Price Controls Are Coming, Then CBDC

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by VBL
Wednesday, May 18, 2022 - 14:58

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US Politicians are now starting to float absurdities like price caps, which hurt the people who need the relief most. But we will leave that tactically stupid, politically expedient idea for another time. For now, here is something very instructive in one GoldFix writer’s education on markets worth sharing.

A quick note that may give some insight into one potential path the US economy is headed. This, from a lesson learned in 2008 on a business trip in Argentina. Meeting a couple business partners in BA working on a MATba/Rofex-CME arb idea and getting shown around. It was very instructive for future trading ideas. The education was not from the business meetings. It was from watching a Football game with a partner's parents.

Argentine Price Controls Backfire

The Argentine economy produces a ton of Soy and beef for domestic and export to the world. The farmers are very powerful families and had not capitulated to big business. Their ag industry is in some ways a throwback to feudalism in the sense that a few wealthy families still have a lot of direct influence over the ag biz. In the 2000’s the Argentinian government sought to keep inflation under control by putting caps on prices of food goods grown and sold domestically. Part of their Buy Argentinian program to reduce debt.

These domestic price caps intended to lower inflation caused the ag businesses to simply export more. The government was outraged and sought to stop that by adding an export tariff to those goods of something like 40% IIRC.

It was during this time that this writer got to see first hand how these economic policies interact as a guest in Buenas Aires. We were watching a football game at a friend's house there and having the most incredible empanadas and ice cream (bicycle delivery mind you!) in a modest area of town.

Then the host switched over to some breaking important news. The farmers were having a press conference. Our host translated: “The farmers are basically going on strike. They will not make any food for domestic or export sales if the government doesn't stop this nonsense.”

Capitalists Take a Holiday

Being ignorant of the farming affluence then I asked: “Can they hold out? Won’t the big corps just hire more workers? The host laughed. He said: No the farmers are the corporations. They are multi-generational wealthy people who still control Ags here. They can hold out forever, they don’t care. They are the economy. And he was right; the government effectively caved on that one. They had to give more money directly to needy families as a result, which upset the middle class, but was necessary because  of their gross incompetence

This is the path we are on now, except our corporations won’t go on strike, or complain. They will simply export more. And if the US prevents or taxes that, then they will not care as their operations are global. They will export from foreign subsidiaries.

It Always Ends With Food Stamps

So if you think: “Those greedy families ruined everything”, think again. If it wasn't for their behavior, which was a de facto strike by Capital, not labor, Argentina would not have had a prayer of getting its fiscal house partly in order back then. If you think a big corporation can be beneficial in a time like that, you should also think again. Corporations are neither beholden to their country nor controllable with domestic government tariffs. The US citizen will suffer again.

The 1973 Ford Pinto, a product of inflation and price controls…

So your food wont be stopped. But it will go up in price and down in quality. And to the extent that it does not go up in price (due to “successful” export restrictions) those “controlled” companies will negotiate back-end tax or subsidy deals that take more money from the state to subsidize their losses. You know the type of deals: no taxes on operations/ buildings for 10 years, interest free loans from the govt through a friendly bank.. etc etc. Not unlike how a sports team holds a city hostage.

And you will be told to “Buy American” while they are selling Chinese. The “American” will be like what they gave you in the last inflationary crisis. Cars that explode, and engines made of aluminum that melt.

The 1973 Chevy Vega, unsafe at any temperature…

The Path to CBDC

Price controls and their cousins, indirect price controls like: SPR releases, Tariffs, poorly run Price-gouging commissions etc etc all in the end have the effect of driving good money out and bad product in. All of what may be coming is the result malicious neglect in politicizing the clean energy movement. And it will be called unintended consequences. And they will ask for CBDC to fix the problem of their tools being too blunt in their effect.  CBDC will allow  them to get money to where it is needed most. This is absolutely true. But it becomes needed because of risk management abrogation. Thus they will get CBDC. The table is being  set right now. Monetary policy that can be pinpointed like  EBT cards can be restricted for certain goods. Thus, like Argentina, when price controls fail as they always do, CBDC (basically electronic EBT cards) will be used like direct aid to people most in need. And that will be the beginning of the end.

Book mark this for 2024. It will happen something like this

-Soren K

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