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05.July 2022

Price Controls Don’t Work Even Under Penalty of Death

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Throughout history, price controls have never been successful in taming runaway inflation. It is impossible to put controls on the bitcoin price.

Nico Antuna Cooper is a university lecturer and works in the borderland. He witnesses the cultural opportunities of Bitcoin in both Latin America and the United States on a daily basis.

On the surface, this seems like a good idea as there is no federal law currently making price gouging illegal on a national basis. For those who have faith in the government’s ability to control the economy this seems like a great relief to average people everywhere.

Simply put, the reason prices are sky high is because of quantitative easing, supply chain interruptions and price manipulation on a global level. Price control laws fix none of these; they are like trying to put a really expensive band-aid onto a hemorrhage. It’s not going to stop the bleeding.

The denarius was the silver coin used most extensively in Ancient Rome. To fund the increasing costs of the empire, e.g., a giant army, opulent orgies and bribes paid so enemies would not invade, the Romans needed to amass increasingly larger amounts of money. In the second and third centuries A.D., Roman silver mines declined in production and tax revenues could not keep up, so the Romans began to debase their currency — slowly, at first under the auspices of Nero Claudius Caesar Augustus Germanicus, but to levels of massive inflation by the time of Diocletian. The silver content went lower and lower, making each coin less valuable over time.

“The first two-thirds of the Edict doubled the value of the copper and billon coins, and set the death penalty for profiteers and speculators, who were blamed for the inflation and who were compared to the barbarian tribes attacking the empire. Merchants were forbidden to take their goods elsewhere and charge a higher price, and transport costs could not be used as an excuse to raise prices.

The last third of the Edict, divided into 32 sections, imposed a price ceiling — a list of maxima — for well over a thousand products. These products included various food items (beef, grain, wine, beer, sausages, etc.), clothing (shoes, cloaks, etc.), freight charges for sea travel and weekly wages. The highest limit was on one pound of purple-dyed silk, which was set at 150,000 denarii (the price of a lion was set at the same price).”

The edict did not have a lasting effect. “By the end of Diocletian’s reign in 305, the Edict was for all practical purposes ignored. The Roman economy as a whole was not substantively stabilized until Constantine’s coinage reforms in the 310s.”

On a macro scale, price increases are not caused by “speculators;” they are caused by currency debasement and inflation. Today, they are also caused by supply chain interruptions and cartel price fixing, not through gouging by the gas station, restaurant or street peddler at the end of the line. In fact, these types of businesses operate on razor-thin margins and profit very little from this process. The final points of sale are not profiteers, and in fact, they are entities with the least influence over the price of goods. As always, price controls attempt to scapegoat the businesses with closest proximity to the customer and not the larger entities which really move prices. As a result, they never really work. Even at the point of a sword in Rome, they did not work.

Ever higher prices are caused by an uncapped money supply, and being that this is Bitcoin Magazine, this is an excellent opportunity to mention that bitcoin is the only truly capped money supply in history. Bitcoin is important because it cannot be inflated away like the Roman denarius or the U.S. dollar. Unless the vast majority of participants agree to raise the supply against their own best interests, bitcoin will continue to be a safe haven against inflation for many years to come, with less and less supply coming out of the system over time. No politician, policymaker or emperor will ever be able to change this.

And most importantly, regardless of fiat-denominated prices going ever higher, bitcoin will never need price controls to ensure its purchasing power.

This is a guest post by Nico Antuna Cooper. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

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