By the end of 1775, Congress had already increased the nation’s money supply by 50 percent in less than a year, and state paper issues had already begun in New England. The Congressional Continental bills followed what was to become a sequence all too familiar in the western world: runaway inflation. As paper money issues flooded the market, the dilution of the value of each dollar caused prices in terms of paper money to increase; since this included the prices of gold, silver, and foreign currencies, the value of the paper money declined in comparison to them. As usual, rather than acknowledge the inevitability of this sequence, the partisans of inflationary policies urged further accelerated paper issues to overcome the higher prices and searched for scapegoats to blame for the price rise and depreciation. The favorite scapegoats were merchants and speculators who persisted in doing the only thing they ever do on the market: they followed the push and pull of supply and demand. In another familiar attempt to deal with the problems of inflationary intervention, they outlawed the depreciation of paper, or the rise of prices.
[…]
State and local governments presumed to know what market prices of the various commodities should be, and laid down price regulations for them. Wage rates, transportation rates, and prices of domestic and imported goods were fixed by local authorities. Refusing to accept paper, accepting them for less than par, charging higher prices than allowed, were made criminal acts, and high penalties were set: they included fines, public exposure, confiscation of goods, tarring and feathering, and banishment from the locality. Merchants were prohibited from speculating, and thereby from bringing the needed scarce goods to the public. Enforcement was imposed by zealots in local and nearby committees, in a despotic version of the revolutionary tradition of government by local committees.
Price controls made matters far worse for everyone, especially the hapless Continental Army, since farmers were thereby doubly penalized: they were forced to sell supplies to the army at prices far below the market and they had to accept increasingly worthless Continentals in payment. Hence, they understandably sold their wares elsewhere; in many cases, they went “on strike” against the whole crazy-quilt system by retiring from the market altogether and raising only enough food to feed themselves and their own families. Others reverted to simple barter.
Murray N. Rothbard, Conceived In Liberty, Volume IV, 1979.
October 28, 2018
QotD: Revolutionary price controls and the plight of Washington’s army at Valley Forge
Comments Off on QotD: Revolutionary price controls and the plight of Washington’s army at Valley Forge
No Comments
No comments yet.
RSS feed for comments on this post.
Sorry, the comment form is closed at this time.
