*Investors Blog*
- Thread starter Warstud
- Start date
One doesn't control the other. You would get a recession with or without price controls. Price controls simply ensure you have less of whatever is being controlled.
The solution to large corps making excess profits is making it easier for entrepreneurs to compete with them. Instead they do the opposite, make it impossible to start a business, afford health care, or get a loan.
Look no further than oil filters. We have what now - two manufacturers of aftermarket oil filters more or less - we used to have many more. How much have your filters gone up in price?
Home run post.
Easier to start and run a business in China. The only way to maybe keep a business going here now is to keep it ultra micro. Hmmmm.
Like every human (self included) we think we are smarter than average. Same with the Fed, only X10Trillion. They try to take the path with least consequences, but every decision hurls out 1-2-3 order unintended (and assuming NO intentionality I mean things they did not see coming)
Is the first order from the top to keep the U$D at the top?
This is an oversimplification.
You argue that price controls ensure you have less of a product. That can happen, but excess demand over available supply drives shortages. And what if the price ceiling is above market price? Markets drive prices.
Price controls have an affect on consumption more than scarcity. Price controls will affect scarcity if price is to low compared to production cost.
You use oil filters as an example. The number of producers is a result of manufacturer consolidation. This is a normal pattern as markets mature.
Sure, you could put price controls on a PlayStation, and they would likely continue to sell as long as the price was above cost - but you may never get a new PlayStation design, dependent on the level of price control.
If you put price controls on oil or wheat, the marginal high cost producers would simply not be able to produce at a profit and they would not. So lets say you put a price cap on oil of $50.00 per barrel. Exxon makes oil at average $15.00 a barrel, so they would continue to sell at less profit which I guess would make you happy. Other producers at more than $50.00 per barrel would stop producing. If Exxon happened to have enough for everyone then great. If not, well some would go without. Guess what, the free market already does this - when prices go down marginal producers drop off.
On the oil filters, there is less competition. Oil filter prices have doubled. Do you think input costs have doubled or are there margins now better? I guess we don't really know, but I can guess.
Please show me one place where price controls for broad sourced commodities have worked long term - like oil or wheat. Its been tried many times. Venezuala has price controls but no food, for example.
I never said I was in favor of price controls. I merely pointed out that your post was an oversimplification. You use oil filters as an example, but do not support that with price controls. Do oil filters have price controls? Not that I know of, but I may be wrong. Oil filters have gone up in price, but a big part of that is distribution costs.
Actually, price controls can have a positive effect for consumers. If demand is strong and price controls limit production due to low profit (or even loss) then a viable alternative may emerge. Smart producers will find more efficiency to increase margins. In business, you grow or you go.
You use wheat as an example. What are your thoughts on the Wheat Price Guarantee Act?
And you go to oil... Price controls? OPEC is the the most successful cartel in history. That's price contol and all the independents rode their coattails...
Again, don't get me wrong. I never said I was in favor of price controls. Is a price fair? That depends on what side of the deal you are on.
My original reply was to someone else that price controls might keep us from a recession - which he didn't say specifically so perhaps I inferred too much, but I still contend implementing price controls now won't keep us out of recession.
The supply side / demand side discussion is way above my paygrade.
Your taking out of context.- it wasn't a price control example - It was an example of how to lower price without price controls - ie encourage competition.
Wasn't a price control. Government guaranteed a price to grow, purchased the wheat, and sold it to market at a loss if needed. They still do similar things with ag subsidies.
Opec lead to the shale revolution and horizontal drilling. If oil prices from the middle east had stayed low forever we would still be over there warring away. So I am not sure which side your arguing - maybe both I suppose - everything has +/-
Anyway, you have exhausted all my knowledge and opinions, so I will bough out of the discussion. I do respectfully appreciate the debate nonetheless.
All well said, @SC Maintenance
I'd like to know how much inflation is actually due valid reasons and how much is due to "riding the inflation train" to reap as much extra profit as possible by greed. In other words, how much "price gouging" is actually going on? Most companies don't care what people pay as long as people keep buying, and as long as the company can make as much profit as possible, even it it means pain for the consumers. When inflation gets out of control like this, it would be easy for many companies to simply jack-up prices artificially high to reap more profits during the madness.
Gasoline aready going up simpley due to the "scare" of hurricane Ian hitting the gulf.
Great link, lots of folks back then were like the Robinhood’ers of today.
Some like to post their margin horror stories on Reddit with screenshots of how much they lost.
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The general consensus is that the Fed will do three more hikes. I’m guessing October, November and January. December is usually a Christmas party.
A lot. For example, gas prices in CA recently jumped about $1 per gallon. Crude is down and crude speculation shows crude trending and remaining down. CA refineries have the highest cost of anywhere in the world. They used to make about 20 cents per gallon but are at $1 now.
Prices generally shoot up quickly but drop like a feather floating down in the air, slowly.
What I mean is if there's a big recession and people stop buying a lot of products, then prices on lots of things may come down in order for people to start buying them again. Of course, if the recession is big and quick that could also mean some businesses would probably go out of business and the only ones that survive are the ones that sell high need (not want) items, and sell them at a reasonable price. Then of course that would trigger a supply reduction which could jack prices up again ... whip lash effect. Companies would have to cut back some profit margin to stay in business, but could still make a profit to survive. This happened with a lot of businesses during the pandemic. Now that inflation is rampant, some of those companies are most likely trying to make up for lost profits when times were rough.
If people start really cutting back on buying products due to a recession, then it could be pretty risky to try and start a new business unless you're going to sell high demand items that people will always need regardless of how deep a recession or depression becomes. During the pandemic, some niche businesses popped up and made mad money, and some went out of business. It's all dynamic, and opportunities and disasters can both occur depending on what's going on and what people choose or not choose to buy.
This is how insidious and destructive inflation is. Consumer Defensive Spending is just one aspect. Consumers will look for bargains wherever they can. Business reacts with Shrinkflation. We have already seen that happen.
Back in the 70’s a popular way to shop for groceries were the U Mark It stores. Product was stacked in a warehouse like setting. Each item had to be priced by the customer with a grease pen. The shopping carts were just wooden dollies.
People will start to adapt as the economy stumbles further. Back in the old days clothing was patched or sewn. Shoes were glued back together. Rubber cement filled holes in the bottoms.
In 2008 I made pretty good money investing in utilities. DUK, PG&E (pre bankruptcy), can't remember who else I bought. The dividend set a floor on price, then paid you to wait.
They don't look attractive at all now.
Anyone looking at these?
They don't look attractive at all now.
Anyone looking at these?
Looking back I’m amazed (and forgot) the DOW is down 6000 points YTD
At the same time the house of cards needs to take a hit back to sanity. Just that I expected it a long time ago until the massive money printing and borrowing took place.
Now I think more than ever the public will expect this behavior.
