sovereignman.com / By Simon Black / March 5, 2013
Throughout history, bankrupt governments in decline almost ALWAYS fall back on a time-tested playbook.
This includes imposing controls on EVERYTHING– wage and price controls, trade controls, capital controls, border controls, people controls. Everything. And this idea goes back to the dawn of human civilization.
The Third Dynasty of Ur in ancient Mesopotamia, for example, built a very early version of a commodities future exchange. People would commit to terms of trade on clay tablets for the future delivery of agricultural crops, then trade the tablets in a secondary market. It was genius.
But when the economy started to turn in earnest, the government set up a bizarre, complex, and increasingly bureaucratic system of regulating such trade and collecting taxes from it. They even started rationing resources and regulating irrigation.
It was debilitating. The market could no longer function, and the society soon collapsed.
Later, in the 4th century AD, Roman Emperor Diocletian infamously failed to control runaway inflation by fixing the prices of everything from labor to food to articles of clothing.
In the 1790s, the post-Revolution French government tried the same trick whilst inflating away their new paper currency. French farmers could no longer grow their crops profitably, and the 1793 ‘Law on Maximum’ created severe shortages of staple foods in the country.
In our modern times, Argentina has become the poster child for these tactics; the government has fixed prices at the grocery stores, banned advertising, prevented people from holding precious metals and foreign currency, nationalized pensions, and restricted beef exports.