On the Candidates’ Disastrous Price Policies—and Harris’s Moral Obscenity

I don’t think any economic fallacy has undergone more scrutiny, for so long, and been so universally condemned by non-partisan economists, as government price controls. Yet price controls keep resurfacing in political campaigns, especially in times of inflation. 

This presidential campaign of 2024 is no exception. Donald Trump is going crazy with tariff proposals, and recently proposed capping credit card interest rates at 10%.

Kamala Harris proposes Federal anti-price gouging laws against the food industry. I touched on the price gouging absurdity in a short post on Quora. She follows from her boss Joe Biden on this issue. 

The damaging economic effects of price controls are covered nicely in an article By Ryan Bourne and Sophia Bagley [published by CATO, titled  Economists’ Damning Verdict on Both Presidential Candidates’ Pricing Policies. So I won’t repeat them here. My focus is on the horrible moral aspects, which are not covered in the article. On the moral aspect, of the two candidates, I think Harris is the most dangerous and unjust.

Here is my Facebook post on this article:

The article rightly focuses on the economic arguments against price controls, which are well known. But of the 2 candidates, Harris is by far the worst because her policies are not just bad economics. They are MORALLY OBSCENE. And she is not original. She is just the latest in a long line of politicians who blame private enterprise for the inflation disasters that their own policies cause. In the 1970s inflation disaster, Nixon, Ford, and Carter all blamed, in their own way, private enterprise. Using useful idiot terms like “greedflation” and “shrinkflation,” (Biden’s favorite terms) and “price gouging” (Harris’s favorite), the Biden/Harris axis blames American business for inflation. This is the moral equivalent of blaming the rape victim rather than the rapist.

Inflation is a monetary phenomenon. It is the creation of excess money to finance excess government spending. This causes excess demand, which triggers GENERAL price rises (Prices can rise for other reasons, such as supply shocks. But that is NOT inflation). Since the Federal Government nationalized money over 100 years ago, ONLY THE GOVERNMENT can excessively inflate the money supply, which the Federal Reserve did in spades to fund the massive Trump and Biden “covid relief” spending. 

The recent “price spiral” was not caused by, and COULD NOT HAVE BEEN CAUSED by, American business, as Harris claims. It was caused by Trump/Biden spending (with the most blame going to Biden, in my view). All economic groups, business, workers, consumers et al, are trying to cope with the resulting cost pressures, as best they can, that 2 administrations set in motion. Harris’s campaign ploy of blaming “price gouging” by business for inflation should be rejected as the moral obscenity that it is. So much for HER character.

Related Reading:

How Anti-"Price-Gouging" Laws Really Work

‘Greedflation’: Biden’s Scandalous Blame Shifting

Joe Biden’s Despicable ,Unjust Blame Game

Memo to Jersey City Mayor Fulop: The Federal Reserve, Not Supermarkets, is to Blame for 'Hidden Food Inflation'

Economics in One Lesson—Henry Hazlitt

Did the New York Times Just Vindicate Reaganomics?

In NJ, the Crusade Against "Price-gouging" Could Be Hindering Recovery

New Jersey’s Political Attack on Takeout Food Delivery Service Providers

Memo to Harris: Corporations are not destroying America: The way the Harris campaign is marshaling economic data paints a misleading picture. By Eduardo Porter for The Washington Post

Money-Making and Commerce go Hand-in-Hand with the Fight against COVID-19

In a NJ Star-Ledger Guest Column, Money’s the madness pushing some lockdowns foes, past Gloucester County Branch NAACP president Milton W. Hinton Jr. joined the chorus of voices denigrating the lockdown critics. As Hinton simplistically put it:

In their minds, commerce takes precedent over everyone’s health and well-being. For them, a large number of future deaths from COVID-19 are acceptable as long as money is being made. This thinking is “collective madness” for society as a whole. [My emphasis]

So, it’s either/or - the economy and death or economic hardship and . . . what, life? He brushes off the view that possibly you can both increase commerce and restrain the pandemic:

