But her most hare-brained scheme — so far — has been price controls, where she’s to the left of McGovern, threatening to punish grocery stores for daring to charge more than their costs.

In fact, grocery stores make 1 to 2 pennies on the dollar. Meaning they have to pass along costs that come straight from the Washington money printer.

That means price controls would, in short, break food.

Price Controls Always Fail

In a recent video I mentioned how price controls have been tried many times, and each time they failed so spectacularly they were repealed. After much pain, suffering, and empty shelves.

When France tried, they got a black market that actually did price gouge. Even Venezuela repealed price controls in 2016 after food shortages and nationwide riots.

But what do price controls look like in reality? For that I go to a great thread by Robert Sterling, a former M&A executive at one of the biggest food producers in America.

Robert walks us through a thirteen step process from grocery price controls to widespread food shortages — something we haven’t seen in this country since the Great Depression, when FDR also imposed price controls.

Stage One: Bankrupt Grocers

So, first, the government announces grocery stores can’t raise prices even though inflation continues — courtesy of the Fed and Wall Street. That means their costs keep going up, so those pennies of profit turn into losses.

Like any business that’s losing money, they shut down.

Of course, not all grocery stores are created equal — small ones lack economies of scale, and while rich people buy high-margin vegetables and expensive cuts, the poor buy low-margin packaged foods.

So the small stores and the low-income stores go first.

You get food deserts, as people in urban centers or rural areas have to drive miles — or take multiple buses — to find food. And, ironically, you get more concentration, as the little guys drop out.

The survivors increasingly aren’t even selling food. They shift shelf-space to things that aren’t price-controlled. Clothing, furniture, supplements.

Grocery stores start to look more like a Dollar Store, with a little food and a lot of junk.

As cities clear of food, you’d need police patrolling parking lots and armed escorts on delivery trucks — perhaps you could even have government-run groceries like Chicago just announced.

Stage Two: Bankrupt Food Producers

The only way to save any grocery stores is to price-control their costs. Meaning food producers like Kraft, Heinz, Tyson, Hormel.

Of course, again, Kraft’s costs aren’t being controlled — their ingredients, wages, parts and electricity. So now they’re losing money.

Like groceries, they wind down, closing marginal factories and running out equipment then not replacing it.

As food producers downsize or go under, now you start getting actual shortages. And the only solution — once again — is price control the next level down. Farmers.

Stage Three: Bankrupt Farmers

Which brings us to the final stage. Because remember Farmers, too, are now forced to sell at a low price, yet their inputs like fertilizer or tractors are still going up.

They, too, go under.

You are now full Venezuela, with the only alternative to starvation a complete government takeover of the food supply, centrally planned from farmer to grocer.

As Sterling puts it, “The government will struggle to operate one of the most complex industries on the planet. The entire food supply chain starts imploding.”

“Imploding” as in starvation.

What’s Next

It’s very unlikely we’ll get to the point of starvation. For the simple reason that at some point the frog boils and the voters — or rioters — share their thoughts with policymakers.

That’s exactly why price controls fail, from France to Venezuela.

Having said, we managed it before under FDR.

And, unfortunately, if the morons running Kamala’s brain trust are dumb enough for price controls, they’re dumb enough for a whole lot more.

(Article image is Florence Thompson “Migrant Mother,” a migrant pea farmer family by Dorothea Lange in March 1936)

In that model, if you want economic growth, you print more money. If you printed too much and got inflation, you just print less. Typically by raising interest rates so banks create fewer loans.

The punchline, of course, is that central banks should print as much as possible, all the time. After all, if printing money creates prosperity, everybody wants prosperity. And then, when prices rise from all that printing, you just beg, borrow and steal to calm pesky voters down enough to get back to printing.

Of course, for non-Keynesian economists — Austrians and free marketers — it’s a lot simpler: money-printing is counterfeiting. And, like all counterfeiting, it steals from everybody else’s dollar, pouring water into the wine of their life savings. With a kicker for economic distortions — recessions — caused by how the new money was printed.

The “Inflation is Prosperity” Fallacy

The inflation-is-prosperity fallacy has been internalized by the ruling class. For example, whenever I advocate sound banking — where the bank actually has the money in the vault — I get attacked by Wall Street types complaining that if banks couldn’t counterfeit via fractional reserve, the economy would freeze up.

