Out of Food !

A few of our clients approached us vexed with the present regime’s threat to go after food companies for high prices and ‘gouging.’ To attempt to regulate food and energy prices nationwide. A regime that’s running for re-election. And a few have asked if such a strategy could actually work. The wiser clients knowing the net effect OF such a proclaimed ‘magic’ strategy.

Nope. Didn’t work in the 70s and made things worse. Remember the pervasive shortages of the 70s shortly after wage and price guidelines were proposed ? Or the utter failure of the ‘Windfall Profits Tax’ ?

And we find it wholly ironic that the Harris Campaign’s go-to solution for rising prices is from the playbook of a failed attempt by the NIXON administration; one that lasted only 90 days but helped trigger the stagflation and shortages of the 70s. Taking 3 administrations and Paul Volcker raising interest rates to 20% to fix. And, due to massive public spending, the buffer that Volcker used doesn’t exist anymore.

ONLY a government can cause inflation. Period.

Why all the Inflation ?

Now a government CAN create inflation in a few ways. The most common is in monetization of debt. The Fed’s primary job is to maintain a stable currency. That primary job can be corrupted by the very government that appoints its members by convincing them to essentially ‘buy’ government debt and print money. This decreases the burden OF public debt because numerically it’s now more manageable (and perhaps can be serviced in the very short term) but has the net effect of erasing money and savings across the country. In economics you NEVER get something for nothing; the public debt is essentially paid by ALL the citizens in the nation by devaluing their currency. Spending their wages and savings for them in the form of a hidden subtile and evil tax. This particularly hits people hard who don’t have alot of money to start with (and see the prices of fuel, electricity, and food skyrocket) and also hits those who’ve put money away in traditional savings accounts (perhaps saving for a rainy day). The money is essentially destroyed while the federal government spends it for them on whatever. In the long term, this ALSO hits working families particularly hard in that the major way to combat it is to hike interest rates, which not only sets up a death spiral for a government addicted to borrowing money (resulting in a net decline of real social services) but also erases an individual’s ability to borrow money for mortgages or to get by in the short term.

Which is exactly what’s happened under the Harris/Biden regime.

Other ways a government can cause inflation is by overregulation and artificial reduction in supply. Increased regulatory burdens represent a significant cost which is passed on to consumers; perhaps 25-30% of the price of goods bought in the US reflects a collateral non-value added cost increase of silly bureaucratic regulations. This does nothing for the consumer; it’s used to fund people in useless jobs who want to use other peoples’ money to live high on the hog (so to speak). The government can ALSO artificially restrict supply. This is what’s been done in the drilling and fracking for hydrocarbon fuels. In its quest to use the carbon scam to perpetuate their marxist power base, the Harris/Biden regime has prohibited drilling and fracking on HUGE segments of public land taking the US from being a net energy exporter to being dependent on foreign oil. It’s also forced utilities to shutter wonderful coal power plants–clean coal having a huge and abundant supply in America–and driven those plants towards a single-point of failure mode (requiring NATGAS in lieu of coal). Nuclear has been deliberately shuttered as well. Unreliable so-called ‘renewable’ energy has been subsidized and pushed which has been a total bust. Predictably, most consumers have seen their energy costs double under this regime. This is a form of self-induced artificially caused inflation; caused by the government.

So now we turn to the present ‘plan’ to go after ‘gougers.’ Since the government HAS caused the inflation to begin with, for the present regime, a REAL solution would involve looking in a mirror. Reversing the policies over the last 4 years that put us in this mess. But that’s not what they have in mind; they propose to use wage and price guidelines to force the issue.

Certainly there IS room for government intervention when REAL price gouging occurs. Price gouging ONLY happens when a short term bona-fide crisis or national emergency occurs. It’s a short-lived event driven by external factors (like hurricanes, tornadoes, blizzards, extreme and unforeseeable environmental conditions, terrorist attacks, or war). For example, the big Texas freeze a few years back froze up the unreliable windmills which set off a cascade of power plant failures. Due to the shuttering of coal plants, wacko EPA regulations surrounding the carbon scam, and the onerous regulations surrounding building nuclear power plants, the state was uncomfortably made dependent on NATGAS. And when compressor stations froze, this resulted in massive power failures (the entire stage being set by an EPA out of control forcing the state away from coal and nuclear–as well as requiring emergency permits to activate oil to back up the NATGAS at the combined cycle plants). To a large extent, the blackout was CAUSED by the federal government but it lay in waiting until the right natural disaster came along to cause the latent defects to happen.

During the crisis, NATGAS prices skyrocketed (being needed both for power production and heating). Several hundred fold. Going from $2/unit to over $400/unit. All during a declared state of emergency for the state. One might understand a doubling of NATGAS prices but what occurred was obviously a short term disaster based event and the prices attempted to be charged would very much come under the definition of gouging. During this short term natural disaster there certainly WAS a reason to cap NATGAS prices (much like someone who owned a reservoir during a water supply outage might try to charge $500/gallon for water to thirsty residents who’d die without it when the previous price was less than a dollar). But it involved a bona-fide unforeseeable short term natural disaster with danger to life which wouldn’t affect long term markets or pricing.

The food and energy crisis has been occurring over the last several years and is a direct RESULT of hostile executive policies towards food suppliers and energy. So to think a continuing of the present regime will solve it is ludicrous. Especially since such a solution involves the reduction of public debt AND backing off its roles in overregulating the food and energy sectors (and abandoning the ‘climate crisis’ scam).

So to the case at hand. What WILL happen if food prices are arbitrarily set ?

You can’t FORCE a corporation to operate at a loss. Food corporations are like all others; they are backed by shareholders (or privately held) and use any revenue to cover costs, pay workers, invest in new technological advances, and distribute profits (which are kept in check by competition). If a corporation is forced to lose money, it’ll try to lose the least amount of money it can; cutting back production and laying off workers. Resulting in a net decrease of supply (just like we saw during the 70s). And massive shortages.

What do incipient shortages cause ?

More shortages.

Remember Covid ? Remember panic buying of paper products and sanitizing equipment which was hoarded and sometimes resold ?

So as these government induced shortages begin to happen, we can expect panic buying as well as buying by opportunists. These opportunists will sell the food on the black market (whose price has gone up due to the forced shortfall) at whatever price is prevailing PLUS their profit margin. INCREASING the price of essential food and energy (much like we’ve seen in third world nations). The policy will create both shortage AND even HIGHER priced food and energy. And set up a death spiral of economic communism just like the FSU.

We urge our clients to look at history and at the REAL effects of this proposal and be sure and vote accordingly. And have their friends and acquaintances vote accordingly. Remember you can vote yourself into socialism/communism, but you have to shoot your way out of it.