“Atlantic County Officials need to sound the alarm. Reopen New Jersey immediately without restrictions. Trust American freedom, ingenuity and the US Constitution. Unite the hands of the Private Sector so it can rescue NJ from this nightmare.” After widespread criticism, Curcio modified his post to read “… with sensible restrictions.” [My emphasis]

Interestingly, Hinton hits on a crucial point about American freedom:

Let me respond to the surrogate that I do not trust “the American freedom” or its “ingenuity” when it appears to mean that citizens can do whatever they want, whenever they want, no matter the outcome for everyone else. Your alleged freedom stops where mine begins.

Medical experts and scientists, who I do trust, are advising the public to maintain social distancing and all the other protective measures in order to prevent needless deaths and spread of this virus.

Note who Hinton doesn’t trust--private citizens. I guess he views money-making and commerce as amoral “anything goes” activities. Notice also that he puts American freedom and ingenuity in scare quotes, and prefaces the word freedom with “alleged” in the last sentence. Maybe he doesn’t really understand the crucial importance of the principle expressed in that last sentence, viz, the American concept of individual rights, which establishes the scope and limits of individual freedom. 

Money-making is the act of creating goods and services that others value enough to pay you for. It is the heart of trade, which is commerce.  It is what we are counting on to defeat the virus. The CARES Act is made possible only because prior money-making gave the government something to redistribute. The huge burst of research and production repurposed toward COVID-fighting supplies, medicines, etc. is made possible by investment capital created by prior money-making. Money-making is the means of supporting our lives, families, and futures. Money-making, in short, is life. 

And individual freedom is the social condition that enables commerce. That’s what lockdown opponents are fighting for (though not all, unfortunately, responsibly). Thankfully, some commerce continues to operate. It’s noteworthy that leaving “essential” money-making businesses free to continue operating with social distancing restrictions seems to be working. This indicates that the rest of commerce needn’t have been shut down. It’s not at all certain that draconian statewide lockdowns were or is the way to go. Limited quarantines and social distancing commerce, rather statewide lockdowns, may have worked.

American freedom does not mean “that citizens can do whatever they want, whenever they want, no matter the outcome for everyone else.” It’s true that “Your freedom stops where mine begins.” That’s what the principle of unalienable individual rights accomplishes. That’s what American Freedom actually is. Our political authorities, not the lockdown critics, are the ones who seem to have abandoned that other American principle, constutionally limited government—"Your authority ends where my liberty rights begin."

While I can’t support all of the tactics of the lockdown opponents, I do give them moral credit for bringing freedom to the forefront of the “reopen” debate. I am, after all, an American.

An American will always hold public authorities’ accountable, and demand they offer strong constitutional and principled justifications for any liberty restricting policies that they impose on us.

Related Reading:

‘Reopening’ the Economy: It’s Not ‘Money vs. lives,’ or Even ‘Money or Lives’

Moral Rights and Political Freedom by Tara Smith  

“Francisco’s Money Speech”, from Atlas Shrugged by Ayn Rand

Healthcare and the Role of Money

Pushy Politicians Make Stay-at-Home Protests Necessary Government officials’ disdain for personal liberty and economic pain drive Americans to the streets.

By J.D. Tuccille

Celebrities and the Media Shouldn't Sneer at Coronavirus Lockdown Protesters The gatherings are ill-advised but understandable given the harms of government-enforced shutdowns.

By Robby Soave

Don't Get Fooled by Fake Photos of Coronavirus Lockdown Protests COVID-19 lockdown protests are spreading and so is misinformation about them.

By Elizabeth Nolan Brown

Coronavirus. Government-Mandated Economic Shutdowns. But is there a Third, More Fundamental Cause of the 2020 Economic Crisis?

I can’t answer that. But I can speculate.

