Thursday, October 9, 2014

Russia Considering Price Controls

Russia’s government is considering freezing prices for some “socially important” goods as inflation nears a four-year high, the government newspaper Rossiyskaya Gazeta is reporting.

Russia’s Industry and Trade Minister Denis Manturov said in an interview with Rossiyskaya Gazeta that the government may artificially stabilize prices for some 40 vital goods if a price jumps by more than 30%. He did not say what these goods were or when the price freeze may happen.

Annual consumer inflation rose to 8% in September from 7.6% in August. Prices for meat and poultry jumped 16.8% on the year in September, while prices for fish and seafood rose 14.1%.

Climbing prices in Russia are not only a function of growing money supply but also a function of tared limits  placed against  Russia by the US and the EU.  The shrinkage in supplies translates into basic supply and demand economics. Less supply means higher prices.

Of course, price controls are not the answer. They simply distort economic activity and cause long lines. Bye, bye Soviet Union, hello Soviet Union style lines.

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