Despite the more optimistic claims of political pundits and Federal Reserve officials (Jerome Powell, specifically), things are far from being under control. Notwithstanding archetypal Austrian objections to “loose” monetary and fiscal policies on the grounds that they create production structures that ultimately deplete the pool of real savings, the operational failures of central banks cross-globally are largely nested in faulty axioms.
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When politicians and pundits tackle international trade matters, discussions inevitably end up focusing on whether Americans get the short end of the stick when they trade with foreigners. The consensus among these folks is that they do. The evidence: Americans buy more goods and services from foreigners than they sell to them.
As of the week of April 1, there have been 11,591 fatalities due to COVID-19 reported in Italy. This is as the number of cases in the country has skyrocketed to 101,739. Of those affected, 29,761 have been hospitalized, 3,732 of whom are in an ICU. These numbers are only expected to climb, as experts fear a rapid rise in cases in southern Italy.
[This article is part of the Understanding Money Mechanics series, by Robert P. Murphy. The series will be published as a book in 2021.]
Quick, what do Amazon, Gilead, and Netflix have in common? Obvious answer: they are getting valuable, even lifesaving, goods to people stuck in their homes; working hard to develop treatments and cures for the new strain of coronavirus; and helping relieve the tedium of government-enforced lockdowns. What a privilege to live in a mostly capitalist society, in which the pursuit of profit, rather than government directive, leads entrepreneurs, inventors, workers, and investors to move resources to higher-valued uses.
As has happened before with many natural disasters, the COVID-19 panic is leading to complaints of shortages and “gouging,” which about two-thirds of US states have passed laws against (often in terms so vague that it makes any enforcement discretionary, and thus discriminatory). But rather than complaining of shortages and gouging, critics should realize that “gouging” is the solution to shortages, not a cost in addition to them. It is just raising prices when circumstances raise the value of the last (marginal) unit of a good available.
