U.S economic collapse spills over into global catastrophe

The simple fact is that governments around the world cannot afford to see the US economy collapsed because this is, and has been for some time, the engine room of the worldwide economy. If US business was to stall or money markets were to freeze then this would effectively kill the business arena overnight and have massive knock-on effects in international markets, both investment and trade.

However, one of the major issues of the moment is the fact that the US authorities have already invested billions upon billions of dollars, as has the UK government, into a previous economic stimulus program. With tax income still relatively low, benefit payments rising and budget deficit problems in the US it is unclear at this moment in time exactly where the US authorities would lay their hands on the funds required. This is a very difficult and a potentially catastrophic situation and one which needs to be addressed on a worldwide basis as soon as possible.

Why are price controls such a bad idea? They distort price signals, which are core to markets’ functioning effectively and, not unrelatedly, economic growth. Prices balance supply and demand, coordinating production and consumption. They are signals, full stop. On the demand side, when they are high and rising, they encourage more people to cut back, substitute and economize. At the same time, high and rising prices imply greater potential profit, signaling producers to boost supply—which eventually helps keep prices in check.