Today’s economic collapse brought to mind a statement from an acquaintance during a long exchange on Facebook some time ago. In defending democratic socialism, the acquaintance said in 2018: “I fear we are headed for a collapse in the near future.” She was referring to an economic collapse, and blamed her fear on technology and  “unrestrained capitalism.”

I answered her misplaced blame in detail. But I never replied to her fear. The discussion was long and involved, so I never got around to it answering that fear. In view of the crisis we’re experiencing now (2020), I thought I’d post what I wanted to say back in 2018. Here is what I would have replied:

“I fear we are headed for a collapse in the near future.” 

Of course we’re going to have another collapse. The government’s interference into the economy has only increased since the 2006-2009 housing bust/financial crisis, which itself resulted from massive interference from the Federal Reserve, Fannie and Freddie, regulatory mismanagement, and the politics of “affordable housing.” What will cause the next collapse is anybody’s guess. But be assured that imbalances due to government policy are building up. This doesn’t mean the current (2018) prosperity is not real. But alongside the prosperity we’re having, the imbalances are building and danger is gathering beneath the surface. Trump’s regulatory reductions and corporate tax cuts will help, but will not nearly be enough.

FAST FORWARD: 

Sure enough, we got the catalyst--the coronavirus. A secondary, more serious catalyst is the massive shutdown of the economy engineered by our political leaders (It remains to be seen if this will ultimately cause more harm than good). These certainly are important factors. But I believe one of the biggest causes is getting too little notice. While those two are getting the public’s attention, a third and probably more important catalyst is greatly exacerbating the crash--the years of near-zero interest rates engineered by the Fed. These artificially low rates have incentivized massive increases in debt, both for individuals and for businesses (not to mention government), well beyond what people would do if markets set the rates. This huge mal-allocation of resources is now unwinding, giving a huge push to an already falling economy and stock market.

Let me focus on one sector--individuals. Typically, savers have reasonable low-risk interest-bearing options. But with interest income shriveling up, people have for years been looking for other options. That has meant common stocks. Hence, many people have been piling into stock market investments out of desperation for better yields. 

Now, I love stocks. They are a great way for average people to ride the coattails of business growth and entrepreneurial “prime movers” and build wealth over time. But thanks to the Federal Reserve’s near-zero rate policies, a lot of money has flowed into the stock market that shouldn’t have gone in--that is, has gone in for the wrong reason, yield. This means that a lot of people have put a lot of money into stocks that they normally would not have. This over-investment has made these people ripe for panic, and that panic is showing up in the stock market crash. This problem is particularly acute for retirees. Retirees, to put it bluntly, have been royally screwed for most of the last 20 years, when the Fed first reduced interest rates to near zero following 9-11. Retirees, who need a lower risk investment strategy and thus less stock exposure, were incentivized into taking on much more risk that prudence dictates. They are now adding substantially to the panic selling according to what I’m hearing on CNBC, the financial news program.

I believe that the acquaintance mentioned above was right, but not for the reason she believed. It’s not unrestrained capitalism (which doesn’t even exist, but should), but central planning, that is the problem. A collapse was going to happen. If coronavirus didn’t come along, something else would have, eventually.

As I said, I can’t say how the various factors influenced the current crisis. Economics is complicated. This period will be analyzed for years to come. But I am convinced that as long as the government coercively interferes in the natural workings of the market, and meets each crisis with more of the same, there will always be a realistic “fear we are headed for a collapse in the near future.”

Related Reading: 

A Tale of Two Bubbles: How the Fed Crashed the Tech and the Housing Markets: “Central Bankers appear to have learned little from recent history.”—Luka Nikolic for the Foundation for Economic Education. [This article was published on August 10, 2019. It is almost prophetic.]

