Price Controls Don't Work --Not Even For President Trump
Basic economic logic and thousands of years of recorded history have verified that price controls take a bad economic circumstance and make it even worse. But alas, President Trump, who seems to be looking for a quick fix to pacify public anger for the results of his policies, is pushing for price controls. Whether it be interest rates, credit card rates, electricity rates ... the more the government subsides and interferes what is left of market prices, the bigger and more numerous the problems become.
Hello, everybody, and thank you for tuning into the Liberty Report.
With us today, we have Chris Rossini, our co-host.
Chris, welcome to the program.
Happy Friday.
Great to be with you, Dr. Paul.
Very good.
Good to have you here today.
And this solves some problems, but we won't talk about big bombs and all the killing that goes on throughout the world and our totally flawed foreign policy.
We're going to talk a little bit about economic policy.
They're pretty big economic bombs that they can draw.
But something that notoriously has been around for centuries, and that is when governments screw up the monetary system, devalue the currency, guess what?
Prices go up.
So you have to do something about that.
You can't just sit back and say, well, there's nothing they can do.
And you explain to them, well, what you have to do is quit debasing the currency.
Don't devalue the currency.
And the value of the currency will be maintained.
And prices might even go down in a positive way.
No, they don't do that.
They say prices are going up.
And my people, my constituents are upset about it.
And they don't have enough money to pay the bills.
Do something about it.
So the politician responds to that.
They listen and find out.
And sometimes the consumers are confused and sometimes they're anxious.
And sometimes they represent special interest.
So what they want, you know, the prices to come down and quit going up so fast.
So a long time ago, they introduced the notion of wage and price control.
You know, literally centuries, they have, even the Romans tried to solve the problem with price control.
But we did in World War I.
We did it with our Revolutionary War, regulate with prices, but not have sound currency.
And that has gotten attention.
And the politician gets a little bit of credit for it, but he shouldn't, because he should tell them, look, what we have to do is quit printing the money.
But that's not very popular.
But right now, we're back at it again.
Wages, wage curtain price control efforts.
And they believe that the politician's obligation and ability is to regulate the prices and smooth out and blame somebody else.
Blame the war, blame the Federal Reserve, what you want to blame, but not really the basic problems.
So they put these regulations on.
And Chris, guess what?
Things get worse.
That's unbelievable.
But anyway, we will make our pitch for sound money and to avoid the temptation of wage and price controls and control on the currency and not allow that effort to grow as it already has in these past eight months, Chris.
That's right, Dr. Paul.
And before I get to price controls, I do want to talk about something that's very relevant, and that's the price of gold.
I mean, we're at 4,600, lots of interest in gold.
We have a, as our regular viewers know, a partnership with Birch Gold Group.
And for this month, they have a special going that if you're interested in even learning about gold and how to invest with gold, they will give you a nice little book that was put together.
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If you text to Ron 989898, you'll get this little book along with information on, you know, because there's a lot of people, you know, they see the price of gold.
It's not a pet rock, as the counterfeiters said.
It's not some useless rock that nobody needs.
It trades as money, 4,600 bucks.
You know, so a lot of people want to protect themselves from inflation.
So we partner with Birch to at least connect you with someone if you're interested.
There's no obligations to become a customer.
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So once again, text Ron to 989898.
Now back to our big problem in our economy.
You know, the prices, the rising prices that we've been dealing with that have not improved, in my opinion, I don't care what the government says under Trump.
They always say that inflation is lower.
Is that the government creates these problems and then they multiply it with their solutions?
Price controls, handouts, STEMI checks.
You know, they just multiply new problems one on top of another, thinking that they're putting a band-aid because all they really care about is getting the public off their backs.
And the public is not happy.
Prices are going crazy.
But the public is also very guilty in all this.
Government Manipulation Creates Shortages00:15:28
As bad as the government is with their wars and spending and deaths and deficits, the public looks to the government for everything.
