Today we’re answering questions that get at those knock-on economic effects of Russia’s war with Ukraine we’ve been talking about recently on the show. One listener wonders about gas tax revenue. Another wants to know: What is an oligarch, and why should I care? We’ll tell you that, plus dig into some specifics about the bond market and provide some clarification about Fed chief Jay Powell’s magic keyboard.
If you’ve got a question you want us to answer next time, send a voice memo or give us a call at 508-82-SMART (508-827-6278).
Here’s everything we talked about on the show today:
- “Democrats weigh gas tax holiday to ease inflation pressure on Americans” from NBC News
- “Whitmer joins coalition of governors calling to suspend federal gas tax” from WZZM
- Stocks Surge, Oil Falls, Extending Volatility Amid Ukraine War from The Wall Street Journal
- Scott Tong’s reporting on Venezuela for Marketplace
- “The U.S. Shifts Focus to Venezuelan Oil, but Output Is Low” from The Wall Street Journal
- “U.S. ties easing of Venezuela sanctions to direct oil supply” from Reuters
- “Meet Russia’s oligarchs, a group of men who won’t be toppling Putin anytime soon” from The Conversation
- “What is a Russian oligarch? Here’s what to know as the U.S. rolls out sanctions” from CBS News
- “Turning the Focus on America’s Oligarchs” from The New Yorker
March 9, 2022 Make Me Smart transcript
Note: Marketplace podcasts are meant to be heard, with emphasis, tone and audio elements a transcript can’t capture. Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the corresponding audio before quoting it.
Kai Ryssdal: All right, Jayk’s ready. Let’s go. There we go. Hey, everybody. I’m Kai Ryssdal, welcome back to Make Me Smart, making today make sense is what we do on this pod.
Kimberly Adams: And I’m Kimberly Adams, thank you for joining us on this Whaddya Want to Know Wednesday, where we answer your questions from the past week. And if you do have a question that you think we should answer, not today, but next week, you can leave us a voicemail at 508-827-6278 or send us an email firstname.lastname@example.org.
Kai Ryssdal: What do you want to know Wednesday? Well, we did some of those. Anyways.
Kimberly Adams: We did.
Kai Ryssdal: Okay, here’s the first question.
Tim: Hi, this is Tim from Evanston, Illinois. I have a question about gas prices. I know there are taxes that are a component of the gas price, but are all state and local taxes on top of the refiner costs a flat cents per gallon? Or are some a percentage? That is are there any states or municipalities that are getting a windfall? Thanks, make me smart.
Kai Ryssdal: Oh, interesting. Well, he’s –
Kimberly Adams: We’ve been all over this on the show.
Kai Ryssdal: Yeah, so look, so cents per gallon, it’s not flat cents per gallon, right. But cents per gallon is kind of a percentage. Federal gas tax is 18 and a half cents, 18.4,technically, cents a gallon. State taxes kind of depends on where you are average, nationwide, it’s about 30 cents a gallon here in California. It’s like 51 cents, I think. So as those prices go up, state revenues do increase, right? Because we’re paying, we’re paying. Hmm. You know, what’s so funny –
Kimberly Adams: There’s more dollars there.
Kai Ryssdal: Yeah, there there are more dollars, right? Is is the short answer.
Kimberly Adams: So more cents per dollar.
Kai Ryssdal: Exactly. So more cents per more gallons. But here’s the catch. None of them are indexed for inflation. 18 cents has been the federal gas tax for I don’t even know how long. And of course now becomes a big political issue. Because we’re paying $4.248 something cents a gallon today. And that’s relatively speaking for a lot of people really, really high. So there’s a move from Democratic state governors, and also red and blue state legislators to get Congress and the states to do something about it, we shall see because it’s a double edged sword because that money goes to most of it anyway, infrastructure. And so what do you do? Because we need roads and bridges and infrastructure and all that good stuff. So it’s, it’s a little tricky. It’s a little tricky.
