The Problem with Price Controls and Why Gold and Silver Might Be Your Best Bet

Recently, Vice President Kamala Harris reignited a debate that many thought had been settled long ago: the idea of using price controls to manage rising costs in the economy. Given that she is running to be the next President, her remarks should not be taken lightly. But while the concept of price controls might sound appealing on the surface, history tells us a different story-one filled with unintended consequences and economic blunders.

What Are Price Controls?

Price controls are when the government decides how much things should cost. They might set a maximum price (so things can’t get too expensive) or a minimum price (so producers aren’t underpaid). The idea is to protect consumers from high costs, especially during tough times.

But here’s the catch: when the government steps in to control prices, it can mess with the natural balance of supply and demand. And that can be disastrous.

Why Price Controls Are a Bad Idea

Let’s look at an example like the price of bread. If the government sets the price of bread too low, bakers might not make enough money to cover their costs. What happens then? They might stop making bread, or the quality might drop. Suddenly, there's not enough bread to go around, and what is available isn't as good. In other words, a shortage.

On the flip side, if the government sets prices too high, people might buy less because they can't afford it. Producers end up with too much product, leading to waste or forcing them to lower their prices anyway, often in ways that hurt their business in the long run.

This cycle can spiral out of control, causing more harm than good. When prices aren't allowed to find their natural level, the market can't function properly, leading to shortages, black markets, and a market meltdown.

History Should Serve as a Strong Warning against Price Controls.

Nixon's Price Controls in the 1970s: In an attempt to combat inflation, President Richard Nixon implemented wage and price controls in 1971. Initially, these controls seemed to work, but soon they led to shortages, especially in oil and gasoline. When the controls were lifted, prices surged, leading to the energy crisis and stagflation-a combination of stagnation and inflation-that plagued the economy for years.

Venezuela in the 2000s: More recently, Venezuela tried to control prices on basic goods like food and medicine. This led to severe shortages, widespread hunger, and a thriving black market. The economy collapsed, and the country continues to suffer from hyperinflation and extreme poverty.

These examples show that when governments interfere with the natural pricing mechanism, it usually backfires, leading to worse economic conditions.

Where do Gold and Silver come in?

In uncertain times, when governments might try to control prices or when inflation is of concern, people often turn to gold and silver as a "safe haven".

Why? Because gold and silver have been valued for thousands of years and aren't as vulnerable to government policies as are dollars. Unlike paper money, which can lose value when too much is printed, gold and silver hold their value because they are finite resources. They are also universally recognized and can be traded globally.

By buying physical gold and silver, you are-in a sense-divorcing yourself from the risks associated with government interference in the economy. You're holding something that has intrinsic value, regardless of what happens to the currency or the broader economy. It's like having an extra layer of insulation against the worst-case scenarios.

But What About Price Controls on Gold and Silver?

You might wonder: if governments can impose price controls on things like bread and gasoline, what's to stop them from doing the same with gold and silver? Well, historically, there have been attempts to control gold prices, but these often fail for several reasons:

Global Market: Gold and silver are traded globally, which makes it difficult for any single government to control their prices. If one country tries to set a price, people will simply buy or sell in other markets, undermining the controls.

Private Ownership: Unlike bread or gasoline, which are consumed regularly, gold and silver are often held privately as long-term investments. This makes it harder for governments to enforce controls without causing widespread confiscation or severe economic consequences.

Historical Precedent: When the U.S. attempted to control the price of gold during the Great Depression by confiscating gold and fixing its price, it led to public distrust and a black market in gold. After learning a painful lesson, the controls were lifted, and gold returned to a market-determined price.

To Put a Bow on It...

While the idea of price controls might sound like a quick and easy fix, history shows that they often lead to like: distrust, black markets, shortages, and higher prices down the road. Under the constant threat of inflation, if our government tries to “fix” the economy through such controls, buckle up!  And consider holding physical gold and silver. These metals offer a hedge against economic uncertainty and government intervention. Historically, they are a tried-and-true way to help safeguard your hard-earned dollars in turbulent times.