Until someone can pull money-madman Ben Bernanke from his overworked printing presses we are going to see serious price inflation. As much as we hear the politicians and their compliant media talk about riots in the middle east or a drought here or frost there or floods somewhere else, that’s not the reason. There’s always something going on somewhere that might cause a temporary bump in the price of this or that. What we are seeing today are record highs in the price of nearly all commodities. Oil, gold, silver, cotton, soy, corn, wheat, sugar, coffee, nickle, copper. There is only one possible cause. Monetary inflation courtesy of mad Ben. Those of us with an understanding of how macro economics really works, who don’t buy into the tooth fairy fantasy of Keynesian economics, have seen this coming and loaded up our portfolios with lots of commodities and commodity-based stocks.
The thing that I really fear is that the politicians will blame the inflation on “greedy” traders and businessmen and implement price controls. This would be a disaster. It will result in long lines and in some cases a black market.
Friday morning I witnessed a perfect example of this. Long lines, really, really long lines for gas at the Lukoil station in the Cheesequake rest area. You see part of Lukoil’s lease with the Parkway stipulates that they can only raise prices once a week. I believe it’s on Friday afternoons. Since gas prices have risen nearly every day since the previous Friday, by last Friday the government-imposed price was about 15 cents cheaper than everyone else. So all the penny pinchers were lined up for cheap gas. I suspect the attendants have been told to take their time under these circumstances and I’ve even seen them run out of gas because of the extra demand. The distortion caused by beaurecrats’ clumsy price control schemes hurts travellers who just want to buy some gas and be on their way. Even if they were perfectly happy to pay the market price for gas they would still have to wait on those lines which were easily 25 minutes long. And in the long run Lukoil will just raise their prices extra to make up for all the gas they were forced to sell below market.
What I witnessed at the Lukoil station will spread to the entire economy if politicians succumb to their urge to try to tame inflation with price controls. The only practical solution is a change of policy at the Fed.
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