economics

Price Controls

The Socialists are following the socialist playbook.

  • Institute profligate government spending policies
  • The spending causes massive, uncontrolled inflation
  • Blame business owners for the increased prices <——– You are here
  • Institute price controls
  • This causes scarcity of products,
  • Which puts pressure on the supply side,
  • Causing runaway inflation
  • Food shortages and famine

The reason why prices of food are outpacing inflation is that the government doesn’t include food and energy as a part of the consumer price index. It’s ridiculous.

Price controls don’t work. An artificially low price set by the government leads to a spike in demand, while the producers are not willing to sell at that price, considering that their profit margins drop considerably or even lurch into the negative. As demand exceeds supply, shortages emerge and consumers are left to cope with them or deal with inferior quality goods in the market. Those who bought up all of the government approved goods then resell them on the black market at the (now even more inflated) market rate.

Ask Venezuela, since they instituted price controls in 2003. The artificial prices set by the government were so low that farmers couldn’t produce food at that price. They had to go out of business. By 2008, the government was spending nearly $7.5 billion on basic food items, but even then high levels of incompetence and deep seated corruption led to the food rotting before it could reach the supermarket shelves. 

Chavez responded to this in 2009 by ordering the military to seize rice farms and make them produce at full capacity. This, and food imported from other countries that was paid for by the nation’s oil exports made up much of the shortfall, and prices stabilized for a couple of years.

Then the bottom fell out from under oil prices. By mid-2011, food prices were 9 times as high as before the price controls. Considering that elections were coming, Chavez persuaded the Venezuelan legislature to pass the 2011 Law on Fair Costs and Prices, which actually made inflation ‘illegal’. A newly created ‘National Superintendent of Fair Costs and Prices’ was empowered to establish fair prices at both the wholesale and retail levels. Companies that violated these price controls were to be subjected to fines, seizures and expropriation. So they simply stopped producing once the prices could no longer support the costs of producing goods.

This caused massive shortages, so people began to hoard necessities like toothpaste and toilet paper, with people buying up 48 rolls at a time. (Sound familiar?) Such trends saw the supermarkets being emptied out even before stockers could get in the supply. The answer for all of this isn’t that the government policies were a failure, nope. Instead, it was the greed of companies and of hoarders, so they had to go.

In 2014, Chavez’s successor Nicolas Maduro passed the Fair Prices Act through which it banned profit margins above 30% and chalked out prison terms for those caught hoarding and over-charging. 

By the year 2020, a dozen eggs cost more than a month’s wages. People were eating the animals in the zoo, as well as their pets.

That’s where we are headed.

By Divemedic, ago

Printing Your Way Out of Debt

The US Treasury just announced that they will be “buying back” outstanding treasury notes during the next quarter for the first time in more than 20 years.

The Treasury Department has undertaken only two previous series of buybacks in the past century. The first took place during the 1920s. More recently, Treasury bought back $67.5 billion of outstanding debt via 45 operations held between March 2000 and April 2002

What followed the first buyback was the Great Depression.

They are claiming that the intent is to make the bond market more liquid. No, what the effect is, is to print our way out of debt. They are going to conjure up $2.5 billion out of thin air, and buy back treasuries with it, in the hopes that people will say “Oh, they aren’t in as much debt now, so I guess I will lend them some more money.”

The first operation is intended for May 29. Through July, the Treasury plans weekly buybacks of up to US$2 billion of nominal coupon securities, and up to US$500 million for Treasury inflation-protected securities (Tips).

This will place more money in circulation and will result in more inflation. There are currently $27.4 trillion in outstanding treasury notes, plus an additional $7 trillion owed to the SS trust fund. A couple of billion isn’t going to do shit, especially when they continue to borrow about $100 billion per day.

This nation and its economy are screwed.

By Divemedic, ago

It Isn’t Gouging

Peter and I usually see things from a similar viewpoint, and I generally respect and listen to his opinions. Not this time. He is saying that:

Businesses aren’t pricing their goods according to what they pay for them, plus a fair and reasonable profit.  Instead, they’re pricing them as high as they think they can get for the product. 

Then goes on to call this “price gouging. This is where I disagree with Peter.

Pricing things according to what people will pay is what everyone does. Let me explain. Let’s say that paying your bills costs you $40,000 per year. Adding on 10% for retirement savings, and 10% for discretionary spending would make your total $48,000 per year.

Now let’s say that your employer offers to pay you $60,000 per year. Do you say, “No thanks, boss. I only need $48,000, so me taking more would be unfair and unreasonable.”

