The consequences of government economic intervention

from The Gray Area:

If you want to see the consequences of government intervention into an economy, look at what is happening in Eqypt today. Gas prices are soaring, electricity prices are expected to increase between 10- 50%. Other commodities are also expected to rise.

Why? The government, trying to reduce the deficit, is cutting the subsidies on many commodities they have been instituting for years. The shock to the citizenry is significant. All the backlog of market corrections are being released at once, creating a enormous shock wave.

It all looks so good when you first try to control prices and the impact of market forces. The short term feels good, lower prices, protection from the negatives of shorter supply and higher prices. That makes us feel good initially about government attempts to control markets. But we know it can't last forever. No free ride can last forever without consequences. Egypt is feeling those consequences now as they try to repair their economy.

So, anytime you hear a politician talk about controlling market forces because they are bad, remember this small example of what that means. Someday, sooner or later, you or your children, will have to pay the price.

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