Price controls don’t work even on pain of death

Nico Antuna Cooper is a university professor and works in the border region. He witnesses daily the cultural opportunities of Bitcoin in Latin America and the United States.

Inflation is so high that even mainstream news sites now care. Overall, the average American is seeing price increases in almost everything. From real estate to groceries to gas prices, consumers are getting less for more in almost every industry. Even the government-provided massed CPI inflation calculations look pretty bad these days. As a result, policymakers like Elizabeth Warren are proposing legislation to implement widespread price controls and prevent “price gouging” across the country, thereby protecting the consumer from the next storm of scammers.

At first glance, this seems like a good idea because there is currently no federal law making it illegal to raise prices nationwide. For those who believe in the ability of government to control the economy, this seems like a big relief to ordinary people everywhere.

Unfortunately, a price control law does not address the underlying mechanisms that cause prices to rise: currency depreciation and its ugly brother, inflation. There are also other factors. Notably, when we talk about high prices, the conversation largely revolves around gasoline, which in turn affects the price of everything else. The price of oil is largely set by global supply provided by OPEC, an entity over which US policymakers have no control. Remember that OPEC is a cartel and cartels, by definition, exist to control the price of a commodity, eg crude oil, cocaine, etc. Unfortunately, cartels do not respect US price controls. So what do price controls solve? Can they still lower the prices?

Simply put, the reason prices are skyrocketing is due to quantitative easing, supply chain disruptions, and global price manipulation. Price control laws solve none of this; it’s like trying to put a very expensive bandage on a hemorrhage. It won’t stop the bleeding.

Price control laws are not new and in fact have a precedent dating back thousands of years; as long as there has been inflation, there have been attempts to control prices. Often it is the same centralizing authority that controls prices to rule over the inflation it created in the first place, and today is no exception. Pedants will point out that federal government legislators are proposing these controls while the Federal Reserve Board (an independent agency) is the one causing the quantitative easing. I tell them: we all know very well that one hand washes the other. It is important to note that historically, price control mandates have never worked. Long before the Federal Reserve, we saw it happen during the decline of the Roman Empire, where not even the death penalty could stop merchants from raising the prices of goods and services.

The denarius was the most widely used silver coin in ancient Rome. To finance the growing costs of the empire, for example, a giant army, opulent orgies and bribes paid so that enemies did not invade, the Romans had to amass ever-increasing sums of money. important. In the second and third centuries AD, production from Roman silver mines declined and tax revenues could not keep up, so the Romans began to depreciate their currency – slowly, first under the auspices of Nero Claudius Caesar Augustus Germanicus, but at mass levels. inflation at the time of Diocletian. The silver content decreased more and more, making each coin less valuable over time.

Although debasement and inflation were not the same thing, at some point silver degraded enough to cause massive inflation and completely eroded confidence in the Roman coinage. Eventually, the Romans minted up to a million coins a day, driving prices higher and higher in an old inflationary environment (sound familiar?). Emperor Aurelian, a peasant class cavalry commander, came to power and attempted to stabilize the money supply by guaranteeing a minimum amount of silver and printing this ratio on coins in order to build trust with the audience. This stabilization was short-lived, however, and inflation returned stronger than ever in the empire. Money creation was the only option for a declining empire. This is an excellent video from Told In Stone on the subject.

Emperor Diocletian – (reigned 284-305 AD) also known for leading the greatest Roman persecution of Christians – attempted to reform the military, governmental and monetary system. Prices became so high that Emperor Diocletian made a famous “Edict on Maximum Prices” in 301 AD:

“The first two-thirds of the edict doubled the value of copper and billon coins, and fixed the death penalty for profiteers and speculators, who were blamed for inflation and compared to the barbarian tribes who raided the Merchants were forbidden to take their wares elsewhere and charge a higher price, and transportation costs could not be used as an excuse to raise prices.

The final third of the Edict, divided into 32 sections, imposed a ceiling price — a list of maximum — for more than a thousand products. These products included various foodstuffs (beef, grain, wine, beer, sausages, etc.), clothing (shoes, coats, etc.), shipping costs and weekly wages. The highest limit was on a pound of purple-dyed silk, which was set at 150,000 denarii (the price of a lion was set at the same price).

The edict had no lasting effect. “By the end of Diocletian’s reign in 305, the Edict was virtually ignored. The Roman economy as a whole was not substantially stabilized until Constantine’s monetary reforms in the 310s.

Pay close attention to Diocletian’s verbiage about “speculators” and “profiteers.” This same vague rhetoric was used by President Richard Nixon to take the United States off the gold standard and is now being used by lawmakers to obscure the role of the federal government and the Federal Reserve in price increases. Speaking of Nixon, he too enacted price controls immediately after taking us off the gold standard. We all know how effective these have been.

On a large scale, price increases are not caused by “speculators”; they are caused by currency depreciation and inflation. Today they are also caused by supply chain disruptions and price fixing by cartels, not by the misuse of the gas station, restaurant or street vendor at the end of the line. . In fact, these types of businesses operate on very thin margins and profit very little from this process. End-sale outlets are not profiteers, and in fact are the entities that have the least influence on the price of goods. As always, price controls try to scapegoat the companies closest to the customer and not the big entities that really move prices. As a result, they never really work. Even at the point of a sword in Rome, they didn’t work.

The federal government cannot impose any sentence that is worse than the death penalty. From increased regulatory procedures to even criminal charges for people selling products at a certain price, nothing is harsher than the tried and true Roman methods of execution of being buried alive, impaled and, of course, crucifixion. If even these brutal penalties couldn’t stop prices from rising, what makes you think anything else will?

Ever higher prices are caused by an uncapped money supply, and given that it is bitcoin magazine, this is a great opportunity to mention that bitcoin is the only truly capped money supply in history. Bitcoin is important because it cannot be inflated like the Roman denarius or the US dollar. Unless the vast majority of participants agree to increase supply against their own self-interest, bitcoin will continue to be a haven against inflation for many years to come, with less and less supply exiting the system. over time. No politician, policymaker or emperor can ever change that.

And most importantly, regardless of fiat-denominated prices rising ever higher, bitcoin will never need price controls to ensure its purchasing power.

This is a guest post by Nico Antuna Cooper. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

James V. Hayes