Kimberly Adams: Yeah. And I wonder what this is going to do to sort of a bubbling debate throughout the country, about how you deal with the fact that a lot of state and local infrastructure is financed by the gas tax. So what about all the people driving electric vehicles who don’t have to pay a gas tax but still use the roads? Because that’s the whole idea of a gas tax is that the people using the infrastructure pay for that infrastructure. But.
Kai Ryssdal: It is literally the free rider problem. Right. So what do you do? What do you do. All right. We’re gonna stay with oil and gas. Here we go.
Sam: Hi, Make Me Smart. This is Sam from Victorville, California. My question is, why is it Venezuela’s economy hasn’t recovered. Given that the sharp rise in oil prices, I would assume that that Venezuela’s economy would be on the uptick, but it’s not. Thanks for making me smart.
Kimberly Adams: So our former colleague, Scott Tong did a ton of reporting –
Kai Ryssdal: I was just thinking about that the other day.
Kimberly Adams: Way back, yeah, yeah. And actually went down to Venezuela. And look, Venezuela has huge oil reserves, and once upon a time, was one of the top four exporters of oil to the U.S. But then there were like decades of mismanagement, there’s corruption, there were sanctions. And so their oil industry is really only a fraction of what it once was. Because to have a robust oil infrastructure industry, you need the infrastructure, and you have to maintain it. And they haven’t maintained a lot of that infrastructure. And so it’s difficult to ramp up production when all your equipment is broken. And then also, the markets fluctuate so quickly. And I mean, just look at today, the oil markets dropping, I was just looking at that a second ago. What did it go down today?
Kai Ryssdal: Well, so BRENT… is 112 bucks down 12% today, which is just a huge drop.
Kimberly Adams: Yeah. And so you know, if you’re already kind of slow to pivot, and then you see a drop like that, you kind of maybe wonder, are you still going to pivot. Nevertheless, American officials are hoping to sort of replace some of that Russian oil they banned with oil from Venezuela, which means they’re going to have to lift some sanctions in exchange for oil, which will be interesting because Venezuela has been considered one of Putin’s allies. So this gets back to what we’ve been talking about, ever since this invasion started of how these, you know, conflicts in one place just slowly suck up the rest of the world into all this geopolitical conflict.
Kai Ryssdal: Yeah. And the other part of that is that, you know, we’re buying – Well, not anymore until yesterday, but we were buying oil from a global bad guy, right, Putin. And we’re buying oil now from Saudi Arabia, where they are not global good guys, let’s just just say, and we’re gonna start buying now, oil from another global not good guy in Venezuela. So it’s, you know, you, you get you get into these relationships, because you need the oil, and sometimes it becomes really problematic.
Kimberly Adams: You know, and this is one of the arguments, a lot of the clean energy folks make is that if we invested in more renewable energies and weren’t so reliant on fossil fuels, then we wouldn’t have these problems as much. Of course not it wouldn’t go away all together, but as much. Okay, so Kai, I think this one is for you.
Friday: Hi, this is Friday from San Francisco. And my question is about bonds. Are there a static number of bonds? When do more bonds get released for purchase? Are all these people trading the same amount of bonds? Or when you say investors flocked to bonds for safety, does that mean they’re more to purchase? Thanks for making me smart.
Kai Ryssdal: Really, really good question, because we’ve talked a lot about bonds.
Kimberly Adams: Your favorite thing.
