It’s Time to Talk About More Creative Ways to Fight Inflation
It’s Time to Talk About More Creative Ways to Fight Inflation
(Bloomberg) -- As the cost of everything now from lumber to sugar surges, it’s worth pausing to consider some more unusual ways to bring down prices.
In China, for instance, Bloomberg reports that the Department of Price has been charged with working out the finer details of the country’s recently announced crackdown on rising commodities costs. The effort to bring down prices includes higher transaction fees for commodity trades, new tax rules, encouraging producers to sell down inventories, and much more.
Last month, for instance, the Tangshan steel hub banned steelmakers from spreading price-hike information, while Shanghai has urged steel mills not to raise prices if production costs haven’t changed.
And while China’s renewed interest in price controls does raise some questions about its continued commitment to freer markets, it’s certainly not the only country to have experimented with more creative types of inflation targeting.
In fact, one of my all-time favorite financial anecdotes comes courtesy of Robert Samuelson’s The Great Inflation and its Aftermath, which describes Lyndon B. Johnson’s own struggles to bring down inflation in the 1960s. As recounted by one of Johnson’s former aides:
“Shoe prices went up, so [President Lyndon B Johnson] slapped export controls on hides to increase the supply of leather. Reports that color television sets would sell at high prices came across the wire. Johnson told me to ask RCA’s David Sarnoff [RCA was then a major TV manufacturer] to hold them down. Domestic lamb prices rose. LBJ directed [Defense Secretary Robert] McNamara to buy cheaper lamb from New Zealand for the troops in Vietnam. The President told CEA [Council of Economic Advisers] and me to move on household appliances, paper cartons, news print, men’s underwear, women’s hosiery, glass containers, cellulose, [and] air conditioners … When egg prices rose in the spring of 1966 and Agriculture Secretary Orville Freeman told him that not much could be done, Johnson had the Surgeon General issue alerts as to the hazards of cholesterol in eggs.”
Unfortunately, as Samuelson put it, “all this was for naught” and the president’s customized inflation-fighting was too small to offset the overwhelming inflationary impulse from the economic boom of the time. A surprising number of people still think eggs are unhealthy though.
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