We are seeing trouble in Europe...and it is not pretty.
Take this headline, for instance:
Italy's Berlusconi says euro strangling economy
Italian Prime Minister Silvio Berlusconi has launched a savage attack on the European Union's budget rules, saying the Stability and Growth Pact had to be reformed if the eurozone wanted to see strong growth.
I can correlate this to similar problems on this continent.
Price caps DON'T WORK! Exhibit A:
There were warnings early on about the energy price caps in California that eventually led to, first brown-outs, then rolling black-outs.
Using California as a model, proponents for price caps were eventually shown the error of their calculations:
Analysts from all perspectives have shown how retail price caps disconnected consumer behavior from the realities of electricity costs and changes in wholesale prices—leading to increased, rather than decreased, consumption in a time of acute scarcity. Increased consumption at prices below cost led to daily financial losses for the state’s electric utilities which in turn drove up wholesale prices even further. Even the state’s Democratic leaders, who long sought to avoid price increases, have come forth and argued that the state’s electricity crisis cannot be solved without price increases.
Which brings us back to the current 'crisis' in Europe:
Working on two fronts simultaneously, the Italian prime minister is determined to relax EU restraints on state spending and also introduce his long-promised tax cuts.
Berlusconi's supporters believe the twin move will kick-start the economy and win back voters disillusioned by three years of sluggish growth....."If taxes are reduced in a consistent and visible fashion, then our journey continues. If not, then the Italians should be called on again so that they can decide their own destiny," he said, making clear he would call elections if necessary.
Lesson learned in California: Price caps DON'T WORK!
Europe, beginning with Italy, needs to pay attention to the historical data that is readily available - it looks like Prime Minister Silvio Berlusconi is on the right track...hopefully he won't get de-railed....
DR