Kai Ryssdal: I know we’ve talked a lot, a lot about bonds on Marketplace lately, because as Friday said, there has been this flight to safety not that so much because the markets apparently decided that, eh risk or whatever, we’ll do whatever we want. But recently, like the last two weeks, people have been buying gold and they’ve been buying U.S. Treasuries. Why? Because U.S. Treasuries are one of the safest places on the planet to get to put your money because you will get your money back. Right. The United States government, despite all the posturing about the debt limit, has never defaulted on its debt. Right. So they are the the classic safe haven U.S. Treasuries. Now, to Friday’s question. There is not a static number of bonds, bonds are sold on a regular schedule by the Treasury Department, February, May, August and November for the 10s, the 20s and the 30s. Those are 10 Year, 20 year and 30 year bonds. Right. And they are auctioned regularly. The government also sort of rolls over some of its older debt into different forms and denominations and durations of debt. That’s too complicated. The short answer is there is not a fixed number of bonds, all these people who are trading bonds, when I give the yield on the 10 year on the show, it’s not that that is the price that day that the Treasury Department’s sold that debt that debt is being sold in the secondary markets, right traders or conceivably individuals, but bonds are really risky. So please don’t do this. You can you can buy and trade bonds on the secondary market and the yield that is reflected every day on Marketplace and on whatever online site you choose. Are the the secondary market active prices for bonds, okay? And and bonds go up, yields go down, bonds go down, yields go up there’s there’s a whole long song and dance I could do about bonds, but lots of ’em them out there, released by the government on a regular schedule. Most of the trading is in the secondary market. There we go.
Kimberly Adams: Just to get a little bit of clarity on something you said. You said that bonds are really risky, but I’m guessing you meant the trading of bonds.
Kai Ryssdal: Oh, sorry. Yes, yes. Sorry. So the bonds themselves owning, U.S. Treasuries is really, really safe. Right? But unless you really know what you’re doing trading bonds can be really hard. So don’t do that. Yes, sorry. Yes. Okay. Thank you for that. I apologize. Okay. Yeah. Oh, my goodness. Back to Russia. Go.
Beth: This is Beth from Harrisburg, Pennsylvania. Hello, Make Me Smart team. I am really hoping that you can make me smart. Can you explain oligarch, everyone keeps throwing this term around? Like we all know it? Why should we care about them? Thanks for making a smart.
Kai Ryssdal: That’s a real – Why should we care is a really good question. That’s my favorite question of all time.
Kimberly Adams: So when you’re hearing oligarchs being thrown around in the context of the Russian invasion and the sanctions, they’re talking about this ultra wealthy elite group of people in Russia, really all over the world who are Russian, who hold just a disproportionate amount of power. And when I say ultra wealthy, I’m not talking about like, you know, have fancy cars I’m talking about have dozens of fancy cars and multiple giant yachts and properties all over the world, like the luxury goods market was designed for them. And the first wave of these oligarchs rose to power following the collapse of the Soviet Union, when all of these nationalized resources became privatized. And so if you knew the right people, namely Boris Yeltsin and his folks You might have been able to get some of those national, formerly Soviet resources under your own personal company and just get super rich. So then when Putin comes to power, he enriches another wave of oligarchs, who then owe their fortune and their success to him, and therefore his allies and help him do all the things that he wants to do. And so this group of oligarchs has become a target for when governments including the United States are trying to sanction or punish Putin, they punish the people around him who support him who keep the mechanics of the Russian government going. And so the U.S. government has sanctioned some of these Russian oligarchs, they want to seize their assets. I think the French government seized some boats as well. There’s this Anti-Corruption Data Collective that scours public documents. And they discovered this was in the Washington Post that excuse me, here in the U.S., museums, universities and philanthropies here, have accepted millions of dollars from these Russian oligarchs. And plus they own a ton of real estate in various parts of the U.S. that’s a lot harder to track.
Kai Ryssdal: One of the interesting things about this conversation that we’re having about the Russian oligarchs is that there is an analogous class in the United States, Jeff Bezos, Elon Musk, Warren Buffett, I mean, you know, and I saw this great this great thing on maybe Twitter, social someplace, whatever, saying, “oh, yeah, Russian oligarchs, good thing all of our oligarchs are good guys, huh?” Oh, yeah. Huh.
Kimberly Adams: I’ve seen a couple of threads like that. And yes, we do have this super powerful, super wealthy class that, you know, sends rockets and cars to space for fun. But I wonder if it’s quite as analogous as as we want to make it like, because are they as tied to our government officials? Like yes, they there’s a lot of dark money moving around and campaign finance. But are they propping up the structures of the government in the same way? Hard to know, because we don’t have really great campaign finance laws that let us see where the money is all going. But as much as I do think we would probably be well served to start calling these folks oligarchs in the same way, just to shift our brains a little bit. I don’t know that it’s quite the same as what you’ve got with Russia.