The Financial Crisis and the Free Market Cure—by John A. Allison

A Free Market is the Only ‘Natural Order of Things’

Related Viewing:

The Pandemic and the Economy—with Onkar Ghate, Yaron Brook, and Rob Tarr from ARI

Studebaker Review, Part 4: the Money-Equals-Wealth Fallacy

Steve Forbes sets the record straight on money:

Today the U.S. and the world are suffering grievously from a cart-before-the-horse mentality when it comes to how central banks approach money. Reflecting obsolete thinking that grew out of a misdiagnosis of what caused the Great Depression, these institutions and their political masters believe that money controls the economy. Manipulate interest rates–the price lenders charge borrowers–and, voilà!, you can steer the economy like a driver does a car. Regarding this, Keynes and his followers had it exactly backward. Money reflects the real economy, which is the production of products and services. It no more directs what we buy and sell than scales control a person’s weight. Money is not wealth; it measures value the way watches measure time. Money is a claim on services and products, just as a ticket can be a claim on attendance at a concert or for a coat checked at a restaurant.

We often hear the absurdity that goes something like this, “The 1% owns 95% of the wealth.” But when you take a proper understanding of money into account, you’ll find that we have amazing wealth equality.

As Barry Brownstein observes:

The essential consumption goods we couldn’t even imagine a hundred years ago are almost universally available in the United States today. The marketplace, aided by many creative, pioneering entrepreneurs and every person who strives to put in a good day’s work, is generating consumption equality.

And as Andy Kessler observes, quoted in Brownstein’s article:

Just about every product or service that makes our lives better requires a mass market or it’s not economic to bother offering. Those who invent and produce for the mass market get rich. And the more these innovators better the rest of our lives, the richer they get but the less they can differentiate themselves from the masses whose wants they serve.

Industrialist Charles Koch calls this simply “Good Profit.” Thank the “1%” for our incredible standard of living! Thank capitalism for allowing economic inequality to flourish. And reject the inequality alarmists. These economic egalitarians are no friend of “the 99%.”

Again, all it takes to know this truth is introspection—and observation. Which are the biggest retailers? Not Jaguar. It’s the Wal-marts and the Home Depots that cater to average folks.

Studebaker’s premises don’t add up. Then where does that leave his macro observations?

To be continued.

Related Reading:

Production versus Consumption—George Reisman

Copernican Revolution Coming to Economics—Steve Forbes

Time to Minimize "Macroeconomics"

My Objective Standard review of  The Forgotten Depression—1921: The Crash That Cured Itself, by James Grant

Equal Is Unfair: America's Misguided Fight Against Income Inequality—Yaron Brook and Don Watkins

Does Inherited Money Ruin Lives?

Quora is a social media website founded by two former Facebook employees. According to Wikipedia:

Quora is a question-and-answer website where questions are created, answered, edited and organized by its community of users. The company was founded in June 2009, and the website was made available to the public on June 21, 2010.[3] Quora aggregates questions and answers to topics. Users can collaborate by editing questions and suggesting edits to other users' answers.[4]

You can also reply to other users’ answers.

Recently from Quora: “What are the advantages of growing up wealthy (in the top 1%)?: Also what are the cons of growing up rich?”

A good answer came from Jenny Hawkins, speaking of her two cousins, each of whom inherited $1 million at age 21. I left this comment on her answer:

I like this essay, and I agree with much of it. But I must challenge this one statement—“I have seen that money ruin their lives.”

Did the money really ruin their lives? Or did these two kids squander the opportunity the money gave them? I think the latter.

I have a friend who inherited a well-established, thriving engineering business from his father. He had all the “advantages” of wealth. He went to an elite private school, then on to Princeton University. Far from squandering the opportunity, or even resting on his laurels, my friend worked hard and built the business into a size many times what he inherited. My friend eventually sold the business and retired a wealthy man. But to this day is an unspoiled, “down-to-Earth” guy with good values.

Or consider David and Charles Koch. They inherited a business worth $23 million. Did they squander the opportunity? No. Over a period of half a century, they built Koch Industries into a $100 billion dynamo. Did they lose their middle class values? No.

Most people I know started with little or nothing and achieved some level of economic success.

