‘Money Printing’ By Governments Fails For the Same Reason That Rent Controls Do

Policy ‘Money Printing’ By Governments Fails For the Same Reason That Rent Controls Do John Tamny Contributor Opinions expressed by Forbes Contributors are their own. Following New! Follow this author to stay notified about their latest stories. Got it! Nov 3, 2022, 01:00pm EDT | Share to Facebook Share to Twitter Share to Linkedin Imagine if the Mayors of Beverly Hills (CA), Lake Forest (IL), and Mercer Island (WA) were to decree a maximum apartment rent in each locale of $1,000.

Would anyone doubt that there would be a lot of takers? Then reality would intrude. Apartments for rent in the three very well-to-do areas mentioned would soon vanish. No apartment owner is going to accept such a low number for property that would command quite a bit more in the real marketplace.

It’s all a reminder of what’s obvious: while governments can’t decree abundance, their decrees (if they have teeth) will result in shortages. Markets always speak, and this is true in free, mixed, and unfree markets. What’s priced artificially will not be available for purchase at the fake price.

To be clear, none of what’s been written so far should be construed as an attempt to reveal something that’s unknown. That price controls result in shortages in many ways defines blinding glimpse of the obvious . Instead, the purpose here is to make a bigger or additional point about alleged “money printing.

” To believe those seemingly obsessed with the latter, governments or central banks (to distinguish between the two is to waste time) can “gun” money in circulation; as in they can use the printing press to increase the amount of currency in an economy. Except that they can’t. Despite what you’re told, money is a consequence of production.

How much it circulates anywhere is a consequence of the production of goods and services. Without production and the exchange of the production, money has no purpose and soon departs. Reduced to the absurd, there’s lots of money circulating in Bedford, NY and relatively little in Buffalo.

No government can alter this truth. But that’s in a sense a digression. MORE FOR YOU The ‘Backsies’ Billionaire: Texan Builds Second Fortune From Wreckage Of Real Estate Empire He’d Sold The 20 Best Baby Books That You’ll Enjoy Reading Over And Over Again Chicago White Sox Name Pedro Grifol Next Manager What about “money printing”? Could governments increase money in circulation just by printing gargantuan amounts? One would think so based on the musings of the central bank obsessed.

The problem is that such a view is as foolish as the just-won’t-die belief among politicians that they can decree lower apartment prices. Call the very notion of “money printing” a corollary to artificially low price decrees. Think about it.

And in thinking about it, remember that money in circulation reflects production. To then believe as the monetarily focused do about “money printing” is to believe that government can force the circulation of what’s not valuable. Except that governments can do no such thing.

With trade it’s always and everywhere products for products. “Money printing” presumes a devalued currency measure, and sometimes seriously devalued measure. Who would circulate that? Certainly not actual producers of goods and services.

None would accept what’s debased for actual goods and services simply because what’s debased isn’t exchangeable for goods and services. We produce for “money,” but in reality we’re producing for goods and services equal to what we’re bringing to market. Money that’s “printed” without regard to its value presumes a monetary regime that doesn’t adhere to a standard of value per unit.

“Money printing” decrees a worth per monetary unit that’s not real. In other words, “money printing” is an artificial price control. That it is signals why contra the imaginings of monetary types, “money printing” invariably results in scarcity of the unit printed.

Which when you think about it is a statement of the obvious. And as I contend in my new book The Money Confusion , all of this arguably explains why the “money printing” is what occurs after the inflation . Inflation is a departure from a monetary standard of value (devaluation), and the latter renders the currency less useful as a medium of exchange.

The printing occurs after the actual devaluation as monetary authorities try to circulate what producers increasingly won’t accept. Producers always and everywhere disdain what’s artificial. To pretend that government can “gun” money in circulation is to presume producers so foolish as to accept anything in return for what they bring to market.

It’s as foolish as politicians believing they can decree cheap what isn’t. Follow me on Twitter . John Tamny Editorial Standards Print Reprints & Permissions.