Government has to do something about this.
No matter how big or how small the problem is, it's so anti-American compared to what America was.
You know, the government was supposed to be in the background.
They uphold law and order, but you're, you know, you're in charge of creating prosperity for your community, for your family, for yourselves.
Now, the government is the prime actor in our society, and people have been reduced to mere spectators.
Government should do this.
No, the government should do this.
And people fight over what the government should do.
Nobody ever saying, you know, the government shouldn't be doing any of this.
So that's how we get into this crazy problem of debts.
They're bankrupt.
They constantly go to war.
And, you know, and they're constantly trying to put these little band-aids of price controls to try to fix everything.
And it's only going to make things worse.
Very good.
You know, there are a lot of things that this principle has been applied to over the centuries.
And sometimes it's very bold on everything.
And sometimes it's isolated, depending on which lobbyist gets the attention of the politician.
But I think the biggest problem in this principle of allowing government to manipulate price or value of some items.
And if they did it on all farm products, which they try to and are involved in right now, it just leads to more trouble and interferes with production.
But there's one that I think is the very biggest, and that is the manipulation of the price of money.
And I use that casually because that means how do you measure the price of money?
Well, the market measures it by interest rates.
You know, if it's a depreciating currency, then the interest rates are going to go way up.
And that has happened before.
So what do they do?
They put price controls.
And we do have one incident we might be able to get around to mentioning that they're trying to do that at this very moment to control the value of the currency.
But if you think of why I believe it's so important, is if you deal with the unit of account of the prevailing currency, that would be the World Reserve Currency, which is the dollar.
If you manipulate the interest rates, you're manipulating the price of this, and it has a big effect.
I mean, hundreds of a percentage of some of these movements, when they're moving trillions of dollars around, it's a big deal, and they're involved in that all the time.
But when you think of the huge size of this problem, is just think now with the reserve currency in the world, and this reserve currency of the dollar is gigantic compared to many other currencies.
So, if they go and start to regulate, you know, the currency now, in many ways, is used in almost every transaction in the world, indirectly or directly.
So, they're manipulating that.
So, if they're changing it, so they don't want to look at what the real value is, and that's the destruction of the definition of the unit of account.
So, they go and manipulate, but it is big.
When they start manipulating, the larger the number of items they're regulating, the worse the problem is.
And this is the one thing that they do.
And there's a big fight going on now.
Who should be the arbitrator who should tell us what the price of money ought to be?
Certainly not the marketplace, because what does the market know?
It doesn't know anything about good politics.
So, it has to be dealt with.
And that's what the big argument is in the big fight over with Trump and the Federal Reserve System right now.
And they're trying to figure out who's the best price fixer.
And in some ways, if they solve that problem, the other problems would be a lot minor.
But we'll mention a couple of other things that are involved.
But over the centuries, they have been there just in my lifetime.
You know, I don't remember the World War I price controls, but I do remember the World War II price controls because we were in the dairy businesses and there was rationing and shortages and all that.
And even as somebody barely in grade school, I had to learn to how to collect these tokens, you know, that made up for the regulations that they have.
So that has been around.
And then it wasn't long after World War II.
We had more wage and price controls on during the Korean conquest.
But it is, I'll tell you, it is still going on.
The principle is there.
And right now, I would say we're moving in the wrong direction, even though we do have voices of sanity out there when they start talking about some of the extreme examples in the daydream of this effort to price fix.
And it does indirectly always affect the wages.
So if they mess around with prices, they mess around with the value of the wages.
So this is something that has been around, it's around right now.
And we would like to cast our vote today and try to warn people that when it sounds good, oh, you keep me interest rates below 10%.
Boy, that'd be neat.
I can borrow money again in my house, book, my mortgage rates, and all that nonsense.
So we want to contribute to the fact that the market is still very important in establishing interest rates.
That's right, Dr. Paul.
And prices are supposed to tell us the truth about supply and demand on whatever the product is.