Here’s the key: “Middle class” is not defined in dollars. It’s defined in values. As Jenny observes, American freedom provides maximum opportunity for self-direction and self-fulfillment. But it is up to each of us to seize the opportunity that freedom provides. The same goes for money. Self-reliance is the hallmark of the American middle class. Did those two cousins make a mess of their lives? Apparently. Do a lot of rich kids squander the opportunity they’re handed? Probably. Blame the parenting. Blame the kids. But you shouldn’t blame the money any more than you should blame the freedom. As a character in Atlas Shrugged observed about inherited wealth, “

[M]oney is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires. . . .Money will not purchase happiness for the man who has no concept of what he wants: money will not give him a code of values . . . and it will not provide him with a purpose. . . . Money will not buy intelligence for the fool, or admiration for the coward, or respect for the incompetent.

Only the man who does not need it, is fit to inherit wealth–the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him. Did it? Or did he corrupt his money?

I believe that if we continue to enjoy substantial political and economic freedom—and that’s a big if—it is up to each one of us, whether we are born into wealth, poverty, the “1%,” or whatever we conceptualize as “the middle class,” to make the most of whatever “hand we are dealt.”

Related Reading:

Francisco’s Money Speech—originally published in Atlas Shrugged, © Copyright, 1957, by Ayn Rand, reprinted in Capitalism Magazine.

Is Inheritance anti-Capitalist and anti-Merit?

Inheritance Taxes, Inequality, and the Economy

How is it Possible that ‘1% control over 95% of the wealth?’ It’s Not, and They Don’t.

The New Jersey Star-Ledger noted in an editorial (Obama is to blame for income inequality? Puleez, which I referenced in my last post) that “The richest 1 percent has captured 95 percent of the income gains since the Great Recession.” That figure comes from a chart based on data compiled by Thomas Piketty, Emmanuel Saez, and National Bureau of Economic Research, and covers the period 2009-2012.

However, correspondent SHAPE, commenting on the Star-Ledger editorial, wrote that “1% control over 95% of the wealth.” That’s something altogether different. I left this reply to SHAPE:

RE: “1% control over 95% of the wealth.”

This is absurd on its face. Statistics like that are grossly misleading because they don’t distinguish between money and wealth. Money is not wealth: It is a store of value waiting to be exchanged for wealth. When you trade your money for Microsoft Word, you get wealth. Bill Gates gets money (leaving aside, for simplicity’s sake, that the cost of the product must first cover employee compensation, suppliers’ bills, raw materials, and other costs of production, as well as stockholder dividends, corporate taxes, and other company expenses). Contrary to that stat’s implications, the value of the wealth gained by consumers typically is immeasurably greater than the monetary fortune earned by the producer. For example, Microsoft founder Bill Gates is worth some $80 billion. But what is the sum of the value, in dollar terms, of all of the Microsoft products bought by consumers over the decades? Just in 2014 alone, Microsoft earned $86 billion in revenue; that’s how much consumers valued Microsoft products by their voluntary choice to buy them—more in one year than Gates’s entire fortune. And that doesn’t tell the whole story. Consumers typically value the products they buy more than the money they surrender for it. Otherwise, why spend the money? Those products bring years of use to consumers—for business, education, personal finance, or just plain personal enjoyment (I’m using Windows 8.1 right now, and enjoying it immensely). How do you put a value on that?

Gates’s monetary fortune is small next to the tens of trillions of dollars in direct and indirect economic value spread through the economy over the decades resulting from the creation of his fortune. If you measure wealth only in liquid monetary accounts, the great capitalist fortunes seem outlandish. But, in reality, fortunes like those amassed by the likes of John D. Rockefeller, Henry Ford, Bill Gates, Steve Jobs, et al, are not disproportionately large. They are the small tip of a vast iceberg of wealth creation that benefits millions and billions of average people—the sum of which dwarfs the creators’ fortunes. Measured correctly, the vast majority of wealth is held by the middle class. It’s just mostly held in material, rather than monetary—i.e., savings—form.