Kai Ryssdal: Totally. Totally fair. Yeah, absolutely. Absolutely.
Kimberly Adams: Okay, and this question, next one comes from someone who listened to that magic keyboard reference you made on the show a few days ago, Kai.
Scott: Hey, Kai, this is Scott in Florida. And I have a question. You mentioned that Jay Powell’s magic keyboard can inject digital dollars into the economy. I’m curious if he can also use his digital keyboard to pull money out of the economy. Thanks very much. Love the show.
Kai Ryssdal: That’s such a great question. And saying it’s a lesson in be careful with shorthand you use for fear of people not knowing what you’re talking about, because you’re being too insider-y. So here’s the deal. The Federal Reserve has the ability alone among the federal government to create money. And the way they do that is by electronically crediting the Feds account, right? At the mint at the Treasury with however many dollars they want, right. And so the shorthand way that I say that is Jay Powell has got this magic keyboard in his office. And he goes in and he adds, you know, $14 trillion to the Federal Reserve’s account. So that’s, that’s what the Federal Reserve does, right? That is their job to manage the money supply. When they create that money, it’s not like it just goes to Congress, and then Congress can spend it. Okay. They use that money the Federal Reserve does to buy in, in the last 12, 13 years, in a policy known as quantitative easing, to buy U.S. Treasury bonds. See also my answer to Friday, and mortgage backed securities, okay. And they buy those from the Treasury Department, which then gives the Treasury Department money to spend in whatever accounts Congress directs, but also mortgage backed securities, which it buys from banks, which then have that liquidity, they then have that money. It does not work the other way around. Jay Powell can go into his office at two o’clock in the morning and say, “I’m going to take $4 trillion out of the economy.” That’s not what happens. Okay. He’s a very nice guy, Jay Powell. I shouldn’t make fun of him. I don’t know where that came from.
Kimberly Adams: I was gonna say that’s a very nice visual there, very villainous.
Kai Ryssdal: The ways to take money out of the economy, there are two one’s pretty clear cut and the other one’s a little more abstract. Number one, you can tax money out of the economy, right? You can take it away from consumers by tax, okay. Or number two, and this is what Jay Powell and the gang at the Federal Reserve are going to do next week, you can raise interest rates, and that makes money more expensive in the economy slows down the speed of money in the economy, and functionally sort of does the keyboard backwards, if that makes any sense. So yes, Jay Powell can giveth, Jay Powell cannot taketh away in a very clear manner, if that makes any sense. Okay. All right. There we go. There we go. That mde me smarter. No, that was that was the totally great question. Totally. Great question. And I think and I think there we’re kind of done.
Kimberly Adams: Yeah. Yeah. That is it for us today. Thank you for listening. And thank you for all those really good questions. We will be back tomorrow for Hollowed Out Shell of a Thursday and I’m going to speak into existence perhaps it won’t be as hollowed out as we might predict.
Kai Ryssdal: One hopes, one hopes, questions please send them to us for next week or for whenever email us of course, make me email@example.com Leave us a voicemail. 508 you be smart and we will see you back. We’ll see you back Make Me Smart is produced by Marissa Cabrera and Marque Green, production help from our intern Tiffany Bui.
Kimberly Adams: Today’s show was engineered by Jayk Cherry, Ben Tolliday and Daniel Ramirez composed our theme music and our senior producer is Bridget Bodnar.
Kai Ryssdal: Bridget Bodnar is in charge of everything. In charge of everything.
Kimberly Adams: Everything, everything, everything.
None of us is as smart as all of us.
No matter how bananapants your day is, “Make Me Smart” is here to help you through it all— 5 days a week.
It’s never just a one-way conversation. Your questions, reactions, and donations are a vital part of the show. And we’re grateful for every single one.