And a lot of times, and myself included, you don't want the truth.
You know, I live in a place where there's concerts, they have concerts nearby, and the price of parking triples whenever there's an influx of people.
Now, do I like that?
No.
But when I go in, there's spots there.
You know, if it was at the original price, there would be no spots.
By the time I got there, I can't park anywhere.
So there is reason for it.
It's the same thing with water and during storms.
It's at a higher price, but there's water there.
You know, people then have to, if there wasn't, if it's at the original price, somebody will go in, buy it all up.
And even if you try to ration it, people will find ways, they'll buy it up and you go.
And that's why it creates shortages.
No gas, no water, no paper towels, because the store can't raise the price because here comes Mr. Politician calling you a gouger, you know, because the Mr. Politician wants you to fake reality.
You know, we need to deal with reality, even if we don't like it.
And that's how markets clear.
And then more supply comes in and all the good stuff happens, but it's hard.
People don't want the truth.
They don't want to live in reality.
They'd rather the politician come in, fix it for me, do something.
So he'll come in and do something.
And then there's shortages.
Now you have nothing.
So the price controls don't work, but people want them.
They want to feel like their politician is going to go get that store that's ripping you off.
And that's not to say that everybody's an angel and everything is perfect until this stuff happens.
No, but the politician doesn't help.
He makes it worse.
Even though we have to deal with crooked businesses and people that do rip you off, genuinely.
But the politician does not help, but he comes across as this big helper.
He's here for you.
He loves you.
He's going to care for you by forcing prices down.
And then you have shortages.
So it doesn't work.
This is going on, like Dr. Paul says, back to the Romans.
You know, people never learn, but some people can learn and some people can learn to deal with it, even, you know, as government messes it up.
Over the years, I've talked a lot about August 15th, 1971, when we ended the gold standard, but there were a lot of other things.
We put on tariffs and we also put on wage and price controls.
And what I remember was that the day the announcement was made on Sunday and on Monday, things changed rapidly.
At that particular time, the stock market went down the most in one day ever.
It was peanuts compared to what we do now because just the devaluation of the currency.
But it happened immediately.
And that meant there were shortages immediately.
But guess what?
The market is pretty shrewd because immediately, it didn't take months to develop.
There was another market.
Unfortunately, they gave it a bad name because it's the real market, but they call it the black market.
You know, the market that is designed to figure this thing out is finding out what the real price is.
And they do, but they have to factor in now all these controls and what the government's doing and the devaluation of a currency.
So it's a big, big job.
We took a wonderful thing and a process in the marketplace to sort all this out in trade.
So the freer the trade, the better.
The other thing that gets involved here, and we put the controls, we introduced a lot of tariffs back in 1971, and that made it even worse trying to sort that out because maybe trade could help smooth things off.
Oh, but right now, you know, the people are very happy with the effort now being put into the tariffs as a solution.
But more and more people are waking up and starting to realize what has been discovered this, even back to Roman times, is the controls won't work.
And the statistics are coming out to show that it doesn't work.
And so therefore, giving up of your liberty to the bureaucrats to tell you how much you're going to pay for warrant rent and all these other things.
Sometimes people say, well, it's a good idea.
My rent isn't going up anymore.
But it's the principle of interference and management, which is mismanagement, is the case.
But that black market comes up.
So you can use the word black market because it's black because the government created it and it's not good.
But it really is the free market trying to seek back its ability to sort out these very, very complex economic problems.
Fantastic, Dr. Paul.
I'll finish up with my closing thoughts.
Yeah, last week, I believe we were talking about Venezuela.
You know, it's war all the time, year two with President Trump, Iran, Venezuela, kidnapping leaders.
No matter how many decades of failure we've been through this, you know, too many people on the right have fallen for it again, the war propaganda.
They think that they're benefiting.
You know, how many decades have to go past to realize that none of this benefits us, the people, at all?
