Paulson Says Developing Countries Should Avoid Price Controls

Source : Bloomberg

"April 13 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson advised developing nations struggling with soaring commodity costs against using price controls because they may do more harm than good to long-term economic growth.
Governments ``need to resist the temptation of price controls and consumption subsidies that are generally not effective and efficient methods of protecting vulnerable groups,'' Paulson said in the text of a speech to the World Bank's development committee in Washington."

Well I'm not really sure if Mr. Paulson is done with all his work on the domestic front with a deflating housing bubble caused by in-sufficient oversight and regulation. The problem being faced in the US today is due to the fact that the federal reserve and regulators stood on the sidelines when an asset bubble was being formed in one of the basic necessities (shelter). Food is one of the basic elements that needs to be kept out of the reach of speculators. Price stability and market regulation are not things that should work when prices are coming down Mr. Paulson, they are supposed to be in place to prevent bubbles in other areas that impact the daily lives of ordinary people and consequently the entire economy. If farmers are wiped out because they made improper bets on crop that may give them a higher yield, not only would we see the farmer get wiped out, we'd also see secondary effects in crops that the farmer chose not to be involved in. Strictly in the context of the US, the massive shift into corn primarily due to the viability of it being a bio-fuel is quite troubling to say the least.

I'm sure Goldman and others that Mr. Paulson speaks for would like price controls to be out of the picture and would like intense speculation driving up the prices so they can profit from those spikes - with price controls there will be losses for the firms speculating in the prices going up.