So where does it come from? Simple: it’s confusing activity and wealth. To illustrate, if Hunter Biden prints a million dollars and hits Vegas for the weekend, there will be a lot of very busy strippers. It’s be fantastic for the Las Vegas economy — tissue-fire level economic growth, an extra million in GDP in however many hours Hunter’s high lasts.

Of course, where did the money come from? It was siphoned from every other dollar holder. Diluted like water into wine. So grandma pays a little more for groceries, but at least Hunter had a hell of a weekend. Activity was created, wealth was not. And all that was left was the theft.

“Helicopter Money” and the Wallet Fairy

Now, there is a way around the theft, first proposed by Milton Friedman in 1969: “Helicopter Money.”

The idea is find some way to print money into the economy without distorting it. Milton used the image of a helicopter flying over the city dumping money.

Of course, even that distorts — if you happened to be walking on 2nd Avenue Thursday afternoon and the helicopter flew by you’re the new elite.So the closest government get is stimulus checks — which have the added bonus of buying votes.

Alas, even stimulus distort: the young and irresponsible spend fast — bubble tea sales take off and stripper work exra shifts. While the old and prudent save and get richer in future.

Fortunately, we have an elegant little thought experiment that we can test the whole idea whether printing money makes us rich: the Wallet Fairy.

This little critter sneaks in to every bedroom, bank vault, and payroll department across America on December 23 — the founding of the Fed — and draws an extra zero on the money.

So you went to bed with $10 in your pocket and wake up with $100. You laid down with $1,000 in the bank and woke up with $10,000. You went to bed making $12.50 as a customer associate at Best Buy, now you make $125.

Perfect helicopter money. So are we rich? Does the customer associate upgrade his house?

Of course not. Because everybody can see what happeend. Houses aren’t $400,000 any more, now they’re $4 million. Bubble teas are $50, rent is $15,000, strippers are too much. It would have absolutely zero impact.

We actually have proof from similar situations in countries that did the opposite, knocking zeros off the money. Mexico in the 1990’s, for example, lopped 3 zeros off the peso. So a dollar didn’t buy 3,000 pesos, now it only bought 3.

What happened? Nothing. Everybody adjusted overnight. A 5,000 peso coffee was now 5 pesos and nobody was dumb enough to think they got rich.

Unfortunately, in the real world, inflation is never so obvious as adding a zero or lopping off 3. In the real world inflation does, in fact, change things: Wages are slower to adjust than groceries, long-term contracts get effectively cancelled, pensions get gutted. Cantillon Effects divide every single person into winners and losers, draining those who have worked hard to build something of value, while rewarding those who did not.

Conclusion

Every inflation carries within a million human tragedies, a million dreams lost, a million life’s works squandered.

But the first step is understanding that printing money itself doesn’t create anything. Its one alleged benefit — the tissue fire — is a lie, an illusion that serves the politicians, bureaucrats, and lobbyists who, in reality, are aiming for the very redistribution inflation delivers.

Final point, the theft is only half the harm from money printing. Because, in reality, almost all new money comes in via asset markets, interest rate manipulation, and the privileging of bank credit over actual savings.

I’ll talk about these another week, but they are the source of our clockwork recessions — each delivering trillions in destroyed value and millions of jobless workers — of the permanent financial crashes that now stalk the American people, and of our exploding national debt.

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If the dollar does lose its position as the global reserve currency, it will be catastrophic for the American economy. Catastrophic for the American people on whose backs 80 years of reserve status were built. And it will subject billions of foreigners, for whom the dollar has meant decades of being bullied, to history’s greatest bait and switch.

Dollar at Risk

In late March, Saudi Arabia announced it will price oil in Chinese yuan. Even CNN was worried, in a rare display of situational awareness, while Fox fretted about “Weimar”—hyperinflation.

The dollar has been the undisputed global reserve currency since the 1940s. Reserve currency status looks great on paper: You get to print stacks of green paper and foreigners give you cool stuff for it, like toasters, luxury cars, and copper mines. The problem is who profits—who gets paid when foreigners crave the green paper?

Unfortunately, it’s not the American people; it’s whomever’s printing money: The Fed, meaning the Treasury, to whom they hand their ill-gotten profits, and—you guessed it—Wall Street. Commercial banks.

To see why, imagine foreigners didn’t want dollars. The Fed and banks could only print a little bit since printing a lot would create inflation, and voters would toss them out.

But if foreigners want a large number of dollars, the Fed and banks can print a matching amount. It’s like a river flowing into the money supply reservoir, matched up with a river flowing out to foreigners. The reservoir stays stable, and voters don’t riot.

