Playing the Price Controls Game; How You Can Profit from the Coming Price Controls
Playing the Price Controls Game, by Mark Skousen, New Rochelle, N.Y.: Arlington House, 1977, 254 pp., $9.95
How You Can Profit from the Coming Price Controls, by Gary North, Annandale, Va: Loopholes Press, 1977, 102 pp., $10 (paper)
Harry Browne was the founder of the doom-and-gloom investment book tradition among hard money conservatives and libertarians. From 1970 to 1973 numerous books appeared preaching depression and monetary crisis and the market for such books was quickly saturated. Each new book, copying the Harry Browne tradition (buy gold, buy silver, buy Swiss francs), sold fewer copies.
Striking out for richer fields, the doom-and-gloom tradition has broadened its appeal. We now have two books purporting to tell us the inside secrets of profiting from the price controls both authors say will surely come. There is little doubt in my mind, or probably in the minds of most readers of REASON, that price controls will sooner or later be imposed again. The question is whether or not either of these books will lead the reader to profit.
Mark Skousen's Playing The Price Control Game is a hardcover book in Arlington House's Dollar Growth Library series. Although it is competently written, many dozens of pages go by before Skousen provides the slightest hint of what to do about price controls. We read a history of Hammurabi's price controls, how the controls failed, and how they distort the economy. We read more detailed accounts of price controls in the United States, from the Civil War through WW I, the biggie in WW II, the Korean War, and finally, the Nixon controls. Everything points to distortion of the economy, widespread evasion, and lackadaisical enforcement.
Dispersed throughout the first several chapters are economists' charts showing how price controls cause shortages. Everything so far is familiar and well known—also available in the Wall Street Journal. We have now read to page 145. Other than information almost all REASON subscribers already know, the book includes some interesting case studies, thoughts of price-control enforcers, and tales of counterfeiting. The means of evasion so far discussed include tie-in sales agreements (I'll sell you 10 gallons of gasoline at controlled prices if you buy my dog for $5), outright evasion, registering for coupons at more than one place.
In chapter seven we learn that the first goods to be in short supply will be high-volume, low-markup items, while high-markup items, mainly luxury goods, will remain in production. What should we do? Keep some cash on hand, learn how to maintain and fix our car, stock up on auto parts, buy an automobile with good gas mileage, and stock up on food. We should become familiar with barter and make good personal contacts among those with whom we may wish to trade. Needless to say, we should also stock up on gold and silver coins. Skousen also tells us how to take advantage of exempt markets, such as foreign products, auctions, and damaged and used goods. Have we really been told anything new?
Next, we learn how to avoid wage controls as workers. It is suggested that we go into the repair trade, because under controls there will be a shortage of new appliances and spare parts. With astounding insight, Skousen also suggests we moonlight to supplement our income. Believe it or not, we are now at page 178.
In chapter nine, businessmen learn to stock up on supplies which may be in short supply under controls; to raise their prices as high as possible now, giving discounts; to discontinue the production of low-profit or no-profit items; to reduce quality; to produce "new" products exempt from controls based on historical prices; and to engage in paper transactions with friendly companies to increase the gross of both firms, permitting higher profits under profit-margin controls.
The next chapter offers similar items for landlords. Finally, chapter eleven, "The Investor Faces Price Controls." This is, of course, the topic for which most people bought the book. We should sell stock short, because large corporations will be hurt. Perhaps buy some put options, although no specific industries or stocks are recommended for this activity. No timing procedure is discussed. We should avoid long-term bonds. Needless to say, we should buy gold and silver, although the author includes a perfunctory caveat. Collectibles, coins, and diamonds are in. And that's it.
The last chapter discusses the black market, although there is nothing specific. It is mostly a discussion of past black markets, with mention of some people making fortunes in steel and petrochemicals. But no information on how to enter the markets is provided.
Gary North's book is very similar, even discussing the topics in almost the same order. In fact, North suggests buying Skousen's book, while Skousen suggests subscribing to North's newsletter.
There is a difference in tone between the two books, however. While Skousen attempts a scholarly approach, North sounds like a minister preaching hellfire and damnation. We will have price controls, and they will be bad. He preaches total ruination of Western civilization, the breakdown of trade and authority, roving packs of looters, and the need for a retreat, self-sufficiency, and a return to small communities. His writing is more fact-laden than Skousen's and far more interesting.
North predicts the controls will be all-encompassing, that pensions and social security will go bust, that annuity payments will cease, and that the banking system will fold. Doom and Gloom all the way. He is also the superior economist of the two, by far. Where Skousen talks of profiting during the controls, North sees it as surviving "on the other side of disaster." He speaks of feudalization of the economy, barter exchange, and religion.
On barter, Mr. North suggests that "closed markets subsidize those who have already entered them," a good point. Whatever barter or blackmarket activity you wish to engage in, you should become familiar with it before the inevitable catastrophe. Again, he suggests dealing in second-hand goods, junk, and repairs, as well as taking a second job. He has a whole chapter on automobile maintenance, going into great detail on tune ups, repairs, and spare parts. Lastly, being a true retreatist, he suggests buying guns and dehydrated foods.
The emphasis of both books is not really on profiting from price controls, but on surviving a complete collapse of society.
The problem with both is that other than gold, silver, and Swiss francs there is no practical advice on entrepreneurial profit. How does one make big money in petrochemical black markets that will arise with price controls? Which goods for speculation should the public stock up on? How to sell them without getting caught? What specific foreign currency should be bought? When? And how much should the buyer expect the price to rise? How does one make money in black-market gasoline—or anything else for that matter? Specifically, what should one do in the futures markets? Questions of this type go unanswered.
If you wish a history of price controls and some educated guesses on what form they will take the next time around, the first book is worthwhile. If you wish to learn that auto repairs will be hard to get, that spare parts should be stocked, that dehydrated food should be hoarded, buy either of the books. But if you wish sound speculative advice, including entry into black or grey markets, neither book will satisfy you.
Dennis Turner is a commodity trader, and his most recent book is Trading Silver Profitably.
This article originally appeared in print under the headline "Playing the Price Controls Game; How You Can Profit from the Coming Price Controls".