#1395 Anthony Pompliano | Should America Have Price Controls?

Anthony Pompliano reflects on the latest remarks from Vice President Kamala Harris, as the campaign proposes a “federal ban on corporate price-gouging” on groceries. Topics include inflation, socialism, grocery store margins, competition, macro environment, free market, historical price caps, and the best solution to lower prices. ======================= Xapo Bank, the world’s first fully licensed Bitcoin-enabled bank, offers military-grade security with an unmatched blend of physical and digital security, as well as pioneering regulatory oversight, so your funds are always protected. Beyond secure storage, they enable you to grow and use your Bitcoin. Earn daily interest in Bitcoin, spend with zero FX fees using a global card, and make instant payments via the Lightning Network for unrivalled access and convenience. Visit ⁠⁠⁠⁠https://www.xapobank.com/pomp⁠⁠⁠⁠ to join. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode.

• 0:30Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 0:53Anthony Pompliano?

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• 1:36Anthony Pompliano?

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• 1:55Anthony Pompliano?

  What's up, guys? Bang, bang. Recently, Vice President Kamala Harris, who's now running to be President of the United States, came out and she put forward a plan to go after the price gouging that's happening in the food industry.

• 2:08Speaker 02

  Prices for everyday things like groceries are still too high. You know it and I know it. And when I am President, it will be a day-one priority to fight to bring down prices. I will take on big corporations that engage in illegal price gouging.

• 2:26Anthony Pompliano?

  This sounds like a great idea on the surface because most people go and as they ring up their groceries in the grocery store, they see that their bills are getting higher and higher. Inflation has been ravaging the middle class of America and people feel like all of their hard-earned cash, they don't know where it's going. But of course, we have to dig deeper and try to understand what exactly is driving this inflation and higher food prices? And why is it that actually a plan to go after price gouging is probably not going to have the desired outcome? In fact, I would even make the argument that going after the price gouging is just communism and socialism wrapped in a cloak. Let me explain. So if you go and you take a look

• 3:10Anthony Pompliano?

  at what's happening in the food industry, supermarkets in particular are notorious for having razor-thin margins. They're not like a normal software business that operates on 60, 70, or 80% margins. Instead, they simply operate on 2, 3, or 4% margins. Imagine trying to run a business that has hundreds, thousands, or millions of customers and simply eking out a 2% profit. It's incredibly difficult business to be in, but these supermarkets have been doing it for decades. And so the idea that they are price gouging on 2% or 4% margins is really, really hard to wrap your head around. On top of that, there are claims that there's been consolidation, let's say in the meat industry, where there might only be four or five major meat producers.

• 3:55Anthony Pompliano?

  And so there's a comment that there's a lack of competition, that lower competition then leads to the ability to increase prices. Unfortunately... None of this is actually true, though. Instead, higher food prices are part of a much more macro trend of higher inflation. Simply, what we see is that there are inputs to every single process. The cost of those inputs are going up. And so if inputs go up, then the cost of the output, the food, goes up as well. Now, when you see what Vice President Harris is recommending, the idea of going after price gouging is actually something that seems more like a marketing stunt. Because price gouging is illegal in almost every state.

• 4:39Anthony Pompliano?

  Yes, it is true, there's not a federal law banning price gouging. But usually, price gouging is in times of crisis. But what is being described right now as price gouging is simply grocery stores raising their prices to accommodate for all of the increased costs that they have to experience. So if President Harris was elected, what exactly would this look like? Well, the first thing that President Harris would do would be to issue some sort of price cap. You cannot increase the price of certain food above a certain level. This is like the government saying that they can run the grocery store better than the entrepreneur and the executives at the grocery company. It is a disaster waiting to happen. But it's not the first time that this would have happened in the United States.

• 5:24Anthony Pompliano?

  If you go back to President Nixon, he actually did issue some sort of price cap. And in those price caps, he also included price wage growth limits as well. Now, what we've seen, whether it was President Nixon, or we have seen in Soviet Russia, or many other places around the world, is that any time a government intervenes in the market, they place artificial caps in various prices. What you get is you actually get a worsening economic condition. What do I mean? Well, if you look at a market, there's supply and there's demand. As supply increases, demand usually responds. Price is a function of supply and demand.

• 6:06Anthony Pompliano?

