Scott Olson/Getty Images

What if, in trying to fix the hangover of domestic inflation, the Federal Reserve is accidentally triggering a series of diabolical domino effects that could screw up the global economy? Joining the show today to walk us piece by piece through those dominos is Kyla Scanlon, a writer and brilliant economic explainer on TikTok and YouTube. Kyla is an expert at what I try to do with this show, which is to explain complicated ideas in simple ways without losing the nuance that makes them complicated in the first place. I’ve learned a lot from her. And I hope you do, too.

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In the excerpt below, Kyla discusses her human-centric approach to economics, Derek shares the story of being offered a writing position with the economics team at The Atlantic, and then they segue into a discussion of what the Federal Reserve is trying to accomplish right now.

Derek Thompson: Before we talk about the news and the Fed and prospects of a global economic meltdown and all that fun stuff, I actually want to talk a little bit about your style of economic analysis. I really think you are unlike just about every other economic commentator that I know and follow. I think that the economic and finance media community can be very insular. Just lots of acronyms, lots of interior memes, and you seem like a popularizer. Your analysis has broad memes and short story quotations, and it’s sprinkled through with all sorts of other pieces that just make it fun to read about economics. And I’m just interested, as sort of a first-order question, what are you trying to do? What are you trying to accomplish with this style of covering economic news?

Kyla Scanlon: So for me, it’s all about making economics more human-centric. Everybody is an economic entity, but if you tell the average person that, they’re like, “No, I don’t like the economy. I have nothing to do with it. I don’t like finance. I don’t like the stock market.” And that’s mostly because they haven’t been given the tools to understand properly everything that’s going on. So my goal is to make it more accessible. And the main way to do that is to make it more fun, because it is fun. Economics, finance—it’s inherently goofy. There’s a lot to pull from. So the goal is just to help people understand what’s going on in the world around them, because they deserve that. It’s crazy that we don’t have that accessibility right now.

Thompson: I think it’s fairly stunning how little economics is taught in, let’s say, high schools. I remember myself—I don’t know that I’ve told this story on the podcast. When The Atlantic first offered me a writing job in 2009, it was a writing job with the economics team of The Atlantic. And my first response was to say, “Absolutely not. Please don’t make me write about economics.” I love the news. When I read The Washington Post at home, I read every single section of that newspaper except for the business section. I throw it away because there’s too many numbers, there’s too many three-letter acronyms, there’s nothing that is legible to someone who just is a generalist. And I love the fact that you’re constantly trying to pierce that and say, “No, the people who are in charge of the machinery of the global economy, they’re not smarter than you. They’re not more sophisticated than you. They just have a different vocabulary.” It’s like if we can explain their vocabulary in a human vocabulary, we can all participate in this game.

Scanlon: Yeah, that’s the whole thing. And I imagine GDP would grow if more people understood the world around them. There’s inherent benefits that would come from people understanding. Conspiracy theories might decrease. There’s so much value that would come from people just being like, “OK, this is what the Federal Reserve does. Those aren’t secret, closed-door meetings that are a big secret. Those are normal.” You just have to give people the tools so they aren’t confused. That’s super important.

Thompson: And also, you’re on TikTok, you’re on YouTube, you have a newsletter with Substack. I think it’s also important that you try to hit people in different ways because some people learn through social media, and some people learn through 45-minute podcasts. And some people, some of my closest friends, hate TikTok and hate podcasts. They just read. And so you’re trying to find them wherever they live and however they consume media. I think that’s a really wonderful part of your work as well. So let’s put you to the test. How would you explain in Kyla English what the Fed is trying to accomplish right now and why they’re trying to accomplish it?

Scanlon: So right now the Fed is trying to battle inflation. So I’m sure everybody knows inflation has been raging. And the Federal Reserve has a dual mandate of price stability, so managing inflation, and maximum employment. And right now they are very much focused on price stability. So, turning that back to normal. And the main way that they do that right now is through raising rates. They can also shrink their balance sheet, but really it’s about raising rates, because the whole goal with that is to make it more expensive for people to be alive so they stop demanding things, and then hopefully inflation would go back down. So it’s kind of like a roundabout way to tackle the inflation problem that we do have by making people stop demanding things, so that way the supply side can sort of recover and get back to normal.

This excerpt was edited for clarity. Listen to the rest of the episode here, and subscribe to the Plain English feed on Spotify for new episodes.

Host: Derek Thompson
Guest: Kyla Scanlon
Producer: Devon Manze

Subscribe: Spotify