But notice where the profits went. That river to foreigners didn’t go to we the dollar-holders—we are the reservoir; we are unchanged. The profits went right through us to the source of the river: the US Treasury and Wall Street.

So, like the rest of our crony financial system, it’s a hustle. The American people think they’re benefitting from reserve status, but the profits were sucked out and handed to the people who designed the institutional fleecing we call a financial system.

Enter Weimar

Now, here’s the problem. What if foreigners suddenly don’t want dollars?

Maybe China’s paying them to sell oil in yuan, or maybe the Fed lost the plot and creates too much inflation.

Demand dries up, the dollar starts to lose value, and foreigners start worry their life savings and corporate treasuries are melting. They sell out of the dollar. A little at first, more and more if it accelerates.

Now that river to foreigners reverses, it flows back into the reservoir. The dollar collapses. 70 years of Fed and Wall Street money printing comes rushing back like a tsunami running up a canyon. We’re talking double-digital inflation, over multiple years, at a minimum.

If they screw this up, reserve currency status could turn out to be a trap, an absolute catastrophe for the American people.

What Are the Stages of De-dollarization?

So what happens if the dollar falls?

For starters, foreigners don’t need as many dollars. Meaning there are extra dollars nobody wants. This makes the price of the dollar fall—it gets weaker.

It’s usually slow at first, then picks up speed if it keeps going, a progressive rush for the exits. This is because the first ones out only lose a little bit, but the longer they waited, the more they’ll lose.

Who’s left holding the bag as the dollar becomes increasingly worthless? Easy: Americans. The only people on earth who are actually obligated to use the US dollar, thanks to an obscure law passed in 1862 as a wartime emergency that nevertheless managed to stick around for 151 years.

So Americans have no choice: unless you swapped your dollars for gold, or Bitcoin, or goats, you go down with the ship.

What happens to those Americans? A falling dollar drives up the price of everything that comes into America. But it also drives up the price of anything traded on world markets. Meaning the raw materials and imported components that drive American factories and sustain American consumers.

The first to jump would be gasoline, heating fuel, and food prices—all of those are world markets. Along with prescription medicines since China has a creeping stranglehold thanks to our idiotic over-regulation—indeed, this is more or less true for every consumer product that China dominates: we shot ourselves in the foot, and now it’s coming back to bite us.

Next, those expensive commodities and input prices pour out through the supply chain. Yanking prices up in industry after industry—cars, construction materials like steel or concrete, clothes, furniture, TVs, computers, and medical devices.

Gone are the days of affordable luxuries—now you gotta work for them.

The Main Event: Capital Flows

And that’s when the main event begins: capital flows.

If foreigners get nervous, they sell not only dollars, they sell assets denominated in dollars. Starting with the most liquid: stocks, bonds, and treasuries. These are easy to trade—IBM stock is easier to sell than a Taiwanese factory in Wisconsin—so they go first.

About 40% of American stocks are owned by foreigners and about one-third of corporate bonds. If foreigners start fleeing, both plunge. This could cut your 401k almost in half, and it could drive up borrowing costs for companies to impossible levels.

Leading to mass bankruptcies on top of the wave of bankruptcies the Fed’s already engineering to try and stop the inflation it started.

It doesn’t stop there: one-third of US treasuries are owned by foreigners—over $8 trillion in bonds. If foreigners start dumping those, it will either send US government debt service soaring by potentially hundreds of billions of dollars a year. Or, much more likely, it forces the Fed to step in and buy up all that foreign demand, flooding yet more trillions into the economy.

This would flip inflation overnight marching back towards double-digits.

Conclusion

There are ways to stop this. But given the Washington clown show to raise the debt ceiling yet again, paired with their obsession with sanctions that scare foreign countries off the dollar, Washington isn’t remotely close to the serious thinking it will take to right this ship.

Losing reserve currency status would savage the American economy, and it would savage the American people. No country needs reserve currency status—after all, it doesn’t benefit the people. But, like climbing a cliffside with no gear, once you go halfway, you better not let go.

About the Author

Peter St. Onge is a Mises Institute Associated Scholar and an Economic Research Fellow at the Heritage Foundation.  For more content from Dr. St. Onge, subscribe to his newsletter where he writes about Austrian economics and cryptocurrency. 

[A version of this article first appeared on Peter St. Onge’s substack.]