Inflation targets another victim, Russia considers price controls.

In a recent piece, we learn that Russia is struggling with what the rest of the world is attempting to combat - food inflation.   While food inflation has taken a violent turn in places like Egypt, Tunisia and Algeria, other governments are starting to consider desperate means to combat increases in money supplies all over the world.  In places like Kuwait, Abu Dhabi and other wealthy countries governments have committed to subsidizing food in order to remove the shock of price increases, in less wealthy countries like China wage increases have been implement to provide citizens with a means to pay.  In places like Russia, some officials are considering price controls.

Deputy Economics Minister Andrei Klepach said on Monday that the Economics Ministry may consider resorting to the tried-and-tested price control system to contain prices, but added that there were no plans to implement this in the near future. "This is a tool which can be used, and I do not rule out that such restrictions will have to be used this year," Klepach told Interfax in an interview. Price caps, if and when introduced, are expected to affect staple foodstuffs like buckwheat, potatoes and other fruits and vegetables, he said.

Fortunately most Russian officials consider this attempt as an emergency vehicle and will utilize it as a last a resort.  This is indeed a tried-and-tested tool, we know the outcome, failure.  Price controls were originally designed with the idea that the seller of consumer goods is in the business of jacking up profits for their own personal gains, but we now know that the price is actually passed from higher order goods and then translated to what the consumer ultimately experiences.  Therefore banning supermarkets from raising prices on vegetables and fruits will have only one tried-and-tested outcome, no more vegetables.  It's really that simple.

The world right now, is awash with money.  Whether it is the US Dollar, Russian Rouble or any of the many currencies pegged to the dollar, each central bank was quite busy cranking out the printing presses in the last few years looking for liquidity to solve the problem.  In Russia, the problem is especially acute as xe.com summarizes:

MOSCOW, Feb 1 (Reuters) - Russian money supply (M2) rose 8.9 percent on Jan. 1 to a record high of 20,173.4 billion roubles ($677.8 billion) from 18,529.4 billion roubles ($622.3 billion) on Dec. 1, the central bank said on its Web site on Tuesday. M2 rose 49.5 percent in year-on-year terms, compared to 30.3 percent in the previous month.

That is astonishing and if M2 is anything like the American M2, then it is hardly the broadest measure of money supply, just enough for you to realize that many additional Roubles have been introduced into the Russian economy.  The effect is predictable, at least for those that can make a correlation between more money and the same amount of goods - price increases.

Unfortunately, most Russians, many Russian policy makers and many rioters/protesters in Africa the concept of inflation as an expansion of the money supply is as distant as the former planet Pluto.   Instead it is much easier to blame random people while the consequences of central planning are unleashed upon the world.