Of course you don’t. So why would you expect a business to act any differently?

Prices are set by supply and demand. If customers are willing to pay $7 for an apple, then businesses will sell apples for $7. That’s what Whole Foods is selling apples for in Peter’s example.

Now let’s say that another business, call them Winn Dixie, is selling apples for $1. Now consumers have a choice: they can go get the $1 apples at Winn Dixie, or they can go get them from Whole Foods.

So why don’t consumers go to Winn Dixie, rather than Whole Foods? There are a number of reasons, which can include what the consumer perceives as the quality of the apples at Whole Foods, or perhaps the shopping experience (maybe one store is cleaner), or other issues like organic foods, the store supports causes or social issues that the consumer also supports, or any number of reasons not directly related to the costs of the apple itself. In other words, Whole Foods isn’t just selling apples. They are selling a shopping experience that some consumers are willing to pay more for.

That’s a choice we each get to make every time we purchase something. That isn’t gouging, it’s the market at work. Even when something IS considered price gouging, I maintain that it isn’t unfair. Let’s say that a hurricane hits my area. The law says that charging more than normal for products like gasoline is price gouging, and that is illegal.

Let’s say that before the hurricane, I was selling fuel for $4 a gallon, but buying it for $3 a gallon. So what happens when the hurricane hits, and everyone wants fuel? I could continue to sell fuel until I run out, then wait for more fuel to come in from my regular supplier, in which case no one gets fuel from that point forward.

Or, I can pay someone to haul more fuel in, even though it takes longer, and I may have to outbid someone else to get that supply from a different supplier. So now I can buy fuel at a higher price, pay more to have it hauled in on a chartered truck, and my cost to have the fuel delivered is now $7 per gallon. The only problem is that the law says that it is price gouging for me to sell that fuel for more than the $4 I was charging before the storm. So I stay home and don’t sell any fuel. Now there is none available at any price.

How did that help anyone, except the 10 guys who came to my establishment before the storm and bought up all of my fuel in anticipation of a shortage?

So how does the market respond? The black market comes in and makes a new, underground market. Now those ten guys are selling fuel for $20 a gallon because they are the only ones with any gasoline to be had.

This is why price controls cannot, and will not ever, work. It’s called the LAW of supply and demand for a reason.

By Divemedic, ago

Warning Signs

Joe Biden’s economy is claiming more victims. I have been saying that restaurants don’t just compete against each other, they compete against home kitchens. When it becomes too expensive to dine out, people begin cooking more at home. That is what it looks like is happening.

Just in the last year, franchisees and chains under the umbrellas of Red Lobster, Chipotle, Taco Bell, Tijuana Flats, Burger King, Hardees, Popeye’s, Wendy’s, McDonald’s, and Denny’s have filed bankruptcy.

It’s getting worse.

By Divemedic, ago

American Dream

From wirecutter, we see yet another article lamenting the loss of the American dream and how it isn’t possible for a family to live in a home with only one breadwinner. I call bullshit.

I hear this all of the time, and I have to say that I disagree with it. Americans don’t want to have the lifestyle of their grandparents, they want to live a life of unbelievably expensive leisure and luxury.

Degradation of the Family

The idea of a basic family: The Father, Mother, and 2.4 children is no longer the case in America. The share of one-parent families with children under the age of 18 has grown from 7.4% of all families in 1950 to 34.3% of all families today. It’s harder for a family to make it when there is only one adult taking care of what used to be taken care of by two adults.

My mother made most of our clothes, and what store bought clothing we did have wasn’t expensive designer stuff. For jeans, we wore Sears Toughskins because my mother claimed that they lasted longer than the stuff she made at home. I was lucky, being the oldest. My younger brother wound up wearing all of the stuff that I handed down after it no longer fit. My brother and I owned two pairs of shoes at a time- tennis shoes for general wear, and dress shoes for church and other “nice clothes” events.

Mom cooked all of the meals. We almost never ate out. When there were dinners out, it was Mom and Dad going out and we got a babysitter.

Owning a home

The average home built in 2023 is 2657 square feet. Just 50 years ago in 1973, the average new home in the US was 1660 square feet. Seventy five years ago, in 1948, the average size of a new single family home was 983 square feet. In 1938, new homes were slightly larger at 1173 square feet, but it was also more common to have multigenerational households then, with grandparents, parents, and children all living under the same roof.
Children shared a bedroom. I remember when I finally got my own room- I was a teenager and thought we had become rich. My parents bought a new house, and my brother and we finally got our own rooms. Looking back, I remember thinking how large that house is. Built in the late 70’s, it’s a four bedroom house that is only 1854 square feet, small by today’s standards.

