Is there a shortage of Model A Fords? No. Is there a shortage of housing? No. Is there a shortage of anything that is available for a price which the “market” dictates? No, and that is the basic fact of supply and demand. Unless there is a government control of prices or supplies, there can be no shortage of any goods. When then President Nixon declared that those malicious Arabs and their OPEC cartel were evil, and should be defeated, he did what all foolish Presidents have done in the past, and that is create shortages by instituting price controls. Those nasty OPEC nations had run the price of oil from $1.80 to $40 per barrel, and smart Nixon would put a stop to that! He did, and millions waited in line for price controlled gasoline, which miraculously had become in short supply. A shortage had been created by government controlling the price.
Suppose a wise government regulator stepped in and said, ’Now hold on, those Model A’s only sold for $350 in 1931, and a $10,000 price is ridiculous, so we are going to set a maximum price of $700 that can be paid for a Model A, twice its price when new, so that’s fair. From now on, no one can sell a Model A for more than $700, or they will go to jail.’ There would instantly be a shortage of Model A’s because no one would sell theirs. A shortage would have been created by a government edict, just like a shortage of gasoline had been created in the early 1970’s by price controls.
The surest way to create a housing shortage is by rent control. Ask anyone in New York or Santa Monica. When prices are controlled by government, a shortage will invariably be created. In rent controlled areas, hundreds of thousands live in apartments with rents so low as to be ridiculous, because landlords are prohibited from raising rents to cover increased property values, taxes, and maintenance costs. Rents that should be $1,000 a month, may be $150, and property owners often just abandon the property rather than go bankrupt. What was once a thriving neighborhood with well maintained buildings, becomes a no man’s land in many cases, due to rent control.
Cartels can create shortages also, until they are broken by the market. OPEC was a sort of cartel when they raised prices in the 1970’s, but it was broken by non-OPEC nations who wanted to sell their oil and compete with OPEC. Within the last two years, oil prices went as low as $10 per barrel, thanks to OPEC’s control being broken. OPEC got some of their competitors to join them, and prices went up again to over $30 per barrel, and now are about $27. When prices go up, consumption decreases, and forces prices down. DeBeers is a classic cartel, which attempts to control the world price of diamonds, and has been mostly successful. We can live without diamonds, whereas oil is difficult to do without. DeBeers was threatened by Russia, but seems to have reined in that upstart of late. DeBeers has huge quantities of diamonds stored, and regulates their dispersal carefully, by allowing only certain buyers and cutters to attend their “sites” where a few stones are released.
Tobacco growing has for years been controlled by government, as have prices for sugar, milk, and even lemons, all making consumers pay more for products than they would if government had not controlled prices. Next time you shop at a grocery store, note the huge difference in the prices of price controlled lemons and non price controlled limes. Chocolate is imported by the millions of pounds from abroad, and competes with Hershey and other American brands. Hershey has to pay the U.S. prices for sugar, which often are twice what the world prices are. Chocolate lovers have to pay and pay.
The drug war is a classic case of shortages and high prices being created by government controls. The drug war will never succeed, because it pits bureaucracy against individual free will and enterprise, but it does create shortages and high prices. Drugs that are now illegal, used to be readily available at “drug” stores, and at low prices. (No, I have never tried them, never will, and think they ruin the mind.) When drugs became illegal, prices rose, because entrepreneurs supplied what consumers wanted, at great risk, so they charged for their risky business. The more drugs confiscated by the drug war goons, the higher prices go, because the drug war has created a shortage. Shortages caused by government intervention, as with mind altering drugs, can also create desire, because of the thrill of doing something illegal.
Prohibition created an incredible shortage of alcohol, briefly, because government attempted to control not its price, but its supply. That shortage didn’t last long of course, any more than the shortage of drugs lasted, because entrepreneurs supplied the merchandise, but at higher cost to the users. Alcohol consumption increased dramatically during prohibition, just as drug ingestion has increased by hundreds of percentages when government controls supplies, or at least attempts to do so. During prohibition, alcoholic beverage consumption went from .3 to 1.86 gallons of wine, from .44 to .87 gallons of whiskey, and from 1.26 to 6.9 gallons of beer per person per year. Hundreds of American breweries went bankrupt, never to re-open, and Canadian producers, such as the Bronfmans became billionaires. The Irish trash Kennedys became super rich because of prohibition, and America profited nothing from prohibition, any more than it is profiting from the drug wars. Government attempts to create shortages by controlling supplies or prices always have deleterious effects on John Q. Public, even though he may not indulge in the product involved.
There can never be a shortage of oil, gas, electricity, or any other commodity unless government sticks its meddling, infuriating, all powerful fingers in the pie. California wouldn’t be short of electricity now if government hadn’t controlled the retail prices, and gas wouldn’t be in short supply if the EPA hadn’t shut down the coal plants and government hadn’t made nuclear plants virtually impossible to build.
Government can not only create shortages by controlling, or attempting to control supplies and prices, as mentioned above, but can also wreck civilizations by creating an oversupply of things, once again, with no control over such political actions by that government’s subjects. Welfare is a classic example. Whatever is subsidized increases, and whatever is taxed decreases, an unalterable economic rule. What is being subsidized now, and is over running the entire globe, destroying civilizations? Easy! It is weak, diseased, non productive people! The welfare system, inaugurated by FDR in America, and resurrected by LBJ and Democrat politicians who were bedazzled by its vote garnering potential, have destroyed America’s once grand cities. America’s major city demolition derby was government sponsored, not by shortages of dollars to the impecunious, but by creating an over-supply, causing delighted recipients to multiply like lemmings, and raise more dependent creatures, consequently destroying a society, as well as the once grand major cities.
When a government floods its land with monsoons of currency, usually to hide its own profligate spending; once again, unalterable laws of economics must come into force. Just as limiting prices and supplies creates shortages and high prices, so over supplies creates low prices. Every Christmas there seems to be some particular toy that captures the fancy of America’s knee panted squirts, causing indulgent parents to shop for the item till they drop to satisfy their spoilt offspring’s desires to be like every other brat in the neighborhood. The result is that supplies are limited, shortages created, and prices zoom to the heavens. When Germany flooded its citizens with octillions of marks in 1924, the mark became useful only for starting fires. A cup of coffee might go for 5,000 marks and a refill might be 10,000, so fast were the presses running. Here in America, again thanks to government presses, things we all use and take for granted have not gone up in value only in prices in dollars. Supplies of currency, created by government with no input of the citizenry, have made the “buck” have perhaps 1% of its purchasing power of a hundred years ago. Ingeniously, they looked the same until recently, causing unaware citizens to not pay particular attention.
Governments and large financial institutions manipulating the prices of gold and silver by flooding the markets with their own stocks, plus lending them out for a pittance, has caused precious metals to become the laughing stock of the world’s bubble headed non Austrian School “economists,” who will eventually deeply regret their folly when control of the scam has been lost. Gold and silver will go the way of all tangibles eventually up in price and we prognosticators will be proven correct.
If there were a simple explanation for so called “shortages,” it would have to go down to a simple three syllable word, and that is government. Government, who sets prices, tries to control supplies, attempts to thwart human will and thought, and eventually destroys what it set out to save. Government, licensed by the Constitution, but which has gone awry and out of control, has caused the decay of America’s cities, millions eating at the unconstitutional welfare trough, dollar decay, and a privately owned “Federal Reserve” controlling our very life. How tragic! Protect yourself.