To
make a halfway rational decision about a purchase, one needs to know
its price. That commonplace idea now seems lost on many Americans. But
it's difficult to know the true and complete price of things when at
every turn the price mechanism is undermined. The most serious undermining of the price mechanism comes from government.
Government is always and everywhere trying to either tamp prices down or prop prices up. A case in point is federal agriculture subsidies, as in milk, sugar, and corn (ethanol). The price of an Amtrak ticket is lower than it would be were it not for federal subsidies. The price of tickets for professional sports events are affected by government subsidies, such as cities paying for the maintenance of professional ball parks. Congress affects prices when it slaps tariffs on imported goods. Occasionally, government just sets a price, as in the price of entry-level labor with minimum wage laws. Government can forbid that prices change, as in the price controls seen back in the 1970s. The U.S. Post Office is going down the tubes because Congress won't allow it to raise the price of stamps.
The Federal Reserve affects prices when it targets or sets certain key interest rates. The Fed also impacts the price of stocks with quantitative easing (i.e., printing money). The Fed's new round of QE, announced Thursday, is aimed in part at driving down mortgage rates -- the price of money. Don Luskin of TrendMacro expressed his doubts about the Fed's latest move in two segments Thursday night on The Kudlow Report (videos here and here). Price stability is one of the Fed's dual mandates, but it should be the Fed's only mandate.
Government is always and everywhere trying to either tamp prices down or prop prices up. A case in point is federal agriculture subsidies, as in milk, sugar, and corn (ethanol). The price of an Amtrak ticket is lower than it would be were it not for federal subsidies. The price of tickets for professional sports events are affected by government subsidies, such as cities paying for the maintenance of professional ball parks. Congress affects prices when it slaps tariffs on imported goods. Occasionally, government just sets a price, as in the price of entry-level labor with minimum wage laws. Government can forbid that prices change, as in the price controls seen back in the 1970s. The U.S. Post Office is going down the tubes because Congress won't allow it to raise the price of stamps.
The Federal Reserve affects prices when it targets or sets certain key interest rates. The Fed also impacts the price of stocks with quantitative easing (i.e., printing money). The Fed's new round of QE, announced Thursday, is aimed in part at driving down mortgage rates -- the price of money. Don Luskin of TrendMacro expressed his doubts about the Fed's latest move in two segments Thursday night on The Kudlow Report (videos here and here). Price stability is one of the Fed's dual mandates, but it should be the Fed's only mandate.
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