Despite the Historical Blunders of Price Fixing, European Commission and G7 Pledge to Impose Price Controls – Economics Bitcoin News

With the global economy looking bleak and financial trade more constrained than ever in history, government-mandated prices appear to be returning with a vengeance. Europe is suffering from significant financial difficulties due to the Ukraine-Russia war, and the Kremlin recently disrupted the European Union’s main gas supply. Currently members of the European Commission and G7 finance ministers are trying to implement a cap on crude oil and electricity prices.

Axios Editor’s Statement The idea of ​​price control is being floated by ‘influential economic thinkers’

The Ukraine-Russia war, following the Covid-19 pandemic and the large number of stimulants created around the world, has put the global economy in a difficult position. Last weekend, global economists discussed Russia’s desire for the “collective West” to lift financial sanctions against the country.

Spokesman for Vladimir Putin, Dmitry Peskov, claim that the Nord Stream 1 pumping problems were caused by financial sanctions imposed on the country. Reuters report that “European gas prices have spiked up to 30% higher,” according to Peskov’s statement.

Almost everyday in the past few months, report note that “Europe is bracing for a brutally cold winter”, this year when the price of gas – used to generate electricity and heat residential areas – has soared to sky-high . Rising gas prices across Europe have prompted politicians to move towards reinstating price controls that haven’t been used since the 70s.

The debate over reinstating price controls started to flare up late last year and it spark much conversation on this topic throughout 2022. With the Ukraine-Russia war, however, discussions have increase reality.

On September 6, 2022, author Matt Phillips of Axios Markets explains in a Editor that price regulations are “no longer a relic of the 1970s”, and the reporter added that “price controls are back.” The Phillips editorial discussed last Friday’s meeting of G7 finance ministers and how members “committed to putting together a plan to limit how much money Russia makes from oil sales.”

Furthermore, the reporter adds that the European Commission revealed plans last week to begin “urgent intervention and structural reform of the electricity market”. Price controls are already on the minds of politicians around the world, and this trend is playing out in the US as well.

Despite historical mistakes in price fixing, the European Commission and the G7 are committed to imposing price controls
“When [a] American economist Fiona M. Scott Morton detailed 2001.

Only recently the price limit is imposed for specific drugs sold in the US, and drug companies are forced to pay fines if the price of specific drugs such as insulin rises too high. Branch of St. Louis of the Federal Reserve has also written about price control and offered a contrasting view from many of the officials who support the idea today.

“As inflation rises, some have called for the government to impose price controls,” said the Fed’s St. Louis report on topic notes. “But such controls have significant costs that increase over time and their scope.”

There are many arguments against price controls from the basic level of economics emphasizing that these laws can distort the natural market. Countless economists believe that price controls also prevent and disrupt supply and demand.

Price caps can cause further headaches for officials because price controls can lead to black markets, hoarding and division, queuing, and actually increasing the prices of consumer goods over time.

“When prices are kept below their natural level, resources such as talent and capital leave one industry in search of better returns elsewhere,” says American economist and Theodore Nierenberg professor at the School of Business. Yale Manager, Fiona M. Scott Morton, explain in a 2001 blog post.

Despite criticism from economists around the globe, the author of Axios Markets said that “price controls, once mocked, [increasingly] brought up by influential economic thinkers. ” Phillips also emphasized a piece of opinion was written by Financial Times (FT) author Martin Wolf, who wrote that “price controls, even allocation, must be on the table”. Wolf claims “the energy crisis in Britain is the burden of war.”

The author admits Nixon’s ‘remarkable step’ in imposing fixed prices as ‘considered ineffective in combating price increases,’ World War II price controls were a complete failure

Furthermore, the editorial mentioned that former US president Richard Nixon had “taken a remarkable step in imposing wage and price controls” in 1971. However, the critics economics has noted for many years, and the site makes it clear that Nixon’s economic moves are not “remarkable”. Phillips also mentioned that Nixon’s price control policy was reversed in 1974. He further remarked that the economic moves made by the 37th president of the United States “was largely considered ineffective. in combating price increases”.

Despite historical mistakes in price fixing, the European Commission and the G7 are committed to imposing price controls
The price control during World War II is also considered a catastrophic failure. “To curb growing dissatisfaction, OPA included scores of basic goods and services (which account for about one-seventh of total consumer spending) into rationing, creating a two-way system. price,” said Robert Higgs, contributor on Written on April 24, 2009. “To legally purchase an auctioned food item, the buyer must deliver to the seller not only the (controlled) price, but also pay the seller an amount of coupons or stamps. (“points”) as prescribed. The system quickly becomes complicatedand it is still subject to periodic changes and has a wide range of exemptions for certain categories of buyers and goods. “

Despite the history of price control in the past and the economic arguments against it, János Allenbach-Ammann and Vlad Makszimov from persistent that price controls have “[entered] Inflation debate in Europe. ” Price controls were also introduced during World War II when the US Office of Emergency Management was established in 1941. The Office of Price Management (OPA) was created to begin fixing prices for with some goods and limit the outbreak of soaring rent costs.

From 1943 to 1945, the consumer price index (CPI) in the US increased by 4%, and from 1939 to 1943, the consumer price index (CPI) skyrocketed 24%. While the CPI then and today research display price control not working, fixed price did not work promote the black market and reduce inflation. Furthermore, the U.S. deficit grew from 3% to almost 27% of the country’s gross domestic product (GDP) in 1943.

Cards in this story

Axios, Author Axios, Bureaucracy, Economics, Economy, Energy price limit, EU, Europe, European Commission, finance minister, Fiona M. Scott Morton, g7, the leaders of the g7, Gas price, Louis Fed, Martin Wolf, Matt Phillips, Nixon, pharmaceutical fixed cost, Politicians, price limit, Price control, fix price, hire repair, Richard Nixon, Robert Higgs, Ukraine-Russia War, WWII

What do you think about government leaders committing to price controls amid economic turmoil? Let us know what you think about this topic in the comments section below.

Jamie Redman

Jamie Redman is the News Lead at News and a fintech journalist living in Florida. Redman has been an active member of the crypto community since 2011. He has a passion for Bitcoin, open source and decentralized applications. Since September 2015, Redman has written over 5,700 articles for News about the groundbreaking protocols emerging today.

Image credits: Shutterstock, Pixabay, Wiki Commons, Editorial source: Spencer Platt / Getty Images

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