------------------------------

As the data cited by the Star-Ledger show, that 95% income gain figure applies only from 2009-12, a period of massive inflationary monetary expansion, including the lowest-ever interest rates and so-called “quantitative easing.” As financial market expert Jim Brown observes in his essay Monetary Fascism, this Federal Reserve policy features a massive government-engineered transfer of wealth from the lower and middle income groups to the upper income segment.

Furthermore, the data shows that, during the 1980s and 90s, the period of “Reaganomics”—lower tax rates and partial deregulation—the 99% did quite well, accounting for well over 50% of income gains. But after 2000, a period of resurgent regulatory welfare statism, the 99% did less than half as well as it did in the previous two decades. This statistical correlation between bigger government and greater income inequality is backed up by empirical data, as Reason’s Ronald Bailey observes in Less Economic Freedom Equals More Income Inequality.

Related Reading:

Monetary Fascism—Jim Brown

Piketty's "Capital" and Obama's "You Didn't Build That": Perfect Together

QUORA: 'How is becoming a billionaire even possible, chronologically?'

Quora is a nice little social media website founded by two former Facebook employees. According to Wikipedia:

Quora is a question-and-answer website where questions are created, answered, edited and organized by its community of users. The company was founded in June 2009, and the website was made available to the public on June 21, 2010.[3] Quora aggregates questions and answers to topics. Users can collaborate by editing questions and suggesting edits to other users' answers.[4]

You can also reply to other users’ answers.

One recent question was “How is becoming a billionaire even possible, chronologically?”

I left this answer:

I’ll assume we’re talking about making a billion dollars, as opposed to appropriating it by hook or by crook (and leaving aside inheritance). To make money is to create an economic value that others are willing to pay to acquire from you. To make a lot of money results from creating a lot of value for a lot of people. Billionaires typically create mass market products that are profitable, yet affordable to and desired by a large number of people.

So how is it possible for anyone to create enough desirable, affordable products to make a billion dollars? The question seems to imply a basic misunderstanding of how wealth is created; that wealth creation is primarily a product of an individual’s own physical labor. This is called the “labor theory of economic value.” On that basis, no one can ever rise much above poverty—let alone make a fortune—because an individual’s time is obviously limited. Chronologically, who would have time to make a billion dollars? No one; and that’s beside the point. The question misses a crucial truth: The labor theory of economic value is wrong.

Making money—i.e., creating wealth—is not primarily a result of physical labor. The fundamental cause of wealth creation is intellectual labor—ideas, imagination, intelligence, leadership, logic; i.e., reason. A productive billionaire, like all successful entrepreneurial businessmen, is a person whose intellectual ambitions far exceed his own meager physical ability to realize those ambitions. So creative geniuses like a John D. Rockefeller, Henry Ford, Bill Gates, Steve Jobs, et-al, create, direct, and grow great companies that employ thousands of other productive people, whose work is integrated and directed by the industrial leader toward the productive mission envisioned by the leader. Thanks to the current internet and information technology revolution—what some have called the Second Industrial Revolution—we can see examples of productive billionaires all around us, and see the evidence in the myriad creative results we all enjoy.

Once one understands that man’s mind, not his muscles, is the fundamental source of wealth creation, one can easily observe how becoming a billionaire is chronologically possible. With each consumer that opts to buy the innovator’s idea, in the form of the final product, the innovator’s fortune grows. Since intellectual potential is essentially limitless—and given a free trade, freedom of contract  economy—the potential for a single individual to make money is effectively limited only by the potential number of consumers in the market. Not only that, but given the growing world consumer market, the opportunity for anyone with an innovative idea and the appropriate drive to become a billionaire is correspondingly expanding. And that’s great news for all of us.

Related Reading:

Ayn Rand on a Modern Dollar Bill? Who Better Deserves the Honor?

Steve Jobs’ Philosophy of Life—Craig Biddle for The Objective Standard

Atlas Shrugged—Ayn Rand