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Thursday December 2nd, 2021
Bellwether

Sri Lanka Minister follows Diocletian after printing money, but stops short of death penalty

ECONOMYNEXT – Sri Lanka’s Consumer Affairs Authority, an agency that creates shortages in essential goods after slamming price controls, is planning hike fines on those who break them 100 times, treading the path of Roman Emperor Diocletian who decreed death, after minting money.

The price control penalties are championed by Trade Minister Bandula Gunewardene, who is accusing traders of profiteering as money printing has triggered import controls and inflation.

Ironically the CAA itself has slammed price controls, creating shortages and blackmarkets.

The CAA has created shortages of gas and milk by controlling prices, putting consumers in difficulty.

The CAA is proposing the raise the minimum fine for individuals breaking price control law by 100 times to 100,000 rupees for a first offence and fifty times to one million rupees for subsequent offences.

For a company the minimum fine for first offence will be raised 50 times from 10,000 rupees to 500,000 rupees.

For subsequent offences it will be 50 times to ten million rupees.

In some areas such as rice and maize, the government itself has created conditions for oligopoly with import duties and import bans.

Overall Sri Lanka’s central bank is printing money to pay state workers after the government cut taxes in a ‘stimulus’ and hired 60,000 more unemployable graduates and 38,000 more unskilled workers to ‘reduce poverty’ in a policy that defies belief.

This week the cabinet approved what appears to be a Gideon Gono style credit program for parastatals through the central bank.

There no penalties however for the central bank, for creating monetary instability, against the provisions of its own monetary law.

Similar laws had appeared in Europe when central banks debased the money and bureaucrats and the rulers started to attack the citizens after creating conditions for prices to rise.

Sri Lanka has a court system, and a law making assembly inherited from Britain and Latin American style central bank set up by a US money doctor.

“It is true that the officeholders are no longer the servants of the citizenry but irresponsible and arbitrary masters and tyrants. But this is not the fault of bureaucracy,” Economist and philosopher Ludwig von Mises wrote in 1944 after watching increased state intervention particularly in countries like Germany.

“It is the outcome of the new system of government which restricts the individual’s freedom to manage his own affairs and assigns• more and more tasks to the government.

“The culprit is not the bureaucrat but the political system.

“And the sovereign people is still free to discard this system.

“It is further true that bureaucracy is imbued with an implacable hatred of private business and free enterprise.

“But the supporters of the system consider precisely this the most laudable feature of their attitude. Far from being ashamed of their anti-business policies, they are proud of them.

“They aim at full control of business by the government and see in every businessman who wants to evade this control a public enemy.”

However the resort to price controls and penalties go back further in history.

MMT and the Copper Bull

Sri Lanka’s central bank is pursuing Modern Monetary Theory in pumping liquidity into the banking system from 2020 taking the proverbial bull by the horn.

But the debasing of the rupee dates back to the previous administration when it was busted from 153 to 182 through ‘output gap’ targeting ‘REER’ targeting.

In the same way, before Diocletian began minting in copper in plenty what was earlier in silver and in limited volumes, his predecessors had been steadily debasing money.

“In the late Republic and early Empire, the standard coin was the silver denarius, the ancestor of the franc, and worth approximately the same as that coin,” explains Roland G Kent, in an issue of the University of Pensylvania Law Review.

“But from time to time the amount of silver in the coin had been reduced, until shortly before Diocletian the emperors were issuing tin-plated copper coins under the old name.

“Silver and gold coinage naturally disappeared from circulation.

“Diocletian took the bull by the horns and issued a new denarius which was frankly of copper, and made no pretense of being anything else; in doing this he established a new standard of value.

“The effect of this upon prices needs no explanation; there was a readjustment upward, and very much upward.”

Unlike Minister Bandula Gunewardene and the leaders of his price control agency who want to raise the penalty a 100 times, Diocletian decreed death for those who broke his laws and sold above the controlled price in the year 301.

However like in present day Sri Lanka traders are blamed, not the Royal mint where the debased coins were made.

“And to the avarice of those who are always eager to turn to their own profit even the blessings of the gods, and to check the tide of general prosperity, and again in an unproductive year to haggle about the sowing of the seed and the business of retail dealers; who, individually possessed of immense fortunes which might have enriched whole peoples to their heart’s content, seek private gain and are bent upon ruinous percentages of profit to their avarice, ye men of our provinces, regard for common humanity impels us to set a limit,” says an English translation of a Diocletians Edict on Maximum prices.

“But now, further, we must set forth the reasons themselves whose urgency has at last compelled us to discard our too long protracted patience, in order that-although an avarice which runs riot through the whole world can with difficulty be laid bare by a specific proof, or rather fact-none the less the nature of our remedy may be known to be more just, when utterly lawless men shall be forced to recognize, under a definite name and description, the unbridled lusts of their minds.”

Diocletian abdicated in 305.

To reach the columnist: BellwetherECN@gmail.com

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