Materialism

Technology has played a role as well. Everyone in the family now has a smart phone with a data plan that permits them to be online 24/7. Multiple televisions in a house, something virtually unheard of in 1973, are the norm.

The stay at home mom didn’t sit around all day and watch TV 50 years ago. No, the woman of the house cooked, cleaned, took care of the kids, made her own and the children’s clothes, and all of the other household chores.

Back then, Dad had the only car, and the upper middle class families had a second, family car. If one of the kids wanted their own car, they paid for it themselves by getting a job.

School

In 1970, only half of Americans graduated from high school, less than 10 percent went to college. When you were 15 or 16, you went out and got a job. You didn’t spend your whole life in school majoring in smoking weed and getting laid while studying gender roles of non-binary sexual predators. No, you became a mechanic, a farmer, or a factory worker. You did something productive with your life and didn’t waste it making TikTok videos about sex toys.

If you want to live like Americans did in the 50s through the 70s, it is still attainable.

By Divemedic, ago

Part Time

This post over at GFZ reminded me of a story that happened to me 15 or 20 years ago, while I was still a street medic. I was partnered with another medic, a female who like to seem like she was jaded, but really wanted to believe the best in everyone.

There was a prostitute who had diabetes that we would run on every month or so. The call would usually follow the same path. Her “customers” would call 911 every time she would pass out at “work” and we would check her blood sugar to find that it was low. We would start an IV, give her some glucose, then she would wake up and refuse to go to the hospital. We did this for several years.

Then we didn’t see her for awhile. After not seeing her for 6 months or so, we got a call to a local convenience store and there she was. My partner says to her: “Hey Dianne! We haven’t seen you in a while. How have you been?”

Dianne replied: “Things are great. I got me a man, now. We have a good job, and moved to Orlando.”

Partner: “Good for you! So what brings you here to town today?”

Dianne: “Well, my husband says that now that we are married, we have plenty of money, so I only have to work part time.”

By Divemedic, ago

Spin

Read this:

This is tipping, but by calling it a “service charge,” it is no longer optional. Then comes the virtue signaling about benefits.

I don’t have an issue with this. I would like to see tipping become a relic of the past.

By Divemedic, ago

Stock Tip

The DOJ has officially opened up a lawsuit against Apple to break up its Smart Phone Monopoly. $AAPL is one of Pelosi’s largest positions. So for you Apple bulls, you have Pelosi on your side for this one.

Follow this Twitter feed for more stock tips. Just buy what Congress buys. Those crooked sonsabitches are all insider trading.

By Divemedic, ago

Real Communism Hasn’t Been Tried

Seattle, which already as a $19.97 per hour minimum wage, passed a law mandating delivery driver minimum wage. Using a complicated formula, the law dictated that delivery drivers receive a living wage. The law caused delivery companies to pass the added costs on to the consumer in the form of extra delivery fees. The next thing you know, people in the Seattle area had to contend with $26 coffees and $32 sandwiches, with taxes and the neew delivery fees comprising nearly 30 percent of the total bill.

The free market responded, as it always does. They don’t call it the LAW of supply and demand for nothing.

Seattle residents started deleting their delivery apps from their phones in response to the spiking exorbitant delivery prices. Uber Eats experienced a 30-percent decline in order volume in the city, while DoorDash reported 30,000 fewer orders within just the first two weeks of the ordinance taking effect.

As a result, the income for drivers actually went down. A driver who made $931 in a week this time last year saw his earnings drop by half to $464.81. Small restaurants are hurting, delivery drivers are hurting, and people who depend on food deliveries are not able to get food because drivers are quitting in droves. So do the socialists in charge admit that they were wrong, and change the law? Of course not.

A spokesman for the mayor noted that “should the data show there have been unintended impacts for workers and small businesses, we are always open to making improvements”—a criterion which has clearly been met already—but nonetheless clarified that the mayor still “stands strongly in support” of the minimum wage ordinance.

Meanwhile, the president of the City Council claims she is “very worried” about the ordinance’s impacts so far—and even argues that “it’s not the role of policymakers to regulate the profit margins of companies”—before going on to say “I’m not going to redo the whole legislation.”

The law required that the city hire more bureaucrats to administer the law, and that is the point of most socialist laws- to increase the size and power of government and its officials. Just remember, the reason why communism and socialism fails is because the right people haven’t been in charge, and true communism hasn’t been tried yet.

By Divemedic, ago