4 ms·

Instead you would have shortages.

• hedora 4y ago
  Those lead to profitable gray/black markets, and then inflation.
• anonporridge 4y ago
  And a black market would rapidly develop to subvert the government's artificial constraint on the free market, and inflation would happen there to counter the shortages by creating real price signals to allow people to allocate resources as efficiently as possible to get to where they're most needed and earned. This is exactly what's happening in countries like Venezuela and Argentina with high inflation right now. The government has set an official forex exchange rate to try to make believe their currency is more valuable than it actually is, while the black market currency exchange gives you the true exchange rate that is reflected by real world markets. In some cases, this situation is fine, because the government just needs the fake numbers to push a political narrative. More commonly, I feel like this action starts a downward spiral of trust in a society's political class or the political system itself. This is probably a big thing that led to the collapse of communism.
  • acuozzo 4y ago
    > to subvert the government's artificial constraint on the free market No government constraint/restriction was mentioned in the hypothetical scenario I constructed.
• acuozzo 4y ago
  > Instead you would have shortages. This assumes an increase in spending rather than saving and/or paying down debt(s).