Tuesday, November 16, 2010

Here Come Price Controls: China Jumps from the Frying Pan Into the Fire

The amazing lack of understanding of basic economic laws throughout the world continues to astound.

On Tuesday, the central bank governor in China, Zhou Xiaochuan, said China will unveil food price controls and crack down on speculation in agricultural commodities to contain inflationary pressure, reports Reuters.

China institutes a mad policy of printing massive amounts of money to prop up the dollar and the mad policy actually results in big time Chinese inflation as a result of the money printing. Food prices climbed 10.1% in China October.

Now China wants to reverse the consequences of this mad policy with price controls. The price controls will only result in shortages. If you don't allow prices to trade on the free market, but instead fix prices below where supply and demand intersects, you are going to have shortages.

In other words, China's bad money printing policy will now intensify with the price controls. Consider this a major roadblock to Chinese growth.

1 comment:

  1. So much for the Chinese being oh so wise and leading us down the primrose path....