One aspect missing from the larger debate over inflation is how government responses to runaway prices threaten freedom.

The Cato Institute’s Jim Dorn tackles this issue, beginning with a history lesson about wage and price controls:

…in the heat of August 1971, President Richard M. Nixon issued Executive Order 11615 to impose the first wage and price controls since World War II. They were intended to suppress inflation, which at the time was less than 5 percent. But just as they did during wartime, the 1971 price controls went on to distort market prices and led to shortages.

When the controls were lifted, after 90 days, inflation continued its upward trend due to the still rapid monetary growth and, by 1975, stagflation reared its ugly head. However, the price controls, low interest rates, and fast money growth were still supported by then Fed chairman Arthur Burns, and helped get Nixon reelected in 1972. It was not a proud moment for the central bank, but could it happen again?

No one knows for sure. But those in control of, or wedded to, the current fiscal and monetary order assure us that whatever prices rises we witness today will pass very soon, and there’s no need to worry.

Except when there is. And as Dorn writes, the government is pouring fuel on the inflationary fire:

If inflation persists, and the Fed caters to political pressure to keep rates near zero to finance the growing federal debt and prop up asset prices, it would be tempting for progressives to call for price controls. Those controls would be dressed up as a temporary measure to stabilize prices and win votes, but they would not address the underlying inflationary pressures stemming from excessive money growth and fiscal dominance.

And this is the threat to freedom:

The risk is that fiscal dominance will prevail and executive privilege will once again be used to impose price controls that will temporarily suppress inflation and create shortages, just as in 1971. A short period of price controls like in 1971 is especially attractive as it would be used to smooth over the volatility as the economy returns to pre-pandemic norms.

The challenge for the Fed is to avoid being captured by fiscal doves and those who see the Fed as a vehicle for satisfying special interests. Although we are far from the double-digit inflation of the 1970s, an acceleration of inflation from its current levels could make the idea of price controls attractive.

They would be attractive only to those who want to maintain power. And that is dangerous, both to markets and to freedom.