  So if there is a low supply and high demand, you usually get prices going up. And vice versa is true. But here, what is ultimately happening is the government is trying to cap the price of the food. If you cap the price of the food, you then have now taken that market dynamic and you have frozen one of the key components that helps us reach equilibrium. And so usually what ends up happening is it leads to food scarcity and actually hurts people more than it helps them. Literally communism and socialism, this is a core tenet, is that the government will step into the market and is going to prevent people in the private market from responding to market forces.

• 6:49Anthony Pompliano?

  The government can plan your life better than you can live it. What we need to be careful of is that as we watch these ideas get presented here in the United States, there is a truth to what the politicians are saying. The food prices are too high and they're accelerating, but it's not going to be solved by price caps. It's not going to be solved by any sort of government intervention. Instead, what we need to be able to take a look at is how can we actually bring inflation down? How can we bring the rate of growth of prices for food down as well? Well, the first thing that we've got to do is we have to stop flooding the economy with the printing of money.

• 7:29Anthony Pompliano?

  We have to stop manipulating interest rates and then we have to help market participants in the food sector specifically, anyone who produces food. We have to give them policies and regulation that encourages them to produce more food. If you're able to increase the production of food, then prices naturally will find an equilibrium and they will come down. Instead of simply focusing on the things that are important and allowing for the market participants to solve the market problem, the government is now saying that they are going to step in, that they are going to eliminate quote-unquote "price gouging" and then that they are going to put these price caps in place. If we watch this occur, I am telling you that if you can just study history, you already

• 8:14Anthony Pompliano?

  know the end result. Food scarcity, exploding prices and hunger will spread throughout a population. Now, that seems a far way off in the United States, thankfully, but we can watch throughout history for centuries, when price caps on food have been introduced, it actually hurts the people, it does not help them. And so what I think ends up being really important here is when you see Something like Vice President Harris and the potential President Harris economic plan. You need to understand why are they doing it? Food prices are too high. You need to understand what they're putting forward, price caps. And then you need to understand what the possible outcomes would be, which in this case would be negative.

• 8:58Anthony Pompliano?

  Now, this isn't the first time in recent memory that we've had the government intervene in the market. The most egregious example is probably back in 2020. Covid was spreading throughout the world. And all of a sudden, the United States decided they were going to lock citizens at home. When they did that, people got scared and they went into the financial markets and they sold all their assets. As they sold those assets, we saw a massive crash across stocks and bonds, real estate, commodities, and many other financial instruments. There was fear that was spreading and accelerating throughout investors' minds. And so the US government stepped in and they said, don't worry, we're going to bail ourselves out of this. They put interest rates down to 0%. That's an artificial suppression of the cost of money.

• 9:42Anthony Pompliano?

  And then they printed trillions of dollars and they had enough capital sloshing around the financial system. And that created high inflation. And so during that manipulation, during that government intervention, we saw a government that tried to be smarter than the market. We saw a government that was trying to figure out what the potential solutions would be. But the government doesn't understand market problems with market solutions. Instead, the government only understands government solutions. And so the government decided to step in, suppress interest rates and print trillions of dollars. But you can't step in and intervene in the market without having negative ramifications. Nothing is as smart as the free market.

• 10:26Anthony Pompliano?

  But the government continues to forget that lesson over and over and over again. And so whether we are talking about the price of food, whether we are talking about the Covid monetary policy decisions, whether we are talking about the unaffordable housing situation in America, or many other issues that we face, we must continue to be persistent in our pursuit of market solutions, not Government solutions. The government has a job and has a place. It can do many great things for people. But stepping in and trying to solve market problems with government solutions has almost never worked. Because ultimately, the market is a very complex machine. The economy has so many inputs

• 11:09Anthony Pompliano?

  that one single actor, like the US government, is not going to be able to design a solution that can accommodate all of the different complexities. And so, as we continue to experience these problems, we must continue to demand that there are market solutions for market problems. The US government stepping in and intervening will only hurt people more, and it will cause more chaos, more pain, more volatility, and more issues. Vice President Harris, yes, the food is too expensive. People don't want to pay more and more at the grocery store. But going after price caps is not the solution. The government should simply encourage food producers

• 11:53Anthony Pompliano?

  to produce more food. Flood the US economy with cheaper food so that then we can actually get prices down, and we can get people back to being able to buy three meals a day for their families with an affordable price tag on it. That's the solution. Produce more food, not cap the price of what the private market sells it for.