Jennifer Stromsteen Submitted 2008-05-10 14:46:55 In our modern  nike flyknit trainer uk , pampered world, many people don't want to take care of themselves and are always whining for the ernnt to "do sothing" about whatever it is that is causing disfort in their situation.

Unfortunately for all of us, those cries for the ernnt to "do sothing" do not fall on deaf ears. Politicians are always eager to buy more votes for themselves by "doing sothing" that gives the appearance that they are helping people.

When ernnt response is applied to the field of economics and prices, just about every tion the ernnt takes is going to cause more pain and disfort than it relieves.

The free market, with honest weights and asures, is the most efficient thod available to humanity for providing the highest standard of living for the global population. Inevitably, if so outside force  nike flyknit trainer womens , such as ernnt, interferes with the free market, it will cause everyone to experience a lower standard of living (with the possible exception of those who directly benefit by the ernnt tion, but even then, that is not always the case).

Prices are rely the free market's thod of finding a balance beeen supply and demand.

Let's use an extre example of prices for a new Lexus in order to understand the point. Suppose that the price to buy a new Lexus, in today's dollars, was only $10.00. Yes  nike air pegasus 83 30 red , ten dollars apiece. How many would you buy? I'd probably get 50. That would cost about $1,000.00. I would only be limited by the spe it required to store them. Everyone would certainly want to buy more than just one, and many people would want dozens of them for that price.

It is easy to see that a low price will encourage great demand. The reverse of that is also true. If a new Lexus cost $50,000,000 eh in today's dollars, the pany would be able to very, very  nike air zoom pegasus 32 uk , very few of them. The exceedingly high price would greatly discourage demand.

If the price is too low, the result it that there is too much demand and the manufturer can't keep up. If the price is too high, there is too little demand and the ftory goes idle for long periods of ti.

Prices too low will encourage too much demand, while prices too high will greatly curtail demand. This principle also applies to profit. If one pany is making a high profit by manufturing an item, other panies will see this and jump in to make a very similar product. This results in more petition and greater supply. The effect of an increase in supply will be a lowering of prices. That is how supply and demand intert with eh other.

Price is like a thermostat that regulates demand and supply. If anyone forcibly plays with that thermostat, it is going to upset the balance of supply and demand.

What typically happens when the ernnt gets involved with rising prices is that the central banks start the process by printing too much currency. In so doing, all the well connected insiders get to enjoy the fantastic benefits of the new money by the billions  nike air zoom pegasus 31 womens , while the mon man doesn't. Instead, as this new money gets spread out into the economy, the value of the money gets diluted. It is like taking one gallon of milk, pouring it into o containers, and adding a half a gallon of water to eh. Magic, presto! Now you have o gallons of milk.

Except that you don't. You simply have one gallon that has been watered down by 50%.

The central bank creates out of thin air new money by the billions. Once it is spent into the economy by those that receive it, the effects of that inflation are felt by the entire population several months later in the form of rising prices. As this process continues  nike kaishi run uk , at so point the public will cry out for the ernnt to "do sothing".

And those wonderful politicians will indeed take so very visible tions by passing a price freeze law. This is price controls. The problem with this approh is that instead of creating price stability for the fort of the population, it will heap more misery and a lower standard of living on the population.

The population yearns for relief from misery, and the ernnt sends more misery as a result.

How so?

The answer lies in supply, demand, and profit. Let's go bk to our example of the Lexus. Let's say that a new Lexus sells today for $50,000 dollars. Let's also say that it cost the pany $40,000 to manufturer it. As the central bank dilutes the value of the currency  nike lunarglide 5 womens uk , the cost to buy that Lexus goes up to $60,000 and cost to produce it goes up to $50,000. More central bank dilution of the currency further dilutes the purchasing power and the cost to buy that Lexus goes up to $70,000 and cost to produce it goes up to $60,000.

This pattern of events continues until the cost to buy that Lexus goes up to $200,000 and cost to produce it goes up to $190,000. At that point the cries from the public are overwhelming and the ernnt steps in to "do sothing" about the problem. Instead of doing what it ould do and create an honest currency that cannot be diluted (which would suprely benefit the people and put an end to the well connected insiders stealing from the system for their own benefit by diluting the currency)  nike free flyknit chukka uk , the ernnt institutes price freezes to halt the rising prices.

If the central bank continues to water down the currency by printing it and making it available to those few elites that have that privilege while price controls are in effect, it will bring about catastrophic results. Let's go bk to the example of the Lexus. What if the value of money is further diluted so that the cost to buy that Lexus ould be $220,000 and cost to make it is $205,000, but the ernnt instituted price freezes and Lexus is only ab.