Price Controls Are Making a Comeback

Kamala Harris is cooking up price controls!  

We’re not surprised.  If you wanted to destroy the American economy, you’d come up with price controls. 

Price controls lead to shortages.  Shortages lead to rationing.  And rationing is total, top-down control by the state.  Cronyism and corruption reign supreme.   

So price controls are the road to ruin.  To the chronic shortage economy.  To Soviet-style grocery stores – remember them?  To currency destruction.  And to wiping out the middle class.  

But don’t just ask us.  Ask the people in Venezuela.  Ask the broken nations that tried them after World War II.  Ask the ancient Romans.  

Or just ask someone who remembers the empty grocery store shelves under Nixon’s price controls.

Unfortunately, Kamala Harris isn’t the only one falling for price controls.  At the beginning of the year, we ran this chart showing that a majority of the American people – Republicans, Democrats, and Independents! – support government price control as a means of controlling inflation.  

Of course, if the government really wanted to control inflation, it would stop inflating, expanding the supply of money and credit.  But instead, the government is about to start inflating more.

Since we are students of monetary history, we were more than a little concerned about the willingness of the American people to fall for it.  Here is some of what we wrote at the time about this poll:

Price controls really aren’t about controlling prices.   Prices have no volition of their own.   Instead, price controls are about controlling people.   They forbid free people from engaging in noncoercive commercial activities.  Instead, politicians institute price controls to wreak their economic toll by creating either surpluses or shortages.   

Government bureaucrats and bureaucrats have no special knowledge of the ever-changing conditions of supply and demand at any given moment.  So, when they set prices artificially, prices that aren’t free to move on their own, they are bound to be either too high or too low.  If they set prices too high surpluses result.   That is because producers attracted by the inordinately high prices produce more, while the inordinately high prices drive buyers to alternatives.

If they set prices too low, shortages result.  Producers who can’t make a profit cut back on production, while buyers buy more at the artificially low prices.

Shortages or surpluses.  Empty store shelves touting nice, low prices, or government warehouses with mountains of surplus government cheese.  Take your pick.

What does all this have to do with owning gold?  Everything.  We live in a world in which Fed bureaucrats believe they can set the price of money.  That is what interest rates are, the price of renting or borrowing money.  If the bureaucrats set interest rates artificially low, bubbles result.  Bubbles in home prices, bubbles in bonds, bubbles in stocks.   If they set interest rates too high, the bubbles they create pop, leaving behind unemployment, recessions, and depressions.

It is very possible that price controls are in our future.  Even as we write this, the Fed is plotting more inflation.  Because the American people are okay with price controls, we’ll get them during the next bout of rising prices… no matter who gets elected.

You still have time to protect yourself with gold and silver.  But you may not have long.