What are the economic effects of Hoarding?
Hoarding is commonly criticized for creating shortages of goods in the real economy. It is possible for hoarding to create a cycle of speculation, self-fulfilling prophecies, and inflation. If several wealthy individuals start hoarding wheat, the price will begin to increase. Middle-class merchants will notice, and then they might hold back wheat supplies in anticipation of future price increases. That is enough to raise prices again. Panicked buying may create real shortages of wheat in some locations. The poorest in some countries could even be at risk of starvation if the cycle continues beyond that point. Hoarding is sometimes blamed for shortages that are actually caused by price controls, fixed exchange rates, and other government policies.
Hoarding is commonly criticized for creating shortages of goods in the real economy. It is possible for hoarding to create a cycle of speculation, self-fulfilling prophecies, and inflation. If several wealthy individuals start hoarding wheat, the price will begin to increase. Middle-class merchants will notice, and then they might hold back wheat supplies in anticipation of future price increases. That is enough to raise prices again. Panicked buying may create real shortages of wheat in some locations. The poorest in some countries could even be at risk of starvation if the cycle continues beyond that point. Hoarding is sometimes blamed for shortages that are actually caused by price controls, fixed exchange rates, and other government policies.