You know, we bear the costs.
You know, the same applies to economic propaganda, you know, whether it's stimulus checks or handouts or price controls, you know, all of this intervention.
You know, whether, so it's not foreign intervention.
Now they're interfering here in our markets.
And again, we bear the costs.
We're not being helped by it, even though it's portrayed that way.
And the costs are getting so heavy that it's going to break our backs.
You know, we're at 38 trillion in debt.
The government is scrambling because the interest on just paying this 33 trillion, 38 trillion is getting out of control.
The Americans can't afford anything.
You have to be 40 to buy a house.
I mean, these are all the costs for the wars, for all the intervention.
We're not getting off scot-free for any of it.
We're paying every single penny of what they do.
But they're so good at swaying the public into supporting what they do that it's a struggle for people like us to say, you know, look, we're like the libertarians are like at a magic show, the people in the crowd saying, no, he's not cutting her in half.
This is what he's doing.
It's all smoke and mirrors.
And then everybody booze you, you know, for telling the truth.
So it's tough, but you got to do it.
You have to tell the truth, apply it to your own life, and then share it with others so that they can protect themselves from the state.
Well, they make this wonderful effort to correct things because they make this claim that they know what is the proper rate of interest.
And that's, of course, what the Fed and others are always arguing.
But they can't know this.
And this is why it all always fail.
It's only the marketplace that sorts all this out.
But right now, there's a senator pushing one of Trump's suggestions, 10% credit card rate cap on certain items.
That whole principle is like, well, 10% is a lot.
And they could have low interest rates.
Matter of fact, the freer the market and the sounder the currency, the lower the interest rates are.
But in this case, when they're 10%, but the correction, unfortunately, is to allow the market to find it out.
And that's what Volcker did when he finally took over.
It was a mess in the 70s.
And he let the interest rates go up to 21%.
I'm surprised we did recover from that, but it's a rough system to have to pay for.
But then there's the right now, people are always sympathetic on electric bills, but there's an abundance of electricity, but now they have to figure out whether There's an industry being developed right now.
And whether it's at the correct rate or not, we don't know.
And that is the interest rates and all the engineering with the computers that they have to build.
And then they prohibit cheaper energy.
And they say, oh, we need to be involved.
And so they want to, you know, set caps on residential electric bills because the prices are going up because the regulations are saying the government has to build this, this, and this, and they might need it for war purposes.
It's such a waste of time and energy, and they're looking all in the wrong places.
And that is the reason the market is so good at trying to solve these problems.
And this is one thing they do is they turn that upside down and say, if you do, you're getting help special interest, which is half true, because some people will get protection.
People Gouging During Disasters00:01:57
And some people say, boy, I did real well.
And after they did this.
But there was one other that I've had a little experience witnessing because we live in the area where we have hurricane.
And hurricanes can be very, very damaging.
And what they do is the government comes in because FEMA's in there and they have to protect everything.
Don't let the landowners come in.
So they come in and they say, Oh, people are gouging you.
Prices of lumber just went up.
So we can't do that.
We are going to put them in prison.
They practically want to shoot people like that, gouging the people for that.
Yet all they're doing is responding and solving the problem because a lot more people would be taking a risk to go through bad weather and bad conditions to deliver certain items to get into those areas.
So they do the opposite thing, but it sounds like good politics.
And they're still doing that.
They still have to pander.
But that means there's a lack of understanding of true economic policy and sound money.
And people are bamboozled into accepting some of these people that are going to solve all these problems for us.
And they have to really look closely into how the marketplace, a free society at property rights and sound money prevents these problems.
And if you have them, they get you out of these problems instead of saying, well, we need is just better management of something that no one person knows exactly what the answer is.
But we do know the evidence is very strong that the freer a society, the more prosperous it is, and the more peaceful it is.
I think those are pretty good goals to seek.
I want to thank everybody for tuning